In Pakistan, supporters of neo-liberal doctrine argue that anyone who challenges the hegemony of International Monetary Fund (IMF), World Bank, and World Trade Organisation (WTO), does not fully understand the real worth of neo-liberal economic arrangement.

Perhaps, they forget that now-developed countries still continue to carve out policies of protection and domestic support for their industry which includes corporate agriculture.

This article deals with key perspectives related to industrialisation under economic globalisation. While arguing for a central role of state in managing economic change, investment and industrial development co-ordination, and building national innovation system, it argues that a focus on re-industrialisation in Pakistan is possible even under WTO rules.

Some argue that Pakistan, under globalisation should forget about possibilities of a new wave for industrialisation altogether. It is also claimed that a lot of water has passed under the bridges, the East Asian tigers’ days are over, and globalisation - meaning flow of foreign direct investment (FDI) and openness - will determine whether the country should industrialise or not. And Pakistan is advised to attract FDI through the policies of liberalisation, deregulation, and privatisation. Most importantly, the government has to be cut-to-size and be kept out of markets in the process.

However, on the opposite side, forceful voices originate from at least two quarters. Broadly speaking, one is institutional political economy and the second is new growth and trade theory approach. The first tries to focus on ‘getting institutions and interventions right’ and emphasises the importance of industrial policy and human development with a ‘purposeful and accountable’ presence of government in support of long-term industrial development objectives and structural transformation.

The second approach lays emphasis on the pivotal role of knowledge and information-related interventions which can induce long-term economic growth dynamism with increasing returns on investment. It also redefines the rationale behind foreign trade beyond traditional comparative advantage and supports the arguments for reasonable tariffs and protection. These arrangements seek to generate economies of scale while warding off mostly wasteful ideology-ridden neo-liberal prescription for competition under all circumstances.

These approaches advise the country’s economic managers to strategically think of the central role of state in managing and co-ordinating investment and industrialisation processes with strategic and cautious integration into the global market. This approach also asks the state to be responsible for the welfare gains and losses of citizens under economic globalisation. The moral of the story is that industrialisation for long-term economic development is too important a business to be left to blind forces of globalisation. On the contrary, looking at the current thinking of policy makers, one feels that the country is trying to maintain a cosy place in the lap of the IMF, World Bank, and WTO. Hence, this has created immense stresses on the possible export-oriented industrialisation.

What is being pursued is a belief in export-led growth which, for all practical purposes, means whatever any business can export should export. This export-led thinking does not argue for any economy-wide significant intervention to establish national system of innovation which can support export-oriented industrialisation for high quality value added manufacture. In reality whether a country exports low value added potato-chips or high value added computer-chips does matter. This should be a worrisome situation for the incumbent post-martial law regime in Islamabad.

In the absence of national industrial policy and increasingly shrinking capacity of the government’s institutional arrangements for investment and information co-ordination, one thinks that all industrial development eggs are being put in FDI-attraction basket. This makes it important to understand the global FDI phenomena.

Many researches show that increase in global flow of FDI has been towards selected countries of Asia and Eastern Europe. One important advantage which Transnational Corporations (TNCs) seek is competitive advantage. This entails availability of skilled and highly productive labour force. TNCs are no longer fascinated with the idea of access to cheap human and natural resources but like to seek efficiency gains and strategic asset building.

Another stream of research shows that TNCs do not bring technology relevant to the national development needs of the host country. They bring technology, if needed, for their own purposes, not for an economy-wide pro-poor national structural transformation. So the advices about looking for FDI as a source of long-term economic growth are at best fragile and not in harmony with the strategic national industrial policy. An egalitarian society and educated citizenry creates its own scale economies and externalities which TNCs always assess before making strategic relocations for competitive advantages.

The conclusion reached by some opinion-holders that under globalisation, industrialisation in Pakistan is not possible, is a faulty one. Though the export subsidies under the WTO regime, are prohibited and provide leverage to now-developed countries but room for investing in research and development for competitiveness, building national innovation system for industrial upgrading, and many aspects of industrial policy are still open. This ‘replicable path’ was used by East Asian ‘Gang of Four economies as well.

It, however, requires a sound vision of democratic developmental state, simultaneously autonomous and accountable, in managing the industrial development. This can be best done by the government, business, and the civil society working together for national development objectives and strengthening of national institutions. Each sector can contribute a set of competitive advantages.