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Promoting inclusive and sustainable industrialization

Few countries in the world have reached a high level of economic and social development without having developed an advanced industrial sector, which is a critical source of growth, economic resilience and job creation. The Addis Ababa Action Agenda reaffirms, therefore, to the importance of sustainable and inclusive industrial development. Progress in industrialization and diversification requires focused funding strategies, investment flows and policies.

Trends in manufacturing value added

Trends in MVA per capita are generally positive, in developing as well as developed regions. However, at the same time, the gap between LDC and developed regions and the rest of the world has actually increased, indicating that there are considerable challenges to these countries with regards to sustainable growth. MVA per capita was less than 100 USD dollars a year in LDCs compared to 4,926 USD in developed regions.

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In African non-LDCs, the share of manufacturing has been larger than the average for developing countries during the whole period.  African LDCs, however, had an average share lower than 10% during the whole period. This picture is quite stable, although it shows a declining trend by the end of the period.  Overall, both African countries and other LDCs have been unable to sustain their process of structural transformation or have actually not yet gone through this process. This can be observed in manufacturing value added (MVA) per capita trends during the same period.

 

Sustainable industrialization

As countries shift to less energy-intensive industries, cleaner fuels and technologies, and stronger energy efficiency policies, almost all regions have shown a reduction in the carbon intensity of their GDP. The proportion of the world’s energy use covered by mandatory energy efficiency regulation has almost doubled over the last decade, from 14 per cent in 2005 to 27 per cent in 2014. More extensive deployment of clean technologies will increase the likelihood of achieving the proposed target of upgrading infrastructure and retrofitting industries to make them sustainable, with increasingly efficient use of resources and greater adoption of clean and environmentally sound technologies and industrial processes.

Research and development

Industrial diversification and the shifting of resources into new and more productive activities in economies is closely linked to learning and investments in research and development (see also chapter on Science, technology, innovation and capacity building).

In 2013, global investment in research and development (R&D) stood at 1.7 trillion US dollars (PPP), up from 732 billion US dollars in 2000. This represented an annual growth rate of 4.6 per cent, which suggests that 1.7 per cent of global GDP was devoted to R&D in 2013. While substantial, this global average masks wide disparities among regions: developed regions dedicated almost 2.4 per cent of their GDP to R&D in 2013, while the average for the LDCs and landlocked developing countries stood at less than 0.3 per cent.

International support to industrialization

Increased domestic resource mobilization will be central to strengthen productive investments in developing countries, as will be the fostering of a favorable business and policy environment for the private sector to thrive. At the same time, international support will be key – international public finance, including lending from development banks and official development assistance (ODA), and a supportive international policy environment, particularly in the areas of trade, investment and technology. Measures to improve the international enabling environment are discussed in the respective sections on trade and regional integration, private business and finance, infrastructure, and science, technology innovation and capacity building. 
 
In terms of concessional finance, official development assistance remains a critical resource for many developing countries. ODA increased significantly in the last 15 years (see section on Official Development Assistance), but particularly up until 2012, the focus of the MDGs on social development led to a concentration of this increase in aid to social sectors and to the health sector in particular. Since 2012, there has been a renewed focus on infrastructure and production – ODA in these areas increased by 40 per cent in real terms between 2012 and 2015, to USD 33.5 billion in 2015. 
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Infrastructure and production has been a focus of south-South cooperation. Some Southern partners are particularly willing to support infrastructure and production, partly reflecting acknowledgement of the role of such sectors in their own development. Infrastructure predominates, and was previously estimated to make up around 55 per cent of South-South cooperation. Development banks also play a key role in providing financing for infrastructure, production sectors, and related areas (see respective sections on national and multilateral development banks, and Southern multilateral financial institutions).

At the Hangzhou Summit in September 2016, the Group of 20 agreed on an Initiative on Supporting Industrialization in Africa and Least Developed Countries. Proposed by the Chinese presidency, this initiative consists of a range of voluntary policy options that members of the G20 will consider to support industrialization in Africa and LDCs. They include facilitation of technology transfer, under mutually agreed terms, in areas such as irrigation systems, water harvesting and conservation techniques, and sustainable agriculture technologies, improving financial and technical support for feasibility and project preparation to support infrastructural and industrial projects, and others. The G20’s Development Working Group will review progress on these actions in 2018.