Why Developing Countries Can't Skip Industrialization
The idea that developing countries can bypass manufacturing and leapfrog straight to services has become more fashionable. Services are becoming a more important source of economic growth and commercial activity, and many question whether traditional industrialization still matters — or is even possible. India’s business process outsourcing boom, UAEs success with financial services, and the Phillippines’s call centre surge are all held up as proof that countries can potentially skip factory-based production.
We should acknowledge new service-based development opportunities. But the notion that countries can skip industrialization is mostly wishful thinking. The evidence shows that very few countries have developed without a strong, competitive manufacturing base. The reason is that services cannot replace what manufacturing uniquely provides: sustained productivity growth, innovation, trade, and the foundation for a strong economy.
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