The Art of Cooperation: There Is Much More Than Meets the Eye



The Japan Africa Business Investment Forum, organised by IC Events and Nikkei Business Publications, in close partnership with Flawless Events, a local event management company, saw the participation of high-level Japanese and African businesspeople and policymakers, including Prime Minister Hailemariam Desalegn and his special advisor, Arkebe Oqubay (PhD). One such person was Hiroshi Kato, vice president of the Japan International Cooperation Agency (JICA). Responsible for Africa, rural development, global partnership and research functions of JICA, Kato is one of the highly respected minds within JICA. His evolution within JICA took 37 years, and involved various levels and responsibilities, including planning and general affairs. Educated at the University of Tokyo and Harvard University, Kato is a typical development expert who looks beyond the obvious and makes comprehensive analyses. In this exclusive interview with GETACHEW T. ALEMU, FORTUNE’S OP-ED EDITOR, Kato shares his vision of Africa and how Japanese businesses perceive the continent. Excerpts:


The Japan Africa Business Investment Forum, organised by IC Events and Nikkei Business Publications, in close partnership with Flawless Events, a local event management company, saw the participation of high-level Japanese and African businesspeople and policymakers, including Prime Minister Hailemariam Desalegn and his special advisor, Arkebe Oqubay (PhD). One such person was Hiroshi Kato, vice president of the Japan International Cooperation Agency (JICA). Responsible for Africa, rural development, global partnership and research functions of JICA, Kato is one of the highly respected minds within JICA. His evolution within JICA took 37 years, and involved various levels and responsibilities, including planning and general affairs. Educated at the University of Tokyo and Harvard University, Kato is a typical development expert who looks beyond the obvious and makes comprehensive analyses. In this exclusive interview with GETACHEW T. ALEMU, FORTUNE’S OP-ED EDITOR, Kato shares his vision of Africa and how Japanese businesses perceive the continent. Excerpts:

Fortune: Japan’s relationship with African countries, including Ethiopia, has largely been dominated by official development assistance (ODA). This focus remains true with Japan while countries like the United States and China are actually doing business with Africa. Why do you think Japan is still focusing more on ODA than trade?

Hiroshi Kato: I am not sure that Japan intends to focus primarily on ODA rather than on encouraging the private sector. I may need to elaborate on this matter a little bit. Many leaders in Africa say that what they need is investment and not more aid. But I do not think that the way of framing the question is correct.

From the Japanese perspective, private sector investment does not happen in an automatic way and there are certain things that governments can do. The government of the recipient country as well as the government of the sending country, in this case Japan, can do something to promote foreign direct investment (FDI) and also the trade transactions between Japan and Africa. So, maybe the question is not whether private activities or aid.

It is not one or either type of question. We need both. That is what we, Japanese development practitioners, believe. For the private sector to flourish, and strengthen the business relations between Japanese and African private sectors, we need the government to intervene. In this case, Ethiopian government and Japanese government interventions are both necessary for the private sectors of the two countries to cooperate. Our understanding is that we continue to provide ODA in such a way that the private sector cooperation between Japan and African will be encouraged.

Q: Specifically, coming to the aid recipient countries or ODA recipient countries, there is a huge interest in having private investment flow to these countries. But the actual inflow of private investment is not comparable with the demand. What do you think should governments of these countries do in order to attract more FDI from countries like Japan?

There are different types of FDI. The investors in China, Turkey and Japan are all different. We cannot simply categorise them together and think of them as FDI. Under the type of FDI from China and Turkey, businesses may want to shift their operations to Africa. Japanese investors have already shifted some of their operations from Japan to foreign countries such as South East Asian countries. And they are satisfied. There is no incentive for the private sector factories of Japan to do like the investors in China and Turkey.  Those investors have different strategies and interests.

Why is Africa attractive for Japanese investors?

One is because of the natural resources; second, the huge potential of the market given the prospect of rapid population growth and the emergence of a middle-class. Thus, from the Japanese investors’ perspective, the interest is to find markets in the African continent and maybe to get natural resources from resourceful countries. From Africans’ perspective, you may say you are not getting as much investment as you would like to have.  I am only partially answering the question, but the reason is that these investors have different interests and may not be able to satisfy the recipient countries all the time.

For the moment Chinese, Turkish or South African investors can satisfy the needs of countries like Ethiopia.  With time, I am sure there will be some investment coming to Ethiopia from Japan in the manufacturing sector. But at the moment, the environment is not mature enough for Japanese companies to invest in manufacturing.

Q: In my discussions with Japanese investors and representatives of Japan Chamber of Commerce, I have heard repeatedly from the businesses that there is an information deficit about Africa within the circle of businesses in Japan. How much do you think this deficit is a factor for the low inflow of FDI?

Well, since I am not a company man, I am not now in a position to talk about this matter. But judging from what I have heard from my colleagues working in the private sector; yes, there is indeed an information deficit. And one of these complaints I often hear from those based in Ethiopia or African capital cities is that they are having difficulty in convincing their headquarters. Because the information they have and kind of feeling they get on the ground is very difficult for the headquarters, CEOs, and high ranking managers based in Tokyo to understand.

So there is a communication gap between local officers and headquarters. In order to fill this kind of communication gap, I think events, such as the Japan Africa Business Investment Forum, are very important and we need to repeat such events.

Q: One of the areas the Japan International Cooperation Agency (JICA) invests in is market-oriented agriculture. Though you have been investing so much in this area, African agriculture remains smallholder agriculture, very subsistent, and dependent on rain. What is the logic for your continued investment in this sphere?

JICA is not necessarily putting a lot of emphasis on large scale agricultural development, like the agriculture in North America or some parts of Latin America. This way what we stress is that the small scale farmers must be empowered. When we talk about market-oriented agriculture that JICA is promoting, it is called Small Horticulture Farmers Empowerment Project (SHEP). The idea of this project is to make the farmers sensitive to the needs in the market and let them change their mindset to become more strategic in their agricultural production.

At the same time, after making them more sensitive to the needs of the market, the government provides the farmers with necessary skills and know-how to produce the products that they want to sell in the market. This approach is market-oriented, definitely, but at the same time, it is designed to help small scale horticulture farmers. It originated in Kenya and now spreading into some other African countries. This is the typical example of Japanese agricultural involvement. It is basically small scale holder oriented that tries to provide the farmers with the know-how and skills so that they can be  more market oriented, make  money and take them out of the subsistence level to more entrepreneurial farming.

Q: Whenever things are done at small or pilot level, they seem to be very viable. But scalability is always an issue when it comes to this type of solution.

If we continue to talk about this SHEP, we have devised a model whereby we can scale up the original activities which started in the small pilot area to wider areas of a country. That has happened in Kenya. So, I think with caution, the project that was successful in the pilot area could be scaled up nation-wide. If the original business model is carefully designed, then it is very possible to scale up nation-wide.

Q: One area you have been putting money into is private sector development. But there is a conception within African business circles that Japanese investors are risk-averse.  Do you agree with the characterisation?

There are many people who say so. I do not have a really strong reason to argue against it. And maybe they are right. They want to be sure that their investment will be successful and they are very cautious in the process of examining the viability of the project, whether the partners are reliable, whether the infrastructures are installed, whether the registrations are reliable, and whether government policies are stable. In that sense, yes, I agree that they are risk-averse.

Q:  If you were to sit on the advisory board of an African Head of State, who would really like to get Japanese investment to his country, what would be the one and most important piece of advice that would be given to him or her?

It is a very difficult question. But what I can imagine is that for the Japanese investors to make decisions, they want to have accurate, detailed and reliable information on the conditions that they are going to find once they make an investment in a foreign country. African governments often say that the infrastructure will be available in two years time; relations are now being debated in parliament and will pass in a year’s time and so on. It is vision, only wishful thinking.  They usually do not provide when, how and how much they can provide to the potential investors.

What they need to give is specific, concise and reliable information. Once they give those pieces of information, governments must adhere and keep their promises. This kind of reliable behaviour is needed in order to continuously discover Japanese private sector leaders.

Q: Coming to your specific organisation, JICA, you are involved in so many areas from agriculture and sanitation to education. So many people in Africa know about JICA and they really appreciate your investment in this part of the world. But I have also heard the critique that the organisation lacks focus and is not doing enough in specific areas. What is your reflection on this critique?

That critique is valid in a sense and not very valid in number of other senses. We are actually trying to engage in a number of focus areas, because unfortunately the financial resources we can mobilise are starting to decline. In the long run, we do not think it will increase. So, given the gloomy prospects for the availability of resources in the future, it may be a good idea to choose a number of focus areas to apply whatever resources we have to make impacts. In that sense we are trying to choose a number of focus areas.

For example, in Ethiopia we have four priority areas and we cannot expand that to six or ten priority areas. It does make sense and that is true.

Fortunately, Japan has a long history of international cooperation and we have many institutions that we have established. For example, in case of Ethiopia, we have the Ethiopian Kaizen Institute (EKI), which is a very reliable institution. With EKI developing its own capacity, and with a small amount of input from Japan, even it can expand itself in the future to provide services to other African countries.  We want to have the experience of EKI, then, from Ethiopia. So, we have those assets in terms of the reliable institutions all across the continent.

For example in Kenya, we have the Jomo Kenyatta University of Agriculture & Technology. It is a well-established university developed with the strong support from Japan. Now, we do not need huge amount of money to invest in the Jomo Kenyatta University, because it is already independent. With a small amount of money, again, we can do huge amount of work not only for Kenya but for the African continent.

If we make use of these institutions all over across the continent, we can do a lot of work with small amount of resources. So, in that sense we should not limit ourselves to very limited areas of focus.

Q: I have also heard concerns that the monitoring, evaluation and learning practice and culture is not really strong enough in JICA compared to other bilateral ODA agencies. How do you see that criticism?

We are doing the monitoring and evaluation of projects according to the generally agreed rules by the OECD/DAC member countries. In that regard, I do not think we are weak in monitoring and evaluation.

Q: So that means you think your monitoring and learning culture is as competitive as any of the OCED/DAC agencies?

Yes. It is no better and no worse than any other.

Q: Do you see any area for improvement?

Of course, one of the criticisms we often receive is that we are very slow in preparing projects, like the private sector firms. They are very slow and cautious and tend to take a longer period than other partners. The reason for this is that we are making sure the project is viable and transparent. That is one of the areas of weakness we need to improve.

Q: As a member of the management team of one of the largest donor agencies in Africa, what kind of Africa would you like to see 10 or 20 years down the line?

Ten or 20 years down the line; we expect African countries to enjoy higher living standards, more democracy and highly educated people with productive businesses. But there are several risks before you reach that stage. Particularly, we are worried about the current business situation that African countries are facing; that is the prices of the oil. It is declining and many of the oil dependant countries are suffering from this decline crisis. And the continent as a whole is expected to record an average of 4.5pc growth this year. This is a kind of optimistic figure. Oil producing African countries and maybe South Africa are going to record a very low growth rate.

For the African continent as whole to record 4.5pc growth rate this year, the non-oil producing countries have to record very high rates of growth and this is a very tall order. If this kind of economic decline continues, there may be some social instability, social frustration and so forth. So I am very much worried and hoping that the African countries will survive these current economic difficulties. After that, once they get out of that turmoil, they will enjoy thriving economies.

Q: I hope you are well informed about the global debate on whether aid works or not. There are proponents of aid that are saying aid actually works even if it has got its own problems. There are also proponents of the counter argument that say aid is not working.  Where do you stand?

Of course, as a development practitioner, I am to take the position that it can work. But one unfortunate thing about the aid debate is that when the critics talk about aid they think of aid provided to Africa. When Japanese people talk about aid, we talk about the aid we did in Asia, which produced very productive results. Basic background information is totally missed. We need to clarify based on what kinds of experiences are we talking about aid. There has to be a distinction between aid in Africa and aid in Asia.

Q: But how about aid to Africa? Do you see it working?

I think it worked as a whole. Aid has undergone a tremendous change over the years. During the Cold War era, aid was used as a political tool by the US and Western Bloc to support the regimes they wanted in their favour. And the Soviet Union and Eastern Bloc countries favoured basically the socialist countries. In that sense it is unfair, to evaluate the past performance from today’s perspective, especially the aid activities up until the end of the cold war in 1990.

Q: How about aid after the end of the Cold War?

I think it is working, but not all and each project has been successful. In our perspective, many of the projects that we have done in Africa have taken root and produced tangible results.

Q: Here we are attending the Japan Africa Business Investment Forum, where, seemingly, Japanese investors are trying to consolidate the relationships with their Africa partners. But this is an unfortunate time where there seems to be a huge competition to get engaged in Africa; be it from Turkey, China, India, the US or Brazil. Each country is trying to have its own position in Africa. Are you optimistic about the fate of Japan in this competition?

I am not sure. The only thing I can say is, let us see.

Q: But do you think Japan is well positioned now, at least, in this competition?

There are areas where we have a comparative advantage and other areas where we do not. We can take of advantage of sophisticated technology and the combination of a comprehensive approach towards development. Individual countries can cooperate with construction of single infrastructure project like roads or bridges. But when it comes to integrated planning and institution-building, they may be too much for some countries. Whereas Japan has the experience in integrated planning and solution provision and in that we have comparative advantage. But in terms of the price comparativeness, Japanese companies are at a  disadvantage because Japanese products are very costly.

Q: As Japanese and [leader of] a management team of one of the largest development agencies in the world, what is the one message that you would like to send to Africa?

One of the biggest things I have noticed is that the mindsets of the African people themselves have changed. I have looked at Africa throughout my career and up until the 1990s, there was a kind of pessimistic outlook on the future of Africa. But now I believe that African people, leaders and all the people walking around the street have a different mindset or perception about the future of Africa. My perception is that you now have the “we can” kind of attitude. This kind of mindset is very important and so long as you maintain this attitude, I think the future of Africa is bright. I am sure that African people are becoming self confident and they now have very strong the “we can do” attitudes. You have to maintain that mindset.



By GETACHEW T. ALEMU,
FORTUNE’S OP-ED EDITOR

Published on Sep 14,2015 [ Vol 16 ,No 802]


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