https://arab.news/m6tt7
Since the 2008 global financial crisis, industrial policy has crept back into respectable economic discourse after decades of being derided as misguided interventionism, particularly for developing countries. But its renaissance is being led by the advanced economies that once rejected it, with the push into artificial intelligence and renewable energy hastening the shift.
For developing countries, this revival presents new opportunities, provided they can manage three major constraints: a weak enabling environment (a lack of infrastructure and other necessary inputs), limited autonomy in policymaking, and fiscal constraints. Industrial policy is often understood in terms of subsidies and tax breaks, but for many developing economies far more than these instruments must be put in place. Without reliable digital connectivity, dependable power supplies, trusted data protection regimes and a skilled workforce, ambitions for AI-led growth will amount to little more than rhetoric.
Developing countries’ policy options are also constrained because World Trade Organization rules limit the use of instruments — export-contingent subsidies, local content rules and technology transfer requirements — that once underpinned industrialization success stories, namely in East Asia. At the same time, major economies continue to march to their own drummer, with the US, the EU and China deploying industrial policy at scale, often bending or breaking the very rules that others are expected to observe. The asymmetry is obvious: of more than 2,500 industrial policy measures introduced globally in 2023, these three economies accounted for almost half.
