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RESEARCH PRODUCT

Essentials of Common Industrial Policy

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A set of sixteen principles of modern industrial policy is derived from the literature for application to entire regions. Such policy strives to create industrial commons and to rectify market failures which cannot reasonably be expected to self-correct over time. This chapter creates a workable typology of genuine regional industries, distinguishing two main types: Type I is the outcome of targeted selection and Type II of broad investment promotion. A ‘dual core’ of both types is appropriate to most African industrial ecosystems. The chapter goes on to clarify the distinction between regional production networks and stand-alone ‘lighthouses’. The incentive system for regional industries is examined, and the distinction between national and regional incentives is elaborated. Practical conflict between allocative efficiency, which most often favours existing industrial hubs in the African regions, and distributive equity is examined. Cross-border policy dialogue has to identify the most binding constraints for new industries at both regional and national levels. This ideal-type policy is juxtaposed against the current practice of ‘buy national’ campaigns in East Africa.