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Industrial Policies in a Changing World: What Prospects for Low-Income Countries?

May 2015
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Following the 2008–09 financial and economic crisis and the remarkable success of emerging global powers such as China, notably through heterodox policy choices, there is an emerging consensus among leaders about the relevance of industrial policies as a means to recalibrate economic structures if a country wants to remain competitive or make it to the next level of development. The current debate on industrial policy has mutated. Today, it is less about interventionist policies that countries need to adopt to promote economic nationalism and development. Instead, it is about putting forward ideas about technological innovation to close productivity gaps, industrial upgrading, and economic diversification. The question is therefore not whether governments should put industrial policies in place, but rather how these policies can be used in a smart way.

This debate is even more relevant for low-income countries (LICs) as they address their multiple domestic priorities and challenges, while at the same time trying to catch up with the fast-changing global landscape and the changing nature of industrialisation in a sustainable manner. This paper focuses on some industrial policies and strategies adopted by LICs and the conditions under which their objectives were achieved (or not). They include Bangladesh’s successes in building up a pharmaceutical industry focusing on affordable generic drugs, and a readymade garments industry that has a large share of the world market, in addition to Ethiopia’s success as an exporter of cut flowers. Looking forward, as the nature of industrialisation and trade policies change, it looks at what policies LICs may adopt to catch up with the developed world.

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