Question

Discuss industrial policy, including pros and cons, and debate over role in SE Asia.

Answer 1

Industrial policy

• It is the strategic effort to encourage the development and growth of the manufacturing sector and the other sectors of the economy.
• It is represented as IP
• It improves the competitiveness
• It also promotes structural transformation
• The protection of textile from imports is a good example of industrial policy

Pros

• lowering of the tax rates with good revenue collection system
• The competitiveness of the system
• Reduce cost and promotes competition amoung international countries

Cons

• Less policies for exporting sector
• Very slow investment methods
• The link between old and new sectors

Role in SE asia

• Most of the economists says that its better to use market forces for the allocation of resources, the fact is that market forces can be easily failed
• So the market forces are pretty much vulnerable and it is a threat too
• The governement interviene to fix those failiers
• In SE asia,  they provided incentives to individual sectors, restricted trade and tightly controlled the financial sector to increase savings and guide investment
• They promoted savings and exports
• How ever the govt interviened in this matter
• The govt intervention laid out some facts that they created methods to manage the investment, recovery from failure of information etc.
• This became a success in the name "market friendly" intervention

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