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Applying Lessons on PDIA and Product Space to Investment Promotion in Ethiopia

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Guest Blog by Meleket Denbu, LEG ’22

I would like to begin by extending my deepest gratitude to the LEG team (professors, coordinators, and TAs). The past ten weeks have been truly amazing in terms of broadening my perspective on the necessary tools and techniques for leading economic growth. Not only that, the program gave me an opportunity to network with like-minded people who are pursuing to bring change in different countries across the globe. The three most important takeaways for me were:

(1) PDIA – I found the problem-driven iterative approach creative in delivering solutions that are tailored to different countries’ contexts. In the same line, I personally benefited from the fishbone diagram as it provided me with the right understanding to analyze the cause and effects of growth challenges. Furthermore, the 3A’s, which are authority, acceptability, and ability provided me with important insights for selecting immediate policy actions. 

(2) Product Space – The concept of the product space and the scrabble theory was a complete eye-opener for understanding the path to incremental growth and diversifying the base of the economy (by jumping into nearby trees). On a related note, the discussion on the different methods of know-how presented critical interventions for achieving desired growth. 

(3) Inclusive growth – The conversation on inequality and inclusiveness taught me that the extent of inclusiveness in building growth is equally important to the actual monetized value of growth. It has become evident to me that building sustainable growth requires putting the inclusion agenda at the core.   

­Each week presented immense knowledge towards understanding my growth challenge and the paths to providing potential remedies. Week 1 and Week 2 challenged my understanding of the various growth challenges witnessed by my country. The assignments pushed me to critically review each challenge and prioritize taking into coordination the objective of the course. The lecture on the PDIA approach was mindset shifting experience for me. The approach presented hands-on techniques for resolving complex growth challenges. The case studies ignited hope in me and made me believe that change is possible if the right steps are taken to so solve problems. The ‘Rock Song’ chart presented by Prof. Ricardo enabled me to locate my country’s position in the product space. Furthermore, the Atlas economic complexity portal helps visualize and understand the progress of various countries following the continuous improvement in export diversification.

The lecture in Week 3 provided me guidance on how I should think about the root causes of my growth challenge. The exercise of designing a fishbone diagram enabled me to distill the causes of my growth challenge while also identifying the right entry points for immediate policy interventions. The 3A’s helped me to critically think about what authority, acceptance, and ability I must influence to witness change in my growth challenge. For instance, in addressing the challenges of export diversification in my country Ethiopia I have realized that the most realistic first step is improving the coordination between (1) government offices, (2) firms in interlinked industries, and (3) government and the different associations representing the private sector.

During Week 4 the concept of high bandwidth institutions highlighted the important steps that can improve the collaboration among various stakeholders so as to introduce horizontal and vertical policy interventions. The two-dimension policy classification approach provided me with key insights on methods of identifying missing public goods for high-potential growth areas. Here, I realized the importance of posing the question as to whether solving my growth requires the provision of public goods or tilting the profitability space.

In Week 5 the important advice provided by Prof. Ricardo Hausmann is the necessity of focusing on understanding why a growth challenge exists as opposed to concentrating on what the challenge is. In addition, the steps outlined in diagnosing growth challenges. The first step in this process is clearly formulating my growth question and then (as step two) delving into the diagnostic tree on the basis of the four principles. These principles relate to questioning (1) whether the constraint has a high price, (2) movement in the constraint must also reflect the change in other areas, and (3) the growth challenge must be a “Hippo rather than a Camel” meaning its existence affects the existence of other related sectors, and (4) the challenge must be a “Hippo in the Desert” – meaning the problem must be a headache for others as well.

Week 6 assisted me in rigorously reviewing my fishbone diagram to make further improvements and to identify the right actors that can champion the implementation of suggested solutions. Another key takeaway was the relevance of identifying unique opportunities that can help me to design entry design. The iteration and re-iteration on fishbone enabled me to identify additional entry points, other than collaboration, concerning improving know-how and access to foreign currency. The entry points with regard to collaboration include (1) improving the collaboration between the government and private sector, (2) enhancing the networking among interlined industries in the private sector, and (3) better incentivizing government entities to work together to support export. The second entry point (improving know-how) mainly focused on tapping into the know-how accumulated by the diaspora. The third entry point which focused on increasing the foreign currency focused on the FX allocation system implemented by the National Bank of Ethiopia.

The lessons in Week 7 and Week 8 helped me to rethink the strength and weaknesses of the PDI approach. It also enabled me to identify the main authorizers of the growth challenge I am working on. The learnings from the Sri Lanka experience gave me the space to think about how to convene teams for the entry points and to identify positive deviance I can further build on.

The lesson on inequality in Week 8 and lessons on inclusion and diversity in Week 9 the need for a renewed commitment to design policies that can strengthen the broader sense of “us”. The lesson on ‘Growth+Inclusion’ is the most timely and urgent agenda, particularly for Ethiopia. Furthermore, the conversation on pro-growth policies and social policies highlighted the need to move away from the conventional dichotomous policy discussion. As one can’t value what it doesn’t measure, the Brookings and OECD economic complexity measures introduced me to new frameworks for widely assessing progress.   

I am currently working in the Ethiopian Investment Holdings, a newly established entity which holds ample potential for transforming the investment ecosystem in the country. The entity is mandated to optimize State Owned Enterprises (SoEs) including intangible assets. I have planned to apply the lessons on PDIA and product space in my endeavors related to investment promotion and in tackling the competitiveness challenges the SOEs are facing.

This is a blog series written by the alumni of the Leading Economic Growth Executive Education Program at the Harvard Kennedy School. 71 Participants successfully completed this 10-week online course in May 2022. These are their learning journey stories.

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