Panel presentation at the 10th International Conference on Appropriate Technology, 22-25 November 2022, Khartoum
Presented by:
Gussai H. Sheikheldin, PhD; Research Fellow with STIPRO (Science, Technology and Innovation Policy Research Organization), Tanzania; and former Director of IRCC (Industrial Research and Consultancy Centre), Sudan (2020 – 2021)
——–
How old is industrial policy
In 1791, Alexander Hamilton, American Secretary of Treasury, submitted to Congress his report on industry in the United States, in which he argued that the US with its industrially backward economy (which was the case back then compared to Europe) needed to protect and support its industries “in their infancy” until they reached a sufficient level of strength to compete with Europe’s manufactures. That might very well be the start of what later came to be known as infant industry protection/promotion, a theory to which many – if not most – successful industrialization stories around the world are linked [7]. Nonetheless, industrial policy goes back even further to the earlier days of the British global empire, when colonial policies discouraged advancing manufacturing enterprises in the colonies. The empire instead preferred to keep its colonies as sources of various raw or lightly processed materials necessary for the manufacturing activities in the British Isles. The idea behind such policy was to keep the colonies dependent on the empire’s metropole in importing finished/manufactured goods, as well as to monopolize manufacturing prowess, and therefore economic dominance. With that, we can say that industrial policy is as old as the industrial revolution.
What is industrial policy
Industrial policy can be defined as any type of intervention or government measure that attempts to improve the enabling environment for industries or to alter the structure of economic activity towards sectors, technologies or tasks that are expected to offer better prospects for industrial advancement [5].
Why industrial policy (Africa wide, and a case study from Sudan)
Policies can make or break successful stories of industrialization. A global study on the subject suggested that “Comparative results from [Africa and Asia] case studies suggest that policy choices are largely responsible for the differences in industrialization outcomes” [3, p.20]. Industrial policies are important marks of developmental states—i.e., states where the governance structure and government’s orientation are primarily revolving around socio-economic development goals (or the state as a pioneer of development, and development as a national project) [2, 4]. African countries that have recently experienced ‘de-industrialization before industrialization’ (i.e., with the service sector advancing ahead of the industrial sector) are caught in a trap: not enough value-added activities are localized to advance the value chains of the local economy, and not enough skilled employment opportunities are available to create consumers that can continuously nourish the market of goods and services—the result is that the economy cannot grow sustainably without industrialization [8].
It is with this view that we treat industrial policy as critical for industrial development, and industrial development as critical for sustainable development, in latecomer African developing countries. The difference between industrial development and economic growth is that, while economic growth objectives are linked to general measures that do not say much about socio-economic realities, such as high increases in annual GDP (and thus GDP per capita), industrial development reflects comprehensive socio-economic transformations through increased skilled labour employment, technological progress, and value-addition to local products [5]. As the late African development economist Thandika Mkandawire put it, “When the media talk about economic growth in Africa, quite remarkably, they don’t talk about Africans as producers, as workers, but they talk about Africans as consumers. Obviously, you can’t sustain growth by simply consuming; you have to produce.”
Let’s now take a closer look at Sudan. As far as history is concerned, research and technology organizations (RTOs) have been part of every recent industrial progress story around the world (say the last four decades). This is not limited to developing and domesticating technology and industrial techniques or bringing into existence nascent manufactures and businesses (through industrial incubators and other mechanisms), but also formulating the industrial policies of their home countries. These RTOs also play a central role in the triple helix of state/government, industrial sector, and academia so as to improve the performance of each, and their cooperation for more gainful and sustainable results. One of these RTOs is the Industrial Research and Consultancy Centre (IRCC), in Sudan, which was established the mid 1960’s. In late 2020, IRCC launched Sudan’s first Institute for Industrial Policy Studies (IPS). According to its mandate, IPS aims to establish and enhance industrial policy in the country by providing decision-makers and stakeholders with knowledge (i.e., data, information and lessons) and recommendations needed to design evidence-based and evidence-informed policies – i.e., making industrial policy guided by evidence and by visions of sustainable, inclusive development. With complex factors becoming more involved in shaping today’s economic systems, synthesized knowledge and updates become more essential for decision-making. The engagement of IPS in the policymaking process can therefore promote sustainable development agenda if and when the political will is available. The political will is, however, not yet there, in Sudan, and it wasn’t there in the last 3 years (let alone the last 3 decades). There was general talk at the level of political leadership, but policy is not what governments say alone—there must be some doing. One evidence for the lack of seriousness in political will was the degree by which the Industry Organization & Development Act (2021) was overshadowed by two acts: the Investment Encouragement Act and the Public-Private Partnership (PPP) Act (2021). The industry act was ready for approval in early 2020, but was stalled, along with other relevant acts, and when it finally came into effect it was rendered toothless, since most major decisions relevant to economic prospects were under the scope of the two other acts.
Which industrial policies are effective and suitable for latecomers in developing countries
At this point, we can give general suggestions, that will need to be observed in each country based on context. Generally, there should be direct and indirect policies:
As for direct policies: they range from a) support for productive SMEs—in the form of incubation opportunities, subsidies, tax preferences, and technology localization (which includes diffusion, institutional support, and technical adaptation—this where we find appropriate technology important) [6]; b) increasing local content in manufacturing and mining (these two policies – a and b – are often recognized under the ‘infant industry promotion’ theory mentioned earlier); c) increasing the technological and innovative capacities of the labour force (i.e., training); and d) state-leadership of industrial flagship projects. There are a few but important trajectories that have been tried and verified in almost every successful development story in the last few decades.
As for indirect policies, they should include: a) building and improving science systems (that is, designing science, technology and innovation (STI) policies and strategies to enhance the research and innovation possibilities of a country) [1]; b) pushing education policies that encourage science, technology, engineering and mathematics (STEM) and innovation; c) infrastructure projects, since a conducive infrastructure has a remarkable system effect, on facilitating more movement of goods and people, investment in the housing and transportation sectors, and reducing overhead costs for industries; and d) last but not least: working to reverse brain drain, with policy tools such as what is known as the ‘Six Rs’—return, recruitment, reparation, resourcing, retention, restriction—all recognizing brain drain as a dangerous obstacle to development.
Here, I just tried to touch upon the main aspects of this big and complex topic, to provoke thinking and discussing.
At the end of this presentation, allow me to honour the memory of Mohammed Majzoub Fidiel, who passed away in July 2019, and who was a pioneer of appropriate technology in Sudan. A development expert and the first country director of Practical Action – Sudan, Mr. Fidiel introduced many Sudanese development practitioners and scholars to the world of appropriate technology, including myself.
Thank you for listening.
Selected References:
[1] Rebecca Hanlin, Aschalew D. Tigabu and Gussai Sheikheldin (eds.). 2021. Building Science Systems in Africa: Conceptual foundations and empirical considerations. Nairobi: African Centre for Technology Studies (ACTS) Press.
[2] Thandika Mkandawire, Thinking about developmental states in Africa, Cambridge Journal of Economics, Volume 25, Issue 3, 1 May 2001, Pages 289–314, https://doi.org/10.1093/cje/25.3.289
[3] Carol Newman et al. 2016. ‘The Pursuit of Industry’, in Carol Newman, John Page, John Rand, Abebe Shimeles, Måns Söderbom and Finn Tarp (eds) Manufacturing Transformation: comparative studies of industrial development in Africa and emerging Asia. Oxford University Press. pp. 1–24.
[4] Arkebe Oqubay. 2016. Made in Africa: industrial policy in Ethiopia. Oxford: Oxford University Press.
[5] Gussai Sheikheldin and Muzan Alneel. 2021. ‘Taking Industrial Policy Seriously in Sudan.’ African Arguments, October 20 (Debating Ideas section, series: Economies and Societies).
[6] Gussai H. Sheikheldin and John F. Devlin. 2019. “Agents of Technology Localization in East Africa: Case Studies of Social Enterprises in Tanzania.” Forum for Development Studies, Vol. 46(2): 321-346.
[7] United Nations Economic Commission for Africa (ECA). 2016. Transformative Industrial Policy for Africa. Addis Ababa: ECA.
[8] Samuel Wangwe, D. Mmari, J. Aikaeli, N. Rutatina, T. Mboghoina, and A. Kinyondo. 2014. ‘The performance of the manufacturing sector in Tanzania: Challenges and the way forward’, UNU- WIDER (United Nations University – World Institute for Development Economics Research) Working Paper 2014/085.