Industrial Policy in Developing Countries

Industrial Policy in Developing Countries

Failing Markets, Weak States

Tilman Altenburg and Wilfried Lütkenhorst

Against the backdrop of persistently high levels of poverty and inequality, critical environmental boundaries and increasing global economic interdependence, this book addresses the role and impact of industrial policies in developing countries. Accepting the reality of both market failure and policy failure, it identifies the conditions under which industrial policy can deliver socially desirable results. General conclusions on the political economy of development are complemented by country case studies covering Ethiopia, Mozambique, Namibia, Tunisia and Vietnam.

Chapter 8: Comparative insights into success and failure

Tilman Altenburg and Wilfried Lütkenhorst

Subjects: development studies, development economics, economics and finance, development economics, industrial economics


In this chapter, we expand on the country studies presented in Chapter 7 and provide a complementary comparative perspective. Whereas the earlier country-specific sections were geared at developing the main national storylines in terms of the evolution and characteristic approach of industrial policy management, we now adopt more of a bird’s eye view, compare key elements of country policy performance, distil some common denominators and seek to gain insights into what exactly determines success or failure. In doing so, we will draw on illustrative examples of policy instruments applied, which to some extent go beyond the more general narratives of Chapter 7. After a synoptic view at the mixed economic performance of the countries reviewed in this book (Section 8.1), the following sections focus on specific elements of industrial policy that – in various forms and degrees – remain to be addressed in all countries. We group these challenges around the questions of business fragmentation as a constraint for inclusive growth; interaction between the government and the private sector; the pursuit of a national transformation project; mainstreaming of green growth; the balance between planning and search processes; and the requirements of effective policy implementation. In Table 8.1 below, we compare the performance of the countries reviewed in Chapter 7 with regard to GDP growth, share of MVA, and overall competitiveness. The data underline the big differences in terms of competitiveness – ranging from rank 80 for Tunisia to 137 for Mozambique – and industrialisation – with shares of MVA in GDP between 4.2 per cent for Ethiopia and 23.

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