Modelling a Systemic Industrial Policy Ecosystem: A Case Analysis of Singapore - Page 5

Developing Entrepreneurial Capability

An important objective of a country’s industrial policy is to sustain economic growth by maximising the entrepreneurial capability of its workforce to meet the needs of the global marketplace. To achieve sustainable economic growth, developing nations need to adapt their industrial structures and production, and marketing mechanisms to fully participate in entrepreneurial activities of international trade and investment. As the industrialisation process is fundamentally concerned with the efficient utilisation of scientific, technical, industrial, organisational and managerial assets to enhance economic competitiveness, developmental efforts have to be managed and guided with strong entrepreneurial capabilities. To be internationally competitive, industrial policy should thus aim to raise the level of workforce entrepreneurial capability to global standards. Governments must therefore ensure the development of a strong institutional base of support systems and provide efficient channels and networks for industries to exploit all opportunities of developing entrepreneurial capability.

Facilitating Inflow of Technology

With the need to keep up with global technological advancements, industrial policy must also facilitate an inflow of technology since the government has a role to play in supporting strategic research programmes (e.g. technology acquisition programmes essential for new emerging industries) to accelerate industrial development. One example is to promote technology transfer agreements - which advance technological inflows through licensing of technology. Another example is to encourage capital investments accompanied by proprietary technology and technical know-how. It is also important for governments to invest in state-of-the-art scientific or technological programmes so as to enhance the prospect of becoming a technology leader in niche areas (e.g. projects on the Internet or DNA sequencing). Take for instance, the US Advanced Technology Program (ATP), which began in 1990, has been instrumental in advancing new promising and high-risk technologies for the country as a technology leader. However, it is noted that industrial policy should not set sights on an overly “narrow theme” of technology inflow but should rather be sufficiently broad-based to support acquisition of prospective technologies that possess good commercial potential.

Enhancing Global Trade

Industrial policy should also promote economic activities that enhance global competitiveness by generating more investment opportunities. Thus, a prominent feature of industrial policy in most developing countries is centred on ways of enhancing global trade and exports. For instance, one is the liberalisation of foreign trade and another concerns the development of export capability. An increased liberalisation of foreign trade improves market efficiency and gives rise to greater competition for local exports in international markets – which enhances the nation’s economic competitiveness in the production of goods and services. An improved export capability enables indigenous goods and services to penetrate overseas markets. Such a policy initiative requires not only institutional support systems for trading activities, but also a comprehensive set of economic measures for promoting global trading and exports.

Encouraging Foreign Direct Investment (FDI)

Industrial policy should result in attracting foreign direct investment (FDI) whose objective is to bridge gaps in investment requirements, and to facilitate inflows of capital for industrial development. To increase FDI inflow, governments must promote initiatives to attract foreign partners in the participation of new business ventures. Besides, it must be acknowledged that at times, in the absence of private sector-led involvement in industrialisation projects, the role of FDI would have to assume dominant importance. Given the intense competition for such investments from new emerging economies, governments would need to put in place initiatives such as investment regulations with fewer ownership restrictions, or to simply impose less restrictive measures. Laws relating to industrial investments, especially with respect to FDI should also provide ample protection and guarantees for foreign investors. However, in the event of “market abnormalities” such as monopolies, government controls would need to be retained to safeguard national interests.

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