has been indispensable , and the evidence on the critical importance of what you export to your development trajectory is clear .
Export-led industrial policy comes across to many as highly technical and complicated , including many well-versed global leaders and development practitioners . Yet actually it is a simple concept : it is merely the coordination of policies across governments to ensure the facilitation of investment in sectors that have the greatest potential to develop an economy by growing the number of value-adding , job-creating , foreign exchange-earning businesses . Whether Chilean wine , Vietnamese electronics , British textiles in the 1600s , Israeli agriculture or UAE ’ s tourism , these all required the coordination of enablers like energy , land , roads , market development , technology , investor facilitation and regulations .
Countries in which these align around the right sectors have often transformed . Clearly , industrial policy is the tool to allow this if led by a responsible head of government . It is now increasingly established that industrial policy is needed to manage and address the market and government failures that we all know are perverse in every economy of the world , let alone low-income countries ( LICs ) and lower-middle-income countries ( LMICs ).
However , many global policymakers have shied and continue to shy away from it . There are many reasons given for this – all of which are weak . Some people still argue that the government is incapable of picking winners , despite the evidence that it can back winning sectors , even with large institutional limitations . Some argue that it may be a route to elite capture and corruption , even though elite capture and corruption are already there without strong industrial policy and is often the result of the vacuum caused by policy incoherence . Some argue that it is unfair to favour certain investors over others – although the reality is that one of the functions of government is to arbitrate these issues : limited resources mean you cannot , for example , develop all the roads in a country at once , meaning that government decisions will favour some firms and sectors over others either way . Another reason given is that industrial policy is a coordination job , and this is just too hard , so many think it is best avoided . Government agencies ’ inability to provide policy coherence to private investors in the most transformative sub-sectors is exactly what maintains the status quo and undermines all other development efforts , whether SDGs , RCTs , technology rollout , democracy & improved governance or climate change .
Lately , a new argument has emerged , which is based on the misguided concerns that Africa is suffering from pre-mature de-industrialisation – a weak argument that ignores the reality that industrial policy has essentially been missing for the past 40 years in African countries and many other LICs and LMICs .
Finally , others argue that China ’ s economic model and automation will undermine the success of the industrial policy . However , China ’ s large investment in Ethiopian industrial parks refutes the former claim , while the lack of evidence of the negative impact of automation on job creation refutes the latter . Even if automation did lower job creation , the answer is to double down on an industrial policy that gives you a bigger chance to create jobs and counter any potential negative impacts of automation .
Despite all the technical arguments against export-led industrial policy being refuted and its importance being accepted by mainstream global and local policymakers , industrial policy is still being shied away from . It is important to understand the reasons why an industrial policy is key to preventing African nations and other LICs / LMICs from continuing to be left behind by the global economy .
There are two main reasons . First is the legacy of the Structural Adjustment Programmes and Washington Consensus . As Cramer , Okubay and Sender document , African policymakers – particularly in Ministries of Finance and Development Planning , President ’ s Offices and Ministries of Trade and Industry – have been influenced and trained to deprioritise the implementation of a robust industrial policy . I have worked with Departments of Industry in countries like Malawi , Liberia and Guyana , and engaged in various others and seen how they are es-
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