Climbing out the Ditch

1
Climbing out the Ditch

• Managing the Politics of Change Leadership
  and the Role of Institutions in East Asia s
  Rapid Growth

2
low per capita GDP
high unemployment
crushing poverty
Underdeveloped Country
wide rural-urban disparities
high illiteracy
weak capacity
high mortality rates
inept government
political instability
poor governance
3
High per capita GDP
Intermittent bouts with unemployment
low poverty
Developed Country
manageable regional disparities
high literacy
well endowed capacity
low mortality rates
well functioning government
long term political stability
good governance
4
The Real Challenge of Development
Managing the Politics of Change
5
East Asias High Performers
Taking the bull by the horns . . .
. . . managing the politics of change
6
Requisites of Change Management
embedding change in the culture
establishing a sense of urgency
consolidating gains producing more change
CHANGE
creating a guiding coalition
generating short term wins
developing a vision and strategy
empowering broad based action
communicating the change vision
John Kotter, 1996
7
Requisites of Change Management
embedding change in the culture
establishing a sense of urgency
consolidating gains producing more change
creating a guiding coalition
generating short term wins
Threat of communist takeover
developing a vision and strategy
empowering broad based action
communicating the change vision
John Kotter, 1996
8
Requisites of Change Management
embedding change in the culture
establishing a sense of urgency
consolidating gains producing more change
creating a guiding coalition
generating short term wins
Shared growth
developing a vision and strategy
empowering broad based action
communicating the change vision
John Kotter, 1996
9
The Principle of Shared Growth
10
The Principle of Shared Growth
All share in increments to the pie
11
The Shared Growth Phenomenon
12
The Shared Growth Phenomenon
Ratio(unweighted average) of Top to Bottom
Quintile and per Capita Growth Rate, Selected
Years 1976-1988
Region GNP per capita growth (per year) 1965- 1990 Income share of bottom 20 percent of households Income of highest 20 percent of households Ratio of top 20 percent to bottom 20 percent
East Asia, Fast Growers 6.1 6.7 43.3 7.0
East Asia Slow Growers 3.6 6.1 47.5 8.3
Latin America 1.4 3.6 55.1 16.4
Africa 0.3 4.3 54.0 15.0
South Asia 2.2 8.0 43.5 5.5
13
The Shared Growth Phenomenon
Integrated Poverty Index, 1988
Region Average Poverty Index
HPAEs 0.25
Other Asia 0.53
Latin America 0.42
Sub-Saharan Africa 0.52
14
Requisites of Change Management
embedding change in the culture
establishing a sense of urgency
consolidating gains producing more change

• Vision 2020
• Annual awards for
• export performance

creating a guiding coalition
generating short term wins
developing a vision and strategy
empowering broad based action
communicating the change vision
John Kotter, 1996
15
But Why Shared Growth?
16
The Role of Institutions
17
The Predicament of Leadership
Paradox of autocracy
Time inconsistency of economic policies
18
The Paradox of Autocracy
19
Time Inconsistency
20
The Predicament of Leadership
Paradox of autocracy
Time inconsistency of economic policies
21
Institutional Foundations of Shared Growth
22
Requisites of Change Management
embedding change in the culture
establishing a sense of urgency
consolidating gains producing more change
government - business deliberation councils
creating a guiding coalition
generating short term wins
developing a vision and strategy
empowering broad based action
communicating the change vision
John Kotter, 1996
23
Institutionalizing Consultative Processes the
Deliberation Council
24
Wealth Sharing Mechanisms

• land reform
• developing rural infrastructure
• investing in basic education
• promoting SMEs/labor intensive manufacturing
• allocating corporate equity
• worker cooperatives
• public housing programs

25
Land reform
Distribution of Land and Owner-Cultivated
Households in Taiwan, by size of Holding, 1039
vs. 1960
Percent Distribution of owner-cultivated households Percent Distribution of owner-cultivated households
Size of Holding (chia) 1939 1960
Less than 0.5 43.2 20.7
Between 0.5 and 1 20.9 45.9
Between 1 and 3 24.6 30.1
Greater than 3 11.3 3.3
Total 100.0 100.0
26
Land reform/rural infrastructure
Overall Effectiveness of Simulated Experimental
Programs in South Korea, 1978
Simulated Program
Land Reform -4.6
Public works and small scale industry -4.7
All Programs -10.7
All Programs but land reform -9.6
Rural Income of Bottom decile
Rural Households in Poverty (percent)
28.7
30.4
77.6
63.5
27
Basic education
Primary and Secondary Enrollment Rates in the
High-Performing East Asian Economies
Primary Primary Secondary Secondary
Region/ Country 1965 1987 1965 1987
Indonesia 72 118 12 46
Thailand 78 95 14 28
Malaysia 90 102 28 59
Korea 101 101 35 88
Singapore 105 n.a. 45 n.a.
Hong Kong 103 106 29 74
(insert table 3-1 in Campos, p.32)
28
Labor intensive SMEs
Exports of Small and Medium Enterprises in Taiwan
(Hundreds of millions of U.S. Dollars)
Categories Value of exports Export value of small and medium businesses Percent of small and medium businesses
Manufacturing 436.89 264.26 60.49
Trade Business 235.25 120.96 51.42
Total 672.14 385.22 57.31
29
Malaysia NEP
Malaysian Ownership of Share Capital of Limited
Companies (at par value 1969-1990)
Year Bumiputra Other Malaysian residents Foreign residents
1969 1.5 59.6 62.1
1970 2.4 34.3 63.4
1971 4.3 33.9 61.7
1975 9.2 37.5 53.3
1980 12.5 44.6 42.9
1982 15.6 49.7 34.7
1983 18.7 47.7 33.6
1985 19.1 54.9 26.0
1988 19.4 56.0 24.6
1990 19.2 46.8 25.4
30
Requisites of Change Management
embedding change in the culture
establishing a sense of urgency
consolidating gains producing more change
well functioning bureaucracy
creating a guiding coalition
generating short term wins
developing a vision and strategy
empowering broad based action
communicating the change vision
John Kotter, 1996
31
Implementation Capacity the Bureaucracy
Merit based recruitment and career advancement
32
Implementation Capacity the Bureaucracy
Estimates of per Capita GDP and Ratio of Public
to Private Sector Salaries, Developing Countries
Country/Region GDP/Capita Senior Level () Senior Level ()
Country/Region GDP/Capita A B
Singapore 14,920 114 114
South Korea 7,190 69.3 69.3
Taiwan, China 7,954 65.2 65.2
Malaysia 5,900 40 40
Thailand 4,610 47.1 47.1
Philippines 2,320 27.7 27.7
Chile 6,190 70.36 70.36
Trinidad and Tobago 8,510 63.53 63.53
Venezuela 6,740 29.54 29.54
Uruguay 6,000 n.a. n.a.
Argentina 4,680 24.11 24.11
33
Depth of political appointments
Source WDR 1997
34
Implementation Capacity the Bureaucracy
35
Economic growth and bureaucratic performance