Industrial Policy in Sustainable Development Strategies

Transcription

1 TOWARDS A RETURN OF INDUSTRIAL POLICY? ARTNeT SYMPOSIUM JULY 2011 ESCAP, BANGKOK Industrial Policy in Sustainable Development Strategies Manuel F Montes, DESA

2 Some Direct Precedents Emel Memis and Manuel F..Montes, (2008) Who s Afraid of Industrial Policy. Policy Discussion Paper. UNDP Asia-Pacific Trade and Investment Initiative, Colombo. Fu, Xioalan (2011) Key Determinants of Technological Capabilities for a Green Economy in Emerging Economies. Background paper for World Economic and Social Survey New York: UNDESA. Gallagher, Kelly, J.R. Siegel, and Aaron Strong (2011) Harnessing Energy-Technology Innovation in Developing Countries to Achieve Sustainable Prosperity. Background paper for World Economic and Social Survey New York: UNDESA. Lewis, Joanna I. (2007) Technology Acquisition and Innovation in the Developing World: Wind Turbine Development in India and China. Studies in Comparative International Development, 42, pp Reinert, Erik S. (2007) How Rich Countries Got Rich and Why Poor Countries Stay Poor. London: Constable United Nations (2011) World Economic and Social Survey. New York: UNDESA. Wilson, Charlie and Arnulf Grubler (2011) Lessons from the History of Technology and Global Change for the Emerging Clean Technology Cluster. Background paper for World Economic and Social Survey New York: UNDESA.

3 Main Messages If nothing else, building green industries and developing green technology potentially good case for industrial policy The case for industrial policy stems from uncertainty in private return and limited availability of non-speculative financing in green industries and technologies Due to private sector pressures and market imperfections, states already engage in non-purposive industrial policy interventions. Industrial policy involves targeting justified from development objectives Industrial policy imposes stresses and strains on international trade regime

4 Plan Define industrial policy Identify sustainable development sectors Elements of industrial policy illustrate by example Discuss some implications for international trade regime

5 Industrial Policy Sectoral, not horizontal, intervention Horizontal: education for all, import surcharge Selective and sectoral: engineering education, cascading tariff structure, selective credit allocation State intervention, not sum of private politics Getting prices wrong (compared to current world prices) Purposively justified (eg. incentives for foreign investors) Always the outcome of politics and policy debate, but some countries are better at relating long-term national objectives to programs and policies

6 Industrial Policy cont. Mediates relationship between state and production units (private sector most countries but including public enterprises) IP as economizing on rent-seeking support Redeployment of private capital Trade liberalization as private capital destruction Not just in manufacturing Agriculture Services

7 Industrial Policy cont. 2 Candidate sectors Higher (labor) productivity Increasing and constant returns to scale Following life and death pattern successful private companies Initial specialization in new, increasing returns to scale sector Firm locks itself into a sector that transitions into a diminishing returns sector Trade liberalization induced specialization concentraded in diminishing returns sectors (Reinert) Sliding down the declining unit cost curve as scale increases Increasing returns to scale obstacle to equilibrium economic models

8 Sustainable Development All-or-nothing concept (UN Rio 1992) Economic and social development consistent with environmental protection and renewal New climate change urgency, not present in 1992 Subject of international negotiations toward Rio+20 (June 2012) MDGs - mainly targets on social development, less explicit targets on economic and environmental (except MDG7) objectives

9 Sustainable Development cont. Development as poverty reduction Development as productivity increase Structural adjustment as development strategy but now under cloud Non-targeted, generalized, liberalization State intervention confined to social development Private investment reliant on prevailing international price vectors Sustainable development as choice of Industries and sectors Technologies Sustainable development requires industrial policy

10 Sustainable Development Sectors Energy Supply (wind, solar, ) End-use Agriculture green revolution was not green Resilient Infrastructure and Disaster response

11 Clean Tech as New Electronics Sector (Measured by Patent Activity) Source: WESS 2011

12 Industrial Policy and Innovation Process Source: UNDESA (2009)

13 Actors in Innovation Process

14 Bangladesh Off Grid Solar Home Systems (SHS) Comparative advantage sun Stand-alone DC power supply consisting of solar panel, charge controller, battery for lights, mobile phone charger, radios, TVs Feasibility Pre-existing micro finance institutions Pre-existing standardized technical and vocational system in Diploma in Engineering Superiority of solar PV over kerosene Support from domestic and international institutions (Industrial Policy)

15 Splendor of Increasing Returns Source: Gallagher et al (2011)

16 Bangladesh Off Grid Solar Home Systems (SHS) 80 per cent rural households lack electricity Liberalize (remove import duty and value added tax (!) on) solar photovoltaic panels Supply of Diploma in Engineering graduates to sell, install, and maintain SHS IFC financing to extend payback period for customers; WB financing for Rural Electrification and Renewable Energy Development Program

17 Bangladesh SHS Takes Off Long wait - long period of slow growth, then take off New income opportunities Improved store lighting, charging cell phones New jobs installing and maintaining SHS, including for rural women to maintain repair and assemble SHS parts New manufacturing capabilities export of batteries to Nepal and Bhutan Start-up of solar panel assembly plant

18 Solar PV in China and Kenya China rapid acquisition, assimilation, learning, manufacturing solar panels for export, not domestic markets, responding to domestic subsidies in Germany, Italy, Japan, and US Emergence of large international companies (Suntech, Yingli, JA Solar) Kenya Solar PV SHS fully commercial, little government support even in product standards comparable scale to Bangladesh (300k units annually), main market rich rural households quality problems lack of domestic technical capability and standards Components still imported, though there are three domestic manufacturing companies in comparable technology

19 Choosing Winners, Choosing Losers Uncertainty can be narrowed in developing countries Adaptation (and further development) of existing technologies Reverse engineering Constraints from TRIPS (global trade regime) Need to build domestic technology acquisition and development capacity Universities, research institutes and domestic companies Targetted to specific products and technologies In the best tradition: initially domestic production, ultimately for export

20 Stresses and Strains on Trade Regimes Industrial policies are restrained by global trade regime and FTAs Proposals to narrow tariff ranges under NAMA negotiations National treatment for foreign companies and their intellectual property > main early policy proposal is (global industrial policy): zero tariff for environmental goods and services Comparative disadvantage US steel workers complaint on China solar PV (interest subsidies, land subsidies) US complaint over feed-in tariff policies in Canada

21 Sustainable Development Oriented International Trade Regime? As outcomes of dispute resolution actions Facilitating faster green technological diffusion International regimes for reasonable compensation International committees on technology development and compulsory licensing actions Domestic policy space for industrial policy

22 Thank you