The creation and upgrading of production capabilities together with the expansion and diversification of markets for goods are necessary to drive industrial development that can foster economic growth and structural transformation. Participants agreed on this at an event organized by the United Nations Industrial Development Organization (UNIDO) in cooperation with the United Nations Conference on Trade and Development (UNCTAD).
Bringing together policy experts, academics, and government representatives, the event was structured around presentations of two recent UNIDO reports, namely the ‘Industrial Development Report 2018’ and ‘Structural Change for Inclusive and Sustainable Industrial Development’.
The participants explored the role of demand in driving industrial development and the pre-requisites for rapid industrial growth, and structural change at different stages of development.
It is clear that demand is so important because production needs markets said Jörg Mayer, UNCTAD Senior Economic Affairs Officer, who added that probably the most important two factors behind successful structural transformation are, first, strong market demand and, second, the policy space needed to support the industrial restructuring that is required to respond to that demand.
Concrete examples of the challenges of opportunities of demand-driven industrialization were explored during the event.
For example, the domestic market in Rwanda is still relatively small for industrial consumption but with sub-regional and continental integration, the issue of demand can be effectively addressed, said Ambassador François Xavier Ngarambé, Permanent Representative of Rwanda to UNIDO. He added that the recent Continental Free Trade Area (CFTA) combined with trade facilitation measures across corridors can be a key ingredient of more intra-African trade, and that, in order to maximize the benefits of the CFTA, Africa must invest in industrialization with emphasis on value addition on many resources. This will contribute to creating much-needed jobs for the young African generations, he said.
“The role of government is critical. Governments should put in place the conditions needed for industrialization and take the lead to stimulate action. Recent investments in car assembly (Volkswagen) and computer assembly (Positivo) are clear examples that this approach is working,” said Ambassador Ngarambé.
The participants also looked into different policy options to create synergies between demand and supply in order to achieve industrialization that is socially inclusive and environmentally sustainable.
“Industrial policy will not be effective unless aggregate demand is taken into account. A broader macroeconomic strategy is important for industrial development to work,” said Jayati Ghosh, Professor of Economics at the Jawaharlal Nehru University in New Delhi, India.
Steve MacFeely, Head of the Statistics and Information Branch at UNCTAD, added that hetergeneous policies require interconnected data and statistics to support policy formation and assessment. Stressing the increasingly close interlinkages between manufacturing and services, he pointed to the risks of looking at one in isolation from the other.
Alejandro Lavopa, UNIDO Research and Industrial Policy Officer, noted that technological innovations and “massified” environmental goods will be necessary to ensure the sustainability of industrial development. He also added that International policy coordination will also be needed to address global environmental challenges and to achieve the Sustainable Development Goals.
Read and download the reports Industrial Development Report 2018 and Structural Change for Inclusive and Sustainable Industrial Development.
Original source: UNIDO
Published on 28 June 2018