The importance of manufacturing in economic development: Past, present and future perspectives
Wim Naudé & Adam Szirmai
#2012-041
The structural transformation of a traditional economy dominated by
primary activities into a modern economy where high-productivity
activities in manufacturing assume an important role remains a defining
feature of economic development. The challenges to attain such
structural transformation may be more daunting than in the past. Based
on a recent UNU-WIDER/UNU-MERIT project on industrialization this paper
discusses the past and present roles of the manufacturing sector in
structural change and analyses new challenges facing industrial policy.
New challenges discussed in the paper include: (i) integration into
global value chains, (ii) the shrinking of policy space in the present
international order, (iii) the rise of the Asian driver economies, (iv)
new opportunities provided by resource-based industrialization, (v) the
accelerating pace of technological change in manufacturing, (vi) how to
deal with jobless growth in manufacturing, (vii) creating adequate
systems of financial intermediation, and (viii) how to respond to the
threats of global warming and climate change. We argue that structural
transformation of developing countries requires a type of manufacturing
sector development that can deliver high-quality employment, that is
aligned with the international division of labour, and that would not
lead to autarky, or a reversal of global gains in establishing openness
in trade. Industrial policy can make valuable contributions in this
regard if the lessons of the past and the challenges of the future are
sufficiently taken into consideration.
Keywords: manufacturing, industrialization, growth, development,
structural change, industrial policy
JEL classification: L60, O25, O40