The demand for industrial policies has surged in recent years, as governments seek blueprints to navigate the ever-changing global dynamics. Following an extended period during which industrial policy had fallen out of favour, many countries are now trying to replicate success stories, such as those of the Asian Tigers.
The global economy has undergone significant changes in recent years. Factors such as the fragmentation of production, stricter international trade and investment regulations, and the emergence of new economic powers have all contributed to reshaping the competitive landscape. Recent trends such as the rise of digitalization, the demand for green technologies, the growth of conscious consumerism, and the shocks from the COVID-19 pandemic have further added to the uncertainty faced by many economies about how to develop industrial sectors that are resilient, competitive and adaptable enough to thrive in this new environment. At the same time, there is growing recognition of the importance of inclusive and sustainable industrialization trajectories, as advocated by the Sustainable Development Goals (SDGs).
Designing an industrial policy in the 21st century is a complex task. There is no one-size-fits-all policy. Industrial policies are highly country- and time-specific, with a responsibility to contribute to countries’ wider development goals, while focusing on the particular needs of a sector and taking global trends and expected future developments into account. Furthermore, policies need to be sufficiently flexible to adapt to changing circumstances.
The capacity for modernization, competitiveness and sustained progress in the industrial sector does not happen automatically; it hinges on deliberate industrial policy actions. In today’s dynamic global economic landscape, strategic interventions are necessary to guide structural changes in the economy towards productive activities with the highest potential. There has been a renewed focus on industrial policy in recent years, placing it prominently on the global political agenda. This revival is driven by the recognition of the crucial role played by the industrial sector in economic resilience and growth, spurred by contemporary challenges and recent global events. Countries are increasingly adopting policies that not only strengthen their industrial base but also address broader economic vulnerabilities and strategic dependencies.
The global financial crisis, rapid technological advancements, the COVID-19 pandemic, the urgency of achieving a green transition, and escalating geopolitical tensions have highlighted the need for targeted government intervention in the economy. These developments have emphasized the importance of adapting industrial sectors to promote innovation, environmental sustainability, and technological adaptation for a resilient future.
The EQuIP toolkit is an important component in enhancing the quality of industrial policies by ensuring they are evidence-based.
