Home Today's Paper Most Popular Video Gallery Photo Gallery
Subscription Blog Signin Register
Logo
Thursday, November 14, 2019 10:26:01 PM
Follow Us On: Facebook Twitter Twitter Twitter Twitter

Industrial Policy

For Promoting New Investments

By
15th-Nov-2019       
Share
  • Twitter
  • Google+
  • Save
  • E-mail
  • Print
Comments
Share your thought
Post a comment »
Read all () »

Jomo Kwame Sundaram and Anis Chowdhury :
Industrial policy refers to the promotion of new investments and technology by governments to encourage the growth and development of specific economic sectors. However, scepticism persists about the feasibility and desirability of using industrial policy, especially of the ability to 'pick winners', often accused of leading to 'propping-up failing industries'.
The debate over industrial policy has arguably been among the most ideological and contentious in the history of economics. Sometimes, the same evidence is cited in support of opposing industry policy positions.
However, differences in opinion on the desirability of industrial policy are not simply ideological. They are also due to genuine differences in theoretical and related perspectives as well as perceptions and interpretations of particularly influential experiences.
For many, industrial policy only refers to promoting manufacturing activity because of its special features, advantages and benefits - especially in terms of its potential employment, productivity and linkages - compared to agriculture and services.
Others insist that industrial policy should be 'general' (or 'functional' or 'horizontal'), rather than 'selective' ('sectoral' or 'vertical). They argue that the state should concentrate on providing education, infrastructure and other public goods, not only because of their ostensibly general benefits, but also because they are likely to be under-provided by the market.
Historically, and even now, industrial policy has been used by developed countries. For instance, the US and even Britain have historically had much higher degrees of protectionism compared to developing countries in recent decades, even before trade liberalization.
Now, although industrial policy is back on the agenda of developed countries, by restricting trade policy interventions, preferential finance and technology transfer agreements, developed countries are, in effect, 'taking away the ladder' for others, both developing countries and 'transition economies', seeking to accelerate economic transformation and growth.
Industrial policy was dismissed as heretical, 'ideological' and passé, with the ascendance of neo-liberalism promoted by policy conditionalities for emergency credit support from the Bretton Woods institutions (BWIs) - the International Monetary Fund (IMF) and the World Bank.
Their so-called 'Washington Consensus' cast industrial policy in a bad light; instead, they insisted on market-oriented policies, ostensibly based on international specialization determined by comparative advantage. Nevertheless, debates continue over notions of comparative advantage, however unconventional, e.g., 'dynamic' comparative advantage.
Recent renewed interest (see OECD) in industrial policy is partly due to growing incontrovertible evidence that both developed and developing economies thus accelerated economic progress. Also, failed industrial development in much of the developing world and deindustrialization in Africa, after more than three decades of neo-liberal policies, have prompted such reconsideration.
There is now grudging recognition, particularly after the spectacular progress of several fast growing East Asian economies, including China, that industrial policy - both investment and technology measures - has been crucial to their development successes.
Plurilateral organizations of developed economies, such as the OECD, which previously argued against industrial policy, now concede the role and potential of industrial policy for sustainable development, seeking to influence the debate for their own ends.
Even the World Bank has begun to operationalize 'building competitive industries', i.e., industrial policy by another name. However, its emphasis tends to be on 'horizontal' or 'general' industrial policy, eschewing more pragmatic and feasible selective promotion.
Implementation key
While some economic activities may help achieve particular policy goals, they may not contribute to others - e.g., investments which can generate mass employment, may not offer much scope for technological learning - thus underscoring the importance of sequencing.
Undoubtedly, some developing countries have been more successful than others in using industrial policy, e.g., due to different circumstances, pragmatic sequencing, better discipline or even good luck. Success has been achieved, often despite unfavourable conditions, usually when policies have been creatively and pragmatically implemented.
But how should industrial policy be implemented? While industrial policy should be realistic, this does not mean avoiding all risk, as some risk taking is typically associated with entrepreneurship and innovation. Careful comparative evaluation of available options often yields useful lessons.
There is no general industrial policy formula or approach for all time and in all circumstances. Rather, it needs to be elaborated and implemented with full consideration of existing challenges, conditions and constraints, and adapted appropriately to changing circumstances.
Some opponents insist that even if industrial policy may once have been important for development, there is no longer the needed policy space, especially with the 'one size fits all' 'single commitment' of the World Trade Organization (WTO) since 1994. Many note how other aspects of globalization, including financialization, constrain national governments.
Undoubtedly, a large number of bilateral, regional and other plurilateral treaties have been concluded among countries, shaping, but also undermining general trade liberalization. While WTO rules and other free trade agreements (FTAs) limit the role of trade and other related policies in the industrial policy arsenal, they still allow legal use of many industrial policy measures; also, even previously agreed tariffs can be renegotiated.
Although unaffordable to poorer developing countries, subsidies are not prohibited by WTO rules. Bilateral and plurilateral trade agreements as well as bilateral investment treaties (BITs) can also be revoked or renegotiated. Such agreements and other dimensions of globalization are not irreversible as Trump, Brexit and other recent developments remind us.
Policy space
Clearly, recent changes in the global environment have not made industrial policy impossible although policy space, or the scope for alternative intervention options, may have been diminished. So, what can developing countries do?
Those who try to elaborate industrial policy in relation to globalization argue that developing country governments should develop their economies by inducing relocation of appropriate segments of 'global value chains' (GVCs) in their economies.
This typically involves attracting relevant foreign direct investment (FDI) for capital, technology, management, expertise and market access. But FDI is a double-edged sword, also undermining economies and development prospects of developing countries.
Sustainable progress requires appropriate and pragmatic industrial policy, which should not be dogmatic, or determined inflexibly by some supposed theory. Instead, options appropriate to circumstances, addressing real constraints and prospects, should be critically considered.
Productive capacity and capability building is critical and needs to be facilitated and coordinated by responsible governments. To be effective, industrial policy design and implementation need to consider both government capabilities and political will.
As no 'one size fits all', governments of developing countries should pragmatically and flexibly use appropriate industrial policy to accelerate sustainable development instead of the conventional wisdom associated with the neoliberal Washington Consensus in recent decades.
(Jomo Kwame Sundaram, a former economics professor, was United Nations assistant secretary-general for economic development. He is the recipient of the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought, and a member of the Economic Action Council. Anis Chowdhury, a former professor of economics at the University of Western Sydney, held senior United Nations positions from 2008 to 2015 in New York and Bangkok).

Tariff
Add Rate

News Archive

Inside The New Nation

Entertainment »

Momtaz is delighted for getting Nat’l award


Sheikh Arif Bulbon :Last week was a memorable week for folk legend of the country Momtaz Begum. This Parliament Member received two national recognitions. For the first time, she became the top taxpayer of the country in category of singer. This information was disclosed on Wednesday. Finance Minister AHM Mustafa ...

Football »

Chelsea win battle to sign Australian women's football icon Kerr


Australian striker Sam Kerr will test herself at the top level of European football after impressing in her homeland and the United States as she joined Chelsea on Wednesday.The 26-year-old Matildas captain - who scored five times in this year's World Cup as the Australians reached the last 16 - ...

Editorial »

People need safe and reliable train service


IN Brahmanbaria's Kasba, Dhaka-bound inter-city train Turna Nishita Express by breaching traffic signal hit Chattogram-bound another inter-city train Udayan Express on Tuesday leaving 16 people dead and injured another 70 people. The nation was shocked witnessing the fatality of the accident. Different quarters have raised voice for not modernising the ...

International »

Senator Kamala Harris promises to lift cap for employment based green cards in US


PTI, Washington :Indian-origin US Senator Kamala Harris is in favour of lifting the existing per-country caps for employment based green cards, her presidential campaign has said, asserting that 95 per cent in line for legal permanent residency are primarily from India, China, the Philippines and Vietnam.Ms Harris' presidential campaign, which ...

City »

BNP Secretary General Mirza Fakhrul Islam Alamgir, among others, at a rally of professionals in front of the Jatiya Press Club on Tuesday demanding unconditional release of BNP Chief Begum Khaleda Zia.


Football »

Michael Brentan (front) of Italy looks to break past Pedro Lucas (center) of Brazil and Daniel Cabral (right) of Brazil during the FIFA U-17 World Cup quarter-final match between Italy and Brazil at the Olympic Stadium Goiania in Goiania, Brazil on Monday.


Football »

Ronaldo's fitness and attitude both under the spotlight


Cristiano Ronaldo's fitness and attitude has come under the spotlight after he reacted angrily to being substituted during Juventus' win over AC Milan and coach Maurizio Sarri said the 34-year-old had been nursing a knee injury for some time.Ronaldo now faces two matches with Portugal where he will want to ...

Editorial »

An innocent`s imprisonment


AFTER 27 days of imprisonment being wrongfully arrested by police, 19-year-old Rajan walked out on Monday. Police arrested Rajan Bhuiyan instead of Habibullah Rajan from the same village Gopalnagar, Brammanpara of Cumilla. The Dhaka Speedy Trial Tribunal ordered the Dhaka Central Jail authorities to set Rajan free. The tribunal also ...

Business & Economy »

Md. Monzur Mofiz, AMD of ONE Bank Limited, inaugurating its Banking Booth at Basundia crossing at Jashore sadar recently. High officials of the bank, Rezaul Islam Khan Russel, local Union Parishad Chairman and elites were also present.


Entertainment »

When Koushani shot daring scenes 180 feet deep inside a mine


Koushani Mukherjee who had to shoot some daring action sequences in her recently released 'Jaanbaaz' says despite the tough scenes she didn't use any dummy. "I didn't use a dummy. I gave my 100 per cent to the action scenes. It was over 40°C there and to add to our ...

Entertainment »

Kashmira Pardeshi to pair up with Bobby Simha


We had earlier reported that actor Bobby Simha will be playing the lead in an untitled film directed by debutant Ramanan Purushothama. The latest is that actress Kashmira Pardeshi, who made her debut in Tamil, in Sivappu Manjal Pachai opposite GV Prakash has been roped in played the female lead ...

Editorial »

Save the Sundarbans, it will protect us


THE Sundarbans, now most neglected world's largest mangrove forest, again has protected the country from the mighty storm 'Bulbul'. Not only the Bangladesh, the Sundarbans this time has also saved neighbouring India's West Bengal from an obvious deadly disaster.  The forest, renowned for its selfless deeds from the prehistoric time, ...

Entertainment »

Ananya Panday shines bright on cover of magazine


Ananya Panday is creating waves ever since her debut. The actress is shining bright on the November issue of a leading magazine. Earlier today, the new song from her upcoming movie was released and we can't stop grooving to the tunes! Brides Today magazine took to their social media to ...

Football »

Messi will stay at Barcelona for another five years


Barcelona president Josep Maria Bartomeu has insisted talisman Lionel Messi could remain at the Nou Camp for at least another five years.The Argentinian is under contract until 2021 but has a clause inserted in his deal which could see him leave the Nou Camp for nothing in the summer.And although ...

Football »

Messi will stay at Barcelona for another five years


Barcelona president Josep Maria Bartomeu has insisted talisman Lionel Messi could remain at the Nou Camp for at least another five years.The Argentinian is under contract until 2021 but has a clause inserted in his deal which could see him leave the Nou Camp for nothing in the summer.And although ...

 
Items that you save may be read at any time on your computer, iPad, iPhone or Android devices.
 
Are you new to our website? Do you have already an account at our website?
Create An Account Log in here
Email this news to a friend or like someone
Email:
Write a comment to this news