Industrialization can contribute significantly to growth. And yet despite the potential, many countries, particularly in Sub-Saharan Africa, are experiencing deindustrialization at a rate that threatens hundreds of thousands of jobs.
Reactions to this trend are mixed. Development practitioners continue the long debate on the pros and cons of industrial policy based on the successes (or failures) of countries that implemented them. Irrespective of such debates, many developing countries continue to seek the World Bank Group’s support for specific industries.
IEG's evaluation found that countries’ industrialization efforts are more successful when these engagements are broader in scope and include a number of the key constraints faced by an industry (such as, for instance, the regulatory framework, infrastructure, and access to finance skills, in parallel).
How has the World Bank Group responded? On one hand, over the last decade the World Bank Group has shied away from developing a distinct and comprehensive approach to supporting industry competitiveness. At the corporate level, the World Bank Group’s strategies do not clearly differentiate between supporting competitiveness at the broad, national level and supporting it at the specific industry level. On the other hand, different parts of the World Bank Group, for example, the Trade and Competitiveness global practice have supported industry specific engagements as part of their own strategies or work programs.
A recent evaluation by IEG looked at the Bank Group’s performance in providing industry specific support to its developing clients, and the extent to which this helped improve productivity, competitiveness, and job creation. The evaluation focused on four industries - agriculture, manufacturing, tourism, and information and communication technology.
IEG’s evaluation found that the World Bank Group’s approach to industry competitiveness is largely embedded in its broader private sector development, sector development, and country partnership strategies. Over the 2008-14 period, the World Bank Group has supported industry competitiveness with 881 projects, for a total estimated value of $21.6 billion, accounting for about 6 percent of all operations.
Is the debate on industry policy missing the key point? While much of the debate focuses on whether or not to pick winners, IEG's evaluation found that countries’ industrialization efforts are more successful when these engagements are broader in scope and include a number of the key constraints faced by an industry (such as, for instance, the regulatory framework, infrastructure, and access to finance skills, in parallel). For example, the privatization of tea factories in Rwanda was successful not simply as a result of a transfer of ownership, but rather, because this transfer occurred alongside other measures, such as the creation of farmer cooperatives that effectively strengthened the relationship between farmers and factories, and the implementation of price reforms for tea leaves.
At the same time, broader support implies that reform programs should be long-term and strategic to be successful. Macedonia succeeded in supporting manufacturing because the World Bank bolstered the country’s competitiveness with well-sequenced and well-executed tools and operations, starting with analytical work, followed by policy dialogue, integration of various instruments into a policy lending platform, and accompanied by technical assistance. Furthermore, the Bank Group leveraged the success of its advice and technical assistance in Macedonia to design new World Bank Group operations in support of industry-specific competitiveness elsewhere in the region.
Does the World Bank Group compromise employment by supporting competitiveness? It is hard to say even though some preliminary evidence shows that the combined (negative) effect of productivity and (positive) effect of market share on employment is positive. IEG’s evaluation illustrates the complex effects of productivity improvements on jobs, but it was not possible to draw conclusive results because only a small proportion of the World Bank Group portfolio specifically references jobs in objectives, interventions, or indicators. Attention to job quality is even less common.
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