Gaidar Institute experts on the current trends in global industrial policy

The discussion of industrial policy in Russia has recently become topical, which is primarily due to the need to achieve technological sovereignty and, as a consequence, the need to prioritize and develop certain industries.

The choice of priorities for sectoral development most often takes place within the framework of industrial policy, which a number of researchers consider precisely from the point of view of the resource-industry approach, i.e. as a policy focused on supporting the most important industries. Industrial policy also implies the development of industry through the system of institutions, bringing industry out of crisis and changing its structure.

The Gaidar Institute experts analyzed the current vision of industrial policy and approaches to its implementation and revealed that it is not limited only to the selection and support of the most promising sectors. It is broader and includes a wide range of possible interventions aimed at addressing market failures, restructuring the economy, improving the business environment and achieving specific industrial development goals.

Depending on the set of objectives to be addressed, three types of industrial policy are identified:

— Neutral or soft, involving macroeconomic regulation and infrastructure building.

— Horizontal or functional, aimed at creating an environment for the development and structural reorganization of the economy as a whole.

— Vertical or selective, aimed at changing the industrial structure and supporting specific industries («picking-the-winner» policy).

According to the IMF, the number of industrial policy measures applied globally has increased sixfold over the last ten years; a particular surge of measures has occurred in large economies: China, the EU, and the US. This could potentially cause a widening gap between large and emerging economies.

But other countries are expanding industrial policy: middle-income countries in Asia and Latin America are using it to overcome the middle-income trap, African economies are using it to overcome the poverty trap, and Gulf oil countries are using it for economic diversification. Most often, industrial policy is seen as a policy focused on supporting the most important industries.

Experts of the Gaidar Institute reviewed the experience of industrial policy in several developed and developing countries, including those leading in terms of economic growth; the study also considered countries with historically non-trivial socio-economic conditions and, at the same time, successful industrial policy measures to support and develop the industry. In total, the cases of 10 countries were analyzed: the United States, China, France, Germany, Iran, Brazil, Singapore, the Republic of Korea, the Republic of China (Taiwan), the United Arab Emirates (UAE).

Identifying features of modern industrial policy are prioritization of technological development and targeted support of certain key sectors. The main goals of industrial policy in most countries are to achieve technological leadership or independence in critical sectors, to increase economic security, and to develop the domestic manufacturing sector.

Interestingly, the main priority strategic areas in most countries are currently similar: these are microelectronics, various «Industry 4.0» technologies, i.e. artificial intelligence (AI), Internet of Things, big data, blockchain, 5G, 3D printing, robotics, drones, quantum computing. Also relevant is the «green agenda» and all industrial technologies that contribute to reducing emissions: solar panels, concentrated solar power, biofuels, wind power, green hydrogen, electric vehicles.

The next important area is «smart» technologies, i.e. advanced materials, new chemistry, smart grids, water purification, efficient energy storage and evenly spaced energy systems, new food products.

Nano- and biotechnologies, biopharmaceuticals, genomic and gene technologies, aerospace and aviation equipment are still relevant and are mentioned in almost all long-term development strategies.

In addition, traditional industries remain a priority: machine building, automotive, metallurgy, chemical industry, infrastructure and logistics.