Why Industrial Policy-making Is the Key to Unlocking Gains From Industrial Policy

This research paper by Prof. David Luke and Hana AlWakeel argues that for African countries to achieve sustainable industrialization and reduce poverty, they must upgrade the practice of industrial policy-making itself. The authors propose a framework based on five tenets—adaptive, consultative, partner-based, transboundary, and capacitated policy-making—to navigate contemporary challenges such as the climate emergency, digitalization, and geoeconomic fragmentation.

• The authors identify five critical 'big five' issues that currently shape industrial policy-making: the need for policy consensus to ensure high-level and societal commitment; the necessity of green industrialization to balance economic growth with decarbonization; the need for supply chain security and resilience against geoeconomic fragmentation; the impact of shifting industrial paradigms (specifically digitalization, platform production, and geographic redistribution); and the utilization of widened policy space for more adventurous industrial policies.
• To unlock the gains of industrial policy, the paper proposes five tenets for a sustainable policy-making process. These include 'adaptive industrial policy-making' which uses 'policy-testing' zones like Special Economic Zones (SEZs) for experimentation; a 'consultative approach' to maintain state autonomy while leveraging stakeholder synergies; 'partnering' to shift investment from primary extractive activities toward sustainable industrialization; a 'transboundary' approach to pool resources and influence, specifically through the African Continental Free Trade Area; and 'capacitated industrial policy-making' to ensure public institutions have the resources and expertise to steer the national agenda.
• The document highlights that digitalization is transforming the traditional role of manufacturing by increasing technology and skills intensity, which may undermine its ability to absorb large numbers of rural workers, while simultaneously offering opportunities for African countries to leapfrog into new production methods and outsourced digital services.
• The authors argue that Africa's path to economic transformation must be through green industrialization, as neither degrowth nor 'grow now and clean later' strategies are viable given that global temperatures exceeded the Paris Agreement 1.5°C target in 2024.

APA

Luke, D., & AlWakeel, H. (2025). Why Industrial Policy-making Is the Key to Unlocking Gains From Industrial Policy. International Institute for Sustainable Development. https://www.iisd.org/articles/policy-analysis/industrial-policy-making-unlocking-gains

Chicago

Luke, David, and Hana AlWakeel. Why Industrial Policy-making Is the Key to Unlocking Gains From Industrial Policy. International Institute for Sustainable Development, 2025. https://www.iisd.org/articles/policy-analysis/industrial-policy-making-unlocking-gains.

Wikipedia

{{cite report |last1=Luke |first1=David |last2=AlWakeel |first2=Hana |title=Why Industrial Policy-making Is the Key to Unlocking Gains From Industrial Policy |publisher=International Institute for Sustainable Development |date=8 December 2025 |url=https://www.iisd.org/articles/policy-analysis/industrial-policy-making-unlocking-gains |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{luke2025why, author = {Luke, David and AlWakeel, Hana}, title = {{Why Industrial Policy-making Is the Key to Unlocking Gains From Industrial Policy}}, institution = {International Institute for Sustainable Development}, year = {2025}, month = dec, url = {https://www.iisd.org/articles/policy-analysis/industrial-policy-making-unlocking-gains}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }