Summary of industrial policy options

Intermediate objective Policy measure Relevant SDG/

target To ensure the realistic design

and flexible implementation of an industrial policy strategy

• Build effective state-business relations through institutionalized dialogue and cooperation between the relevant state agencies and private manufacturing firms and their sectoral associations

• Put in place a mechanism for the monitoring, evaluation and accountability of policy measures

• Identify the most binding constraints for building productive capacities in the manufacturing sector and the development of specific activities that drive structural transformation of entrepreneurs to invest in manufacturing capacities

• Provide fiscal incentives for investment in strategic manufacturing sectors and for innovative new activities, linking these incentives closely to the undertaking of additional investment and the reinvestment of retained profits

• Ensure a growing and reliable supply of raw materials and intermediate inputs to strategic sector, by coordinating agricultural and industrial policies, providing industrial policy support to domestic ancillary industries and by setting up input supply enterprises, including for bulk purchases of imported inputs

• Grant privilege to long-term credit for investment in strategic manufacturing sectors in the design of central bank refinancing facilities and reserve requirements

• Provide public credit guarantees covering long-term loans for investment in strategic manufacturing sectors and innovative activities, and engage in public-private joint financing of such projects, to share credit risks

• Provide interest subsidies for the financing of investment in strategic sectors and innovative activities that may have large external benefits for structural transformation high social rates of return and complementary and cumulative effects

• Establish national and/or sector-specific development banks with a mandate to assume specific credit risks related to investment in innovative activities, which commercial banks are unable to assume but have a potential to advance structural transformation

1.b capacities of SMEs and firms owned and manged by women

• Introduce a selection and monitoring process for the provision of special credit lines by the national or sectoral development banks for enterprises with a high potential for growth and diversification

8.3 9.3 To generate cumulative effects

and supply chain integration and raise the effectiveness of infrastructure investments

• Provide infrastructure and public services in such a way that they foster the agglomeration and clustering of manufacturing activities, including by the creation of industrial parks dedicated to specific manufacturing activities

7.a 7.b 9 To ensure that technical and

management skills meet the needs of firms in the expanding manufacturing sector and evolve in line with growth of the capital stock and technological progress

• Align the curriculum and instruction of technical and vocational education and training (TVET) institutions with the specific requirements of the strategic sectors

• Increase the number and enrolment capacity of TVET institutions and upgrade the competences of their teaching and training staff

4.3/4.4/

4.5/4.6/

4.7 8.1/8.5/

8.6

Intermediate objective Policy measure Relevant SDG/

target To harness the exports of

manufactures for faster structural transformation

• Integrate industrial policy and a proactive trade policy for strategic insertion into the international economy

• Use all the flexibilities provided under multilateral trade rules to promote manufacturing exports with instruments such as export subsidies and subsidized trade finance

• Create or strengthen export promotion agencies that provide information on international market opportunities and related marketing support

• Raise awareness in SMEs of the opportunities offered by preferential market access for LDC exports and enable them to use these opportunities to the largest possible extent

• Use FDI and integrate into GVCs as entry points for export activities

• Consider the usefulness of export taxes or export bans on raw materials to incite their domestic processing before export

• Avoid currency overvaluation and maintain a stable real exchange rate

1a/1b

• Allow the duty-free import of intermediate inputs and machinery and equipment and facilitate the financing of such imports

8.1/8.2/

• Use the policy space available to temporarily protect infant industries against overwhelming international competition

8.1/8.2/

8.3 10.a To harness FDI for the creation

of productive capacities

• Attract foreign investors to the manufacturing sector, including with fiscal advantages and the creation of EPZs, ensuring that the benefits from FDI are equal to the fiscal cost and that incentives do not discriminate against domestic firms

• Encourage foreign firms to transfer knowledge and technology to domestic industries

• Avoid excessive reliance on low wages for attracting FDI

8.1/8.2/ To optimize the impact of FDI

on structural transformation

• Incite foreign investors to engage in production linkages with domestic firms, including through measures such as local content requirements

• Give priority to attracting FDI in manufacturing subsectors where local supply capacities already exist or are developing thanks to other sectoral and horizontal support policies

• Support FDI in the form of joint ventures with domestic partners

1.1/1.2

Intermediate objective Policy measure Relevant SDG/

target To make the participation of

local SMEs in global value chains work for sustained structural transformation

• Support the provision of managerial training to SMEs participating in GVCs to improve their capacities to negotiate with international lead firms and to gain influence in decision-making on products and processes

4.5 4.b/4.c

8.2

• Devise specific horizontal or industrial policy measures to support SMEs to engage in GVCs at gradually higher levels of skill and technology sophistication

• Enable local firms engaged in GVCs to suggest options to lead firms for increasing the use of domestically produced raw materials or intermediate goods, including by measures to strengthen domestic supply chains

8.2/8.3 9.3

• Ensure the adherence of partners in GVCs to strong labour and environmental standards and establish related monitoring institutions

8.8 8.a