Having confidence in the potential

Jin Kimiaki is chief country representative for Japan International Cooperation Agency (JICA). During his stay in Ethiopia, he was able to receive both Prime Minister Shinzo Abe and the newly assigned JICA’s president, who visited Ethiopia one after another. Kimiaki says Ethiopia is a priority country for Japan in terms of development assistance and industrial policy dialogue. He is also not shy to admit Japan’s interest to replicate the South East Asian development model in Africa and that countries like Ethiopia are perceived to be pilot projects for this experiment. However, there is a feeling that Ethiopia has seen the least of the Japanese assistance compared to other African nations. In addition to that, it is argued that Japanese investors are yet to be convinced to come and invest in Ethiopia. But Kimiaki argues that the Government of Ethiopia needs to be mindful of how things work from the Japanese side. For instance, the government wants to have a quick and fast track access for concessional Yen loans. The Japanese side, on the other hand, wants to be meticulous about spending or approving any loan, be it for potential projects in areas of power, transport or road construction. The other diffidence between the two sides is on the speed with which Japanese investors are taking on investment potentials in Ethiopia. Ethiopian officials want to have as many Japanese investors as possible in a very short period of time to take part in the manufacturing sector. The Japanese are tough to convince though. Kimiaki says that between eight to ten years’ time, Ethiopia might become a hosting nation for Japanese investors. Birhanu Fikade of The Reporter sat down with Kimiaki to explore these points in-depth and learn about JICA’s activities in Ethiopia. Excerpts:

The Reporter: To begin with, what can we say about the achievements of Tokyo International Conference on African Development (TICAD) thus far?

Jin Kimiaki: The TICAD process kicked off in 1993. That time was particularly known as the period of Afro-pessimism in history. Hence, TICAD aimed at creating a multilateral platform to discuss and share the values of Africa’s development. Through the TICAD process, every five years, multilateral agencies and leaders of African countries have been meeting in Japan. But following the upcoming Kenyan TICAD meeting, this duration will be reduced to three years. During the Kenyan TICAD meeting, we will focus on different issues such as the importance of economic growth and the value of human security mainly promoting peace and stability with the emphases of post conflict reconstruction.  Climate change will also be one of the issues that we are going to talk about. Basically, the TICAD is all about organizing a platform where these kinds of issues are discussed among African stakeholders. All in all, TICAD brings together country representatives of various organizations in Africa, the AU, the World Bank Group, the UN agencies and the Government of Japan. In addition to that, TICAD promotes different programs like Coalition for African Rice Development, Kaizen in Africa and some others.

The TICAD process has been in place for past two decades now. Yet again, it is criticized for not doing so much. Is TICAD merely a show of sympathy for the African continent as some say or is it really deriving positive changes in Africa?

Of course, TICAD is about inspiring positive changes in Africa. But, a single country cannot do everything on its own. Hence, what we are trying to do is creating the network and the knowledge sharing and mutual learning process among African countries. This is very important. For me, although providing monetary support is somehow necessary to the continent, we also need to create substantive methods and movements among the people.

We know Kenya is gearing up to host the first TICAD in Africa this August. During the last TICAD meeting, in 2013, Japan pledged to avail some 30 billion dollars in assistance to projects in Africa. Yet that money have not reach continent until now. What happened there?

We usually conduct follow up ministerial conferences and monitoring sessions after the TICAD summit. At the end of each period of a TICAD summit and before the start of the new one, let’s say between TICAD IV and TICAD V, we have a progress report which is posted publicly. There you could see how much was committed and how much of that has been disbursed. The 2013 commitment is due to last until 2018. So far, the 2013 commitment has not being disbursed. You might have seen new commitment figures for the upcoming TICAD VI.

Then what basic outcomes do you expect in Kenya?

Basically, TICAD is not a pledging conference. We want to share the common understanding of the importance of different visions. There are ongoing discussions regarding the framework of the conference; it is still a work in progress. But one of the key points to be considered is the economic transformation or the industrialization of the African economies. Social stability and resilience will also be expected to be on the table. We want to promote these issues. To do that, we think it is important to empower youth and women. It is vital to promote science, technology and innovation. In addition to that, we cannot set aside the importance of public private partnership, investments and infrastructure development. These are some of the expected topics to be discussed.

Compared to other African nations, how does Ethiopia fare in terms of Japanese development assistance?

Ethiopia is a very important country when it comes to development assistances from Japan. It is one of the ten recipient countries. Japan prioritizes Ethiopia in every aspect of development activities. We have been assisting the country in areas of infrastructure development via building roads and bridges. We are there in areas of agricultural development activities, water supply, education and health. In recent years, Ethiopia has become an interesting economic model in the continent by pursuing labor intensive industrial development strategy. For me, Ethiopia is benefiting from our development assistance immensely.

However, one weak point I can think of through our engagement is that we have not been able to initiate Yen-based loan provisions. Projects we assist via Yen loan are basically very concessional. Though Ethiopia is an eligible country to receive loans from Japan, we were unable to help the country access Yen-based loans. Currently, we have prioritized Yen loans to be extended to Ethiopia. We hope we can have some projects to be financed via Yen before TICAD VI concludes.

How much money is expected to be released as Yen loan to the country?

Well, we haven’t yet decided on the size of the loan to be released. 

It is very true that roads, bridges and the like have been built in Ethiopia fully funded by the Japanese government. That said, however, the Government of Japan extends better assistances to other African nations. What do you make of that?

We have three components in our development assistances. Technical assistance, grant aid and concessional loans making up the entire commitment we extend to countries. The size of the concessional loan we extend is one of the biggest. If we can create projects suitable for loans the amount that Ethiopia receives will be much bigger.

Are you saying Ethiopia is still not capable of receiving Yen-based concessional loans for its projects?

Ethiopia is already eligible and capable to receive loans from Japan. But our greatest challenge comes from the conditions. The interest rate is 0.01 percent and that is very low. The repayment period is 40 years with ten years of grace period. I think it is very good for the Government of Ethiopia to assist its debt sustainability and economic growth concerns. I am personally feeling that the government is expecting very quick release of finances. This is not fit for our way of preparatory process. That is probably one of the challenges I think we are faced with these days.

For instance, how long will it take to approve a single loan project?

If we start from the scratch, it will take one-and-a-half year to reach an agreement. Then further time is needed for implementation of the project. But, in case of the Government of Ethiopia, they often want to start a project within one year period. That is the difference. My understanding is that if we properly plan the project and provide the fund considering the difference of the timeframe, I believe we can formulate good projects. We need to discuss with the Ethiopian authorities to go ahead.

Which projects do you have in mind as having the potentials to receive Yen loans?

Firstly, it’s the power sector. Second, roads and transportation are fit for loans. We also have some ideas on how to support small scale women entrepreneurs. Through the Ethiopian Development Bank (DBE), we are planning to initiate this project. It is yet to be finalized.

There are various forms assistances extended by the international community to Africa and Ethiopia. But, what makes Japanese assistance unique? Can you mention two or three peculiarities?

If you see the British, they are active and innovative to bring new ideas of development. For instance, in 2000, they came up with the notion of aid effectiveness and they have promoted a budgetary support system. That has very good advantages for the British. Basically, my understanding is that their approach is suitable to create a policy framework and provide the budgetary support and then monitor the performance. But, our approach is different. It’s a bit conservative. It is based on our experience in the South East Asian countries. We start with concrete models and practices and then scale up by extending bigger finances through capital grants or loans thereby creating actual change on the ground. That mostly consists of human resource development. We sent Japanese experts or technicians to the recipient countries. Based on the context of the recipient societies, we modify the original technologies based on the environment. Our approach is mostly oriented on practicalities. The British focus mostly on policy. We call the UK approach a framework approach. But, ours is an ingredient approach. We trust our experience in South East Asian countries. We trust the applicability of such experiences in Africa too. Maybe there are some complementarities between ours and some Western donors’ approach.

The Government of Japan is also actively involved in industrial policy formulation in Ethiopia. Experts from Japan often came to Ethiopia to offer advice to high level officials. These experts have been engaged in dialogue with Ethiopian policymakers for the past eight years. Will that continue in the years ahead?

We have not yet reached an agreement with the Ethiopian government. But, our intention is to continue the policy dialogue. It is because our experience in the South East Asian countries is quite applicable in the Ethiopian context. Industrial policy formulation and human resource development via Kaizen and infrastructure development efforts together with private investment are quite essential elements we need to work on in this country. It is evident that Ethiopia needs more private investments from abroad.

Japan and Japanese experts stand as the foremost advocates of the developmental state approach. Do you believe it works in Africa as it did in Asia? Will Africa leap forward and be in line with powerful states at the top with less private sector involvement?   

That is why we are supporting the industrial development process in Ethiopia. The ideology of the developmental state is surely applicable in Africa because there is a weak private sector, weak infrastructure and the role of the public sector is very strong. The approach makes more sense due to the weaknesses of the private sector. That is one of the key differences among the developing and the developed nations. The public sector dominates the private sector in developing countries in order to avoid monopolies. We cannot depend on the private sector to build infrastructure. In the western model, dynamism of the private sector is very essential to create innovate and sustainable growth because governments do not know how to lead those innovations. In developing nations, governments have to catch up with the existing technologies. There are models out there to carefully learn from. We should not mix the catch up process with the front runner process.

How long do you think it takes African states to achieve the forerunner status?

If you see Japan, it has developed very fast and now obviously it is in a frontrunner position. Hence, the catch up process does not concern Japan and it does not work either for us. But, shifting from developmental state ideology, which is a catch up process to frontrunner economy sometimes, is very difficult. We have a very successful experience as a catch up country; we had to create a drastic or a gradual change once.

Currently, Japan is suffering from economic stagnation. My interpretation of that is because Japan is a very traditional country with strong social ties and systems reinforcing loyalty to the existing society, a dynamics quite different from the one in the US, where every new generation comes with new innovation and technological advancement. Japan is not like that. But, for developing countries, there are lots of good models either in Asia or in the West to learn from. The key point is that we have to learn from one-another. The public sector should learn from the private and vice versa. We are promoting industrial policy dialogue with the intention of learning from others. The government of Ethiopia is keen to learn from others.

Recently, JICA has been promoting a project known as Champion Products which aims at branding some particular products from Ethiopia in the global market. The movement to globalize branded high quality Ethiopian leather is one of the projects. How is that progressing?

Ethiopia has negative images due to the famines it has suffered in the past. But, the country has a huge potential for offer quality products. We want Ethiopian products to be accessible in the high-end markets around the world. At the start, we will focus on the high-end market in Japan. A recent study in Japan shows that leather materials will have greater market opportunities. Hence, we have created a brand with a trade mark for very fine and high quality Ethiopian highland leather.

We have produced promotional materials. We have registered the name to protect the intellectual property rights of the products in Japan. We are almost finalizing similar procedures in Ethiopia too. The project is owned by the Ethiopian Leather Industries Association (ELIA). Every member of ELIA can benefit from the trademark as long as they can provide high quality products. In addition to branding activities, improving quality is the other target we are focusing on. So far, the approach seems effective and we want to continue the process. Apart from the leather subsector we also want to extend the branding program to other products. Coffee might be considered but we have to analyze key factors first.

The Government of Ethiopia seems more eager to embrace Japanese investors in Ethiopia. It has pledged to provide a plot of land for the construction of an industrial park specifically designated to host Japanese manufacturers. How is it progressing from the Japanese side?

To be frank, we have not found enough number of investors who want to come to Ethiopia. We are feeling that we might need some more time to attract Japanese investors to come. If we can create an industrial park for Japanese investors within two to three years’ time, then I think we can bring in a good number of investors. When we look at the experience in South East Asian countries such as Cambodia or Vietnam, it usually takes five to eight years for Japanese investors to go to those countries and invest in the industrial parks. Our timeframe for this kind of investment to be realized is between eight to ten years. But, I believe the Government of Ethiopia expects to have investors of Japanese origin to come and invest in a much shorter period of time. That is another issue we have to deal with. But, we are definitely working on it. We are receiving advices on how to improve the construction of quality-based industrial parks.

Do you have the minimum number of investors targeted to come to Ethiopia?

I don’t really know that. You see investors are like birds. When there is conducive and attractive environment, they will come and stay. They migrate if things are not up to their standards. You can see Kenya hosting big size of Japanese investors. South Africa also has the biggest number. But, Ethiopia has huge potential. Yes, people here need more training but you have a considerable quality of human resource. We cannot ignore the infrastructural development activities this country.  My intention is to draw and create a long-term strategy. Perhaps, after ten years’ time, I expect Ethiopia to become strong in its industrial path. But, that might not be what the government expects. They like to see quick outcomes.