2. BEYOND INDUSTRIAL POLICY
Ivan Rossignol, Chief Technical Specialist
17th TCI Global Conference, 13th November 2014, Monterrey, NL, Mexico
3. Industrial Policy is back (again)
⢠European Commission adopted a new
communication on Industrial policy âFor a
European Industrial Renaissanceâ
⢠France has âLa Nouvelle France Industrielleâ
an industrial strategy outlining 34 sector
based initiatives
⢠UK has developed a strategy to develop and
prioritise 28 technology clusters
⢠Italy, through its âDestinazione Italiaâ has
identified a number of specific measures to
attract FDI to Italy in targeted sectors
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4. And not just in high-income countries
India
The Make In India program is a major new program encompassing 25 sectors from
Automobiles to âWellnessâ designed to facilitate investment, foster innovation, enhance
skill development, protect intellectual property and build best in class manufacturing
infrastructure*.
China
China continues to manage its economic growth through carefully crafted industrial
policies. The Catalogue of Industries for Guiding Foreign Investment classifies
industries as being âencouragedâ, ârestrictedâ or âto be eliminatedâ. The most recent (Dec
â11) reveals the following 3 priorities (amongst others);**
- Upgrading of manufacturing capabilities
- Promotion of new strategic industries
- Development of a modern service industry
Brazil
EMBRAPA (Brazilian Agricultural Research Corporation) is a state-owned enterprise/
research center that focuses on activities for which international demand is increasing
and technologies can be adapted and developed to make Brazil more competitive
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*Make In India website, makeinindia.com *Jones Day Publications, jonesday.com
5. We strive to âreplicateâ what successful countries did to achieve
sustained economic growth
Economies identified by the Growth Report as development success stories
Success story
1 Period in which GDP growth was 7 percent per year or more, according to Growth Report
Source: âThe Growth Reportâ, Commission on Growth and Development, 2008; literature search; team analysis
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Growth, 1960s to 2005
% change p.a. in income per capita High growth period1
1960 - 2005
1950 - 1980
1961 - 2005
1960 - 1997
1966 - 1997
1950 - 1983
1960 - 2001
1967 - 2007
1963 - 1994
1960 - 1999
1967 - 2002
1965 - 2002
1960 - 1997
Used industry
approach
Did not
Results
⢠8X per capita
incomes
⢠700m people
out of poverty
⢠90% focused
on specific
industrial
sectors and
explicit actions
to boost
innovation and
technological
upgrade
Used industrial approach
Did not use industrial approach
7. âŚ.The global context has changed
As Dani Rodrik writes in this recent paper âUnconditional Convergence in
Manufacturingâ, it may be very difficult to duplicate successes of South Korea, Taiwan,
Botswana and Chile because;
1. Global environment is no longer development-friendly
- rich countries use to provide direct access to markets / capital / technology
- rich countries use to exhibit âbenign neglectâ towards industrial policies that were
being employed
2. A handful of countries have consolidated capability and have become manufacturing
centers of the world. New entrants will find it very difficult to compete in even basic
manufacturing
3. Success story growth was based on manufacturing, demand for which is declining
(in favour of services)
4. Employment absorption capacity of manufacturing has significantly reduced due to
technological advance
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8. âŚWe are not seeing results
⢠Projects are too complex
⢠Projects are too ambitious
⢠The timeframe for results is unrealistic
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Typical length for
WBG Projects
(5yrs)
13. And still we must exercise cautionâŚ
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Becoming âbuzzwordâ for many very different concepts. How
can we have dialogue if weâre not all talking about the same
thing?
Only 50% success rate and failures are catastrophic
Well understood, but very difficult to replicate
Powerful but incredibly complex
Usually has most transformational potential in multi-sectorial
context for which political economy is a crucial factor of success
or failure and is yet weakâŚ
Even with respect to SME lending and support:
Innovation and jobs are equally created by large firms. So why support SMEs?
14. We need to shift the development paradigm
How can we identify
⢠Instruments and interventions that actually workâŚ
⢠âŚthat are within the field of play available to us.
How can we target and leverage public support such that we
⢠Move away from ineffective broad public investments programs
⢠Identify entrepreneurs and young/small firms that could/would be
empowered by seed money?
⢠Create pockets of growth where public investments will be directed to
growth platforms to help private sector growth and job creation
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15. Are we nimble? Are we flexible? Are we listening?
⢠Course-correction and flexibility at the government is not possible without a
private sector / industry stakeholders who are equally flexible and equally
nimble
⢠Can we avoid the promotion of approaches that we know how to do (in this
case regional cluster development) just because we know how to do them
and rather â where necessary - identify new innovative solutions that we can
become part of.
⢠Letâs pit our approaches and against other measures, letâs prepare to fall short
and adjust so that we remain relevant in the current context
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