Improving productivity

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Kenichi Ohno is a Japanese professor at the National Graduate Institute for Policy Studies. He specialized in comparative research on industrial strategies how 21st century latecomer countries can industrialize under globalization pressure from the economic as well as political and social perspectives, in Asia and Africa. He have been working on economic issues of east Asia and east Africa. He has advised Vietnam for 15 years and currently conducts regular policy dialogue with the Ethiopian government. For the last 12 years he was advising governments on the economic issues of the country.
Recently he was participating to conduct policy dialog on Ethiopian productivity jointly with Ethiopian Policy Study Institution (PSI) and national graduate institute for the policy studies. He talked to Capital about his work. Excerpts;

Capital: The Ethiopian policy studies institute in collaboration with the national graduate institute for policy studies has conduct Ethiopian productivity report, what was your role?
Kenichi Ohno: My role on the report was to guide the Ethiopian researchers from the PSI. When you do research to the government you have to do it differently from scientific, academic or journals, you have to write or speak the government language, you don’t get to be too theoretical or mathematical and you use easier language.
I wrote the most miner things, which will help them to attract the attention of the policy makers. And the other is that to initiating the fund to conduct the research, to make it join effort between the Ethiopia government and the Japanese.

Capital: What are the major findings of the research?
Kenichi Ohno: There are a lot of findings that are listed on the executive summary of the report, but the strong findings is that labor productivity grew at the annual average of 4.9 percent, which is not bad but not good, still low. Ethiopia should accelerate to catch up with other countries. Services grew fastest in labor productivity. The very interesting fact in Ethiopia is that of migration to the urban areas. In other countries migration of farmers to the next developed city is high, in Ethiopia it is low even if there is high industrializing and urban development. It is very unusual at this level of development, farmers migration is very low, why is not happening like the other countries is one of my questions, and when they migrate they move to the service sector not the manufacturing, we don’t know what kind of services, is the other question.

Capital: What was the major challenge that you face when you conduct the report?
Kenichi Ohno: The main challenge is finding data.

Capital: How do you see the current foreign exchange shortage in the country as an economist?
Kenichi Ohno: In terms of this I got three suggestions which are the short term, middle term and the long term solutions: the first is that the short term, which is borrowing a big amount of money from somewhere, but not with commercial interest rate which is very high so borrow from IMF, world bank and other donors with low interest rate, I think PM Abiy’s government is doing it, I agree with that. This may not be enough so they should go to other donors and the diaspora.
Allocation of foreign exchange to vital sectors such as medication should be done. The medium term and the long term solution is that the country needs to generate more and create value. Value creation in Ethiopia is very limited.
Many officials says more FDI is coming so wait a little bit and you will have more foreign currency, I don’t think that is true because the value creation in Ethiopia is very limited which doesn’t generate more profit and income, not competitive things are imported and exported with a little bit of adding value.
There will be a turning point so you have to use multiple approaches to solve it, don’t expect a miracle in one night.
Another thing is remittance from the diaspora, this will be positive and long term solution if Ethiopian diaspora become more confident about the government’s policy. It will happen faster than FDI in turning surplus like the Vietnams experience.
If the government is working right and Ethiopia continues to grow, many Ethiopians would be happy to invest and do business. At the same time as I said it before the government need to save money, improving buildings, government offices and parks; it is good it costs too much money and you have to limit the budget, these visible achievements should be seen. In japan if you go to the minister’s office it is very crowded and old.

Capital: What should be done to attract more FDI into the country? What is your suggestion?
Kenichi Ohno: It is very complicated and difficult. First you have to know the different types of FDI, I was telling the Ethiopian investment commission about this. You have to know what is happening in other countries about FDI and industrial parks.
You have to know what modern countries investors want. Should also provide small shades in the industrial parks for investors who need small place and they can produce a lot, because some investors want to have small investment and some tends to have huge investment so it should be ready to serve both, for example Korean investors invest huge amount of money and Japanese don’t do that. So you have to know all these and let them create value, these requires a lot of knowledge and experience.
The other thing is that don’t limit the minimum investment flows the new proclamation stated investment starting from 250,000 dollar, that is too big size for Japanese investors, so don’t limit the capital size and allow the small one also to invest.

Capital: Can you compare the economic development and capacity of east Africa and East Asia?
Kenichi Ohno: Each country is different, Japan and Korea are different and some of the countries are backward because of some political and other issues. The way of handling industries and investors is also different, even if there are some common areas. Making good policies is the main point.
Many people say east Asia is developed and east Africa is lagging behind so we have to adopt different approach. My approach is that, we don’t need to worry about whether the country is in Africa or in Asia, treat the country individually. Something that works in Vietnam may not work in Ethiopia.