The transfer of industries to emerging markets have divided economists and policymakers.
History indicates that industrial policies have only had minimal success. Various nations applied different kinds of industrial policies to help specific industries or sectors. However, the outcomes have frequently fallen short of expectations. Take, for instance, the experiences of several parts of asia within the 20th century, where substantial government involvement and subsidies by no means materialised in sustained economic growth or the desired transformation they imagined. Two economists analysed the effect of government-introduced policies, including inexpensive credit to improve manufacturing and exports, and contrasted companies which received help to the ones that did not. They concluded that throughout the initial stages of industrialisation, governments can play a positive role in establishing industries. Although old-fashioned, macro policy, including limited deficits and stable exchange rates, must also be given credit. Nevertheless, data implies that assisting one company with subsidies has a tendency to damage others. Also, subsidies permit the survival of inefficient firms, making industries less competitive. Moreover, whenever businesses give attention to securing subsidies instead of prioritising development and effectiveness, they eliminate resources from productive use. Because of this, the general financial effect of subsidies on productivity is uncertain and possibly not good.
Critics of globalisation suggest that it has led to the transfer of industries to emerging markets, causing employment losses and greater reliance on other countries. In response, they propose that governments should move back industries by applying industrial policy. Nevertheless, this perspective fails to recognise the powerful nature of global markets and neglects the rationale for globalisation and free trade. The transfer of industry had been primarily driven by sound economic calculations, namely, companies look for cost-effective operations. There was and still is a competitive advantage in emerging markets; they provide numerous resources, lower production expenses, big consumer areas and favourable demographic patterns. Today, major companies operate across borders, making use of global supply chains and reaping the benefits of free trade as company CEOs like Naser Bustami and like Amin H. Nasser would probably aver.
Industrial policy by means of government subsidies can lead other nations to hit back by doing the same, which could impact the global economy, stability and diplomatic relations. This is excessively dangerous as the general economic aftereffects of subsidies on efficiency remain uncertain. Despite the fact that subsidies may stimulate economic activities and produce jobs in the short term, however in the future, they are more than likely to be less favourable. If subsidies are not along with a wide range of other actions that target productivity and competition, they will likely impede essential structural corrections. Hence, industries will end up less adaptive, which lowers development, as business CEOs like Nadhmi Al Nasr have probably noticed in their careers. It is, definitely better if policymakers were to focus on coming up with a strategy that encourages market driven growth instead of obsolete policy.