Industrial policy has returned to the agenda of many developed countries. In particular, the United States has been actively implementing strategies aimed at supporting key industries. However, for developing countries, the issue of adopting such approaches remains controversial. The main argument against it is the risks associated with insufficient institutional development.
Historically, developed countries have used industrial policy to accelerate economic growth. This approach ensured increased productivity and enhanced competitiveness. Developing countries strive to adapt these practices, but face challenges. The lack of strong institutions limits the effectiveness of policyand can lead to inefficient resource allocation.
An example of successful industrial policy implementation is the experience of China. It demonstrated that a combination of state support and private initiatives can stimulate the economy. However, the Chinese model requires significant financial and managerial resources. For many developing countries this level of support remains unattainable.
According to the UNCTAD 2024 report, global economic conditions are becoming more complex. The overall growth rate of global GDP stabilized at 2.7% from 2023 to 2025. This is below pre-pandemic levels, which increases economic pressure. In this context, developing countries need a new strategy to achieve sustainable growth.
The return of industrial policy is associated with changes in geopolitical situations and economic thinking. In recent years, the focus has shifted from free markets to a more active role of the state. This shift is driven by the need to strengthen national economies in the face of global challenges. Developing countries must take these changes into account when forming their own strategies.
Industrial policy can stimulate investments in innovation and infrastructure. However, clear control and management mechanisms are needed for its successful implementation. The absence of such mechanisms increases the likelihood of corruption and inefficient resource use. Historical examples show that such risks can undermine trust in government initiatives.
Economic growth in developing countries is also constrained by high levels of public debt. Since 2020, state debts have sharply increased due to the pandemic. The report highlights that the combination of low economic growth and high interest rates increases the debt burden. In this context, industrial policy strategies must take into account the need for long-term financial stability.
Another important task for developing countries is to support small and medium-sized businesses. Without them the economy loses flexibility and growth opportunities. Industrial policy should include measures aimed at developing entrepreneurship and creating new jobs. This is especially relevant against the backdrop of rising unemployment and declining purchasing power of the population.
The UNCTAD report notes that the return of industrial policy requires consideration of climate challenges. Record temperatures, floods, and droughts were recorded from 2023 to 2024. These phenomena put pressure on the economy and require active measures. Integrating climate measures into industrial policy helps to reduce risks and strengthen economic resilience.
A positive example of industrial policy usage is investment in green energy. The transition to renewable energy sources can stimulate growth and reduce dependence on fuel imports. Developing countries rich in natural resources can use them to create new productions and technologies. This requires a comprehensive approach and long-term planning.
However, adapting industrial policy for developing countries requires caution. Incorrect resource allocation can lead to crises. The report emphasizes the importance of coordinating economic measures and ensuring institutional support. Developing countries need to strengthen internal institutions to increase the effectiveness of implemented policies.
The experience of developed countries shows that industrial policy can be successful. But without proper preparation, it can become a source of problems. The examples of China, the US, and other countries demonstrate the importance of a strategic approach. Developing countries should learn from these examples and adapt them considering their own specificities.
In conclusion, the return of industrial policy is an opportunity for developing countries. But successful implementation requires a comprehensive approach that takes into account economic, social, and environmental aspects. Only in this way can sustainable growth and development be ensured in the current conditions.
Prepared by: Alen Serik (expert of the Ec[ON]omyKZ online publication) specifically for www.economyKZ.org
