Industrial Policies in Lower Middle Income Countries

Francesca Guadagno, Policy Officer, Economic Transformation and Trade

4 December 2014

Second Meeting of the E15 Expert Group

• LMICs underwent structural change from agriculture to manufacturing.

• LMICs are specialized in low-tech industries, but medium and high-tech manufacturing industries play an increasing role.

• 2 challenges:

Increasing productivity in labour-intensive industries employment creation

Diversify production structures towards increasingly sophisticated products avoid competition with LICs, improve job quality, …

Some characteristics and challenges of LMICs

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• Case 1: Pharmaceuticals in India

Patent reform allowing for low-cost production of patented drugs + knowledgeable SOEs

• Case 2: Aerospace in India

Offset policy + cluster policy

• Case 3: Automotive in Indonesia

LCR with insufficient incentives for capabilities accumulation for auto-parts production

Capabilities as condition for success

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• Capabilities’ accumulation as an important objective of IP in LMICs.

How international trade policy regimes can facilitate this?

Opportunities for imitation? (role of patent reform in Indian Pharma)

• There are some exceptions and grey areas (e.g. offset policies in Indian aerospace industry).

• Innovation policies are common in HICs and UMICs, but are the least exploited area of IP in LMICs.

Implications for international trade policy regime

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