1. Does COVID-19 Change the Long-Term Prospects of Latecomer Industrialisation?
- Author:
- Tilman Altenburg, Clara Brandi, Anna Pegels, Andreas Stamm, Christiaan Vrolijk, and Tina Zintl
- Publication Date:
- 01-2021
- Content Type:
- Working Paper
- Institution:
- German Institute of Development and Sustainability (IDOS)
- Abstract:
- This study explores to what extent the COVID-19 crisis affects the long-term prospects for industrial development. The focus of the study is on latecomer economies – those facing an uphill battle because they joined global markets at a point in time when other economies had already established global production networks. In a first step, we analyse how the prospects for industrialisation are changing, mainly as a consequence of three global megatrends: digitalisation and automation of production; global economic power shifts; and the greening of economies. These trends create new opportunities for latecomer industrialisation, but they also raise entry barriers to markets, especially for country with weak innovation systems. We then explore COVID-19 effects through the analytical lens of the pre-COVID megatrends. While the pandemic has had a severe impact on the world economy, such impacts will not change the ongoing trends fundamentally. The ongoing recovery from COVID-19 is not showing much structural transformation – despite many voices demanding to “build back better”. Yet, the pandemic is accelerating or decelerating some of the previous trends. One is the trend towards online trading. The dominance of international trading platforms may lead to concentration in “upstream” activities such as manufacturing, crowding out weaker market actors. At the same time, platform economies are boosting delivery activities, such as courier services. Another trend that may be accelerated by the pandemic is towards the reshoring of previously offshored productive tasks, yet, evidence here is mixed, and we may see other risk-hedging strategies rather than large-scale reshoring. We may also see the gap between dynamic economies in East/Southeast Asia and other developing regions widening, because the former recovered faster due to vaccination programmes and fiscal stimulus packages. Regarding the greening of economies, some major economies initiated green fiscal stimulus packages, accelerating for example the development of global green hydrogen economy. Also, the trend towards tele-work is reducing emissions from the transport sector. Overall, however, the pandemic does not seem to alter the ongoing, but slow, progress towards greener economies. We conclude with police recommendations in five domains: i) Fostering economic resilience through economic diversification; ii) the need to develop pharmaceutical and medical supply industries in all countries; iii) increased investments in digital capabilities, including the ability to regulate platform economies; iv) strengthening domestic revenue generation to increase policy space and resilience, including pro-environmental fiscal reforms; and v) improving international governance e.g. in the domains of intellectual property rights and technology-sharing.
- Topic:
- Development, Economics, Governance, Industrialization, Resilience, and COVID-19
- Political Geography:
- Global Focus