February 13, 2014 | Contribution by
Mushtaq Khan is a Professor of Economics at University of London
Heavy traffic jam at Chandni Chowk in Old Delhi. Photo: © shigemitsu
As developing countries increasingly experiment with "industrial policies," a big question is how to get the incentives right for these policies to work.
The JKP recently spoke with an expert on the topic – Mushtaq Khan, Professor of Economics at the School of Oriental and African Studies, University of London. In Part 2 of this series, he explores two successful examples in the 1980s – launching a garment industry in Bangladesh and producing Indian automobiles. Going forward, however, he cautions that many developing countries will have to make industrial policies work in a setting where the political environments, governance capabilities, and private sector capabilities are much weaker. This will mean starting with small-scale experiments, rather than ambitious endeavors, to avoid doing long-term damage.