Transcript #2
Now this picture, which is kind of hard to see, is the history of authoritarian developmentalism in East Asia-Korea, Taiwan, down the line. The pink part is the regimes that are considered as Authoritarian Developmentalism (AD) in the book by Professor Akira Suehiro. Some countries have already finished this regime, like Korea and Taiwan, and then they have democratized. I am not sure if the Philippines' Marcos regime is AD, but that is what Professor Suehiro says. Singapore and Malaysia still continue this regime, whereas Vietnam and Myanmar never had AD. They have authoritarian governments but are not yet satisfying these conditions. I think this AD regime is a temporary historical regime in East Asia. It is typically established under severe threat to national security or unity. As I said, East Asia has never been a very peaceful region in the past. It is often established by a military coup and it replaces a previously weak government, and economic growth itself legitimizes the regime. But over time, its own success undermines the legitimacy and leads to a democratic transition, as you can see in Korea and Taiwan. So this is a very temporary regime that lasts maybe a few decades to a little bit more.
In this light, I think we have to redefine good governance. If you want to initiate trade-driven growth, maybe different and narrower conditions are needed, including the following: strong leadership with ownership, and an administrative mechanism for policy consistency and effective implementation. On the other hand, high-performing East Asia did not typically have the following: transparency, accountability, a participatory process, clean government, privatization, and free trade. These are not typically shared by the high-performing East-Asian countries and maybe these are not necessary for initiating growth, although these are necessary for other purposes.
In addition to individual governments' efforts, I think we need regional cooperation in the past and we will need that in the future in order to avoid and remove difficulties and crisis, support the private sector from the sidelines, and present visions to reduce uncertainty. In East Asia, regional cooperation and integration has moved from this stage of market-led integration to institution-led integration. Previously, integration was done by the private sector trade and FDI, as I showed you in the diagrams. It was an open regionalism in the sense that the countries outside East Asia were not discriminated against in their trade relations. It was informal and voluntary. But now East-Asian governments are institutionalizing their efforts of integration and the basic framework for this is ASEAN+3 - ASEAN ten countries plus China, Japan, and Korea. And there are many other institutions, alphabet soups, that are related to this ASEAN+3. This morning, we heard Japan's initiative for development in East Asia. And for these regional cooperation efforts, remaining issues for East Asia are as follows: We have to maintain regional peace and security-that is a matter of course, without that we do not have any development. But the next one is very important: narrowing the gap between early developers and latecomers. Intra-regional income gap is a very serious and maybe the top concern among East-Asian governments right now. We also must promote globalization while mitigating its native impacts, and human resource development, institution building, and governance improvement are necessary for strengthening competitiveness, because in East Asia each country is always pressured by the market to do better and better, otherwise you will fall. It is a bicycle situation.
In my view, East Asia should also do the next two following things: it should project its views to the world. Sometimes East Asia has different views from the World Bank or the global development strategy. On top of that, we should study the new modality of industrial promotion in the age of globalization. We know that simple protectionism does not work and it is not allowed today. But that does not mean that we should add up to a 100% laissez-faire policy. What is the policy modality that is suitable for this age of globalization? That is the thing that East Asia should really think about. I am leading a study project in Vietnam that does exactly this thing: What is Vietnam's policy for industrialization in the twenty-first century?
What is Japan's role in East Asia? It is in the past and at present by far the largest ODA donor, it is a large trading partner for East Asia, and Japanese firms are the chief architects of regional production network through FDI, especially electronics. But there are things that Japan should do but has not done. Regional leadership has not been forthcoming from Japan very strongly. And the economic vitality of Japan itself is lacking, which is a very big negative for the region.
Let me talk about Japanese ODA a little bit more. Japanese ODA has the two-track principle, and this is my own characterization of how the Japanese ODA has been implemented and should continue to be implemented in the future. There should be two pillars to Japanese ODA: one is for the prosperity of Japan and East Asia for national and regional economic self interest, and the second pillar is for solving global issues like global warming, poverty, health, and education. These two pillars must be combined flexibly, and Japan should continue to do so. Japan also wants to help the self-help efforts of less-developed countries. Japan never considered ODA as charity. Japan's ODA is to let them grow and become equal trading partners, like Korea did in the past and the ASEAN countries are now doing at present. And Japanese ODA wants to supplement private dynamism, not replace it.
Poverty reduction in East Asia. Extreme poverty in East Asia already halved from 1990 to 1999, so MDG, the most important goal of MDG-halving extreme poverty-in 25 years has already been achieved in 10 years. This achievement is made mainly not by improving governance but by high growth. Most East-Asian countries have national strategy for equitable growth in place, even before PRSP was invented by the World Bank. In my opinion, any coordination centered on proper measures alone is unlikely to work in East Asia, and that was the theme of the previous session. Vietnam has a strong ownership and growth and equity orientation, and PRSP was put under the national strategy. You may even ask the questions, "Does Vietnam really need a PRSP from outside when it already has a strategy? Why don't we reduce transaction costs for Vietnam to have only one strategy rather than two?"
Now, finally, let me talk about replicability. What are the implications for Africa and other regions? These are my views, but I have discussed this with Japanese officials and experts before I came here. I want to say a few things.
First, simple replication will not work-that is the starting point. We have different situations in East Asia and Africa, and particularly in Africa there is no regional production network that I have described for East Asia. However, I think the methodology for policy formulation can be transferred, and I will elaborate very shortly.
I think Africa must balance two things: One is the fight against poverty. It is a humanitarian cause and it must be done, but at the same time growth generation for long-term self support must be concretized. Everybody talks about how growth is necessary for poverty reduction, but at the operational level I think this growth strategy has not been concretized. And everybody is talking about coordination for proper measures. That has to be changed. We need concrete growth strategy too, on top of PRSP.
Japan's approach to development emphasis is the following, and these are the general characteristics: We want to respect each country's uniqueness. We do not want a globally common framework or something like that. We want a long-term and holistic perspective, and I think in this regard the World Bank's holistic approach is not holistic enough for Japan. We are interested in real sector concerns like trade, investment, key industries, and technology. Of course financial institutions and institution building and other things are important, but the primary goals should be real sector, and these are the supporting factors that we have to think about. We want to continue to help LDCs in good times as well as bad.
Now, this Japanese approach is not quite like the World Bank's approach or the current approach based on short-term conditionality, frequent monitoring and a globally common framework. I am not saying the World Bank approach is bad or that this is good. I think both elements of short-term, frequent monitoring plus long-term commitment are necessary, and the latter is desperately lacking at this point.
If Japan is to get involved with African development-and that is not taken for granted yet, I think-then these are the steps to follow. First, build domestic support in Tokyo, in Japan, to build domestic support for more aid to Africa. As you know, most ODA from Japan goes to East Asia right now, that is our priority area; and Japanese ODA is being cut because of the budget crisis, so it is not certain whether the Japanese government wants to increase commitment to Africa, so we have to first decide on that. If we are to increase our commitment in Africa, then select a few countries, do not disperse resources. Select a few countries and study deeply how realistically we can have a growth scenario. To select these one or two countries a new selectivity criteria for growth is necessary, not the good governance-criteria of the usual type.
We want to create a permanent policy research team, not three weeks, three months or three years, and work in partnership with other stakeholders and propose a concrete and realistic strategy with additional ODA to support it. That is my view.
My last words. Japan already extends such policy support to Vietnam, Laos, Myanmar, and Mongolia. We study all aspects of real sector issues. I am a member of this Vietnam team. Some of these programs are good, some are not so good. We have to improve the situation, but the question is whether we want to start this kind of study for one country or two countries in Africa as well, and that has not been decided. Ad hoc, short-term involvements are unlikely to produce lasting results-those are my last words. Thank you very much.
Mr. Sumi: Thank you very much, Mr. Ohno, for your excellent overview of the major issues to be discussed in today's session. I am very much struck by his very convincing argument on the need of a strong state. I just recall that Thomas Jefferson of the United States said, "Small government is good government," but you may want to say small government may not necessarily be good government. You need to have capable leadership. Maybe you need to rephrase it for the twenty-first century. Also, I liked his analogy of the flying geese. Although I am not very sure that the first goose is still Japan because that first goose has been suffering from a chronic flu for ten years or so. I hope that that goose is not suffering from pneumonia. But anyway, I liked his philosophical thoughts.
