Active development states or passive free markets?

The development strategies that the international economic community advocated for developing countries during the 1980s and 1990s were flawed and need to be changed according to the latest United Nations thinking.

In their annual Trade and Development report for 2006 released last week UNCTAD, the United Nations Conference on Trade and Development, is encouraging developing countries to be proactive in their industrial and growth policies and to adjust tariffs and subsidies so as to nuture promising innovative businesses in their countries.

In fact, the best historical example of development we have in recent history is South Korea which went from almost nothing in 1953 to 12th largest economy in the world 50 years later.

South Korean president Park Chung Hee, the president during the era (1961-1979), led the Korean economy, often micromanaging it, into the era of the Heavy-Chemical Industry (HCI) drive. Since this time, South Korea has established its own chemical, steel, shipbuilding, and automotive industries independent of foreign multinational corporations.

The UNCTAD report is available for downloading and reading online.

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Noteworthy:

1. China's importance as a destination for developing country exports (p. 86),

2. "These countries should not be overly restricted by international trade rules or by conditions imposed by international lenders from doing what is best for their economies." (Source)

3. Emphasizes that policy "must respect the specific situation of each country." There is no `one-size-fits-all.'

4. Policies supportive of innovative investment.

5. Adaptation of imported technology to local conditions

5. Strengthening of industrial policy

6. Strategic trade integration — which is "careful, managed introduction of domestic business into international markets." (Source)

FDI including cross-border mergers and acquisitions among developing countries is still in its infancy compared to developing countries.