The Competitiveness of Capital-Goods Industries in Developing Countries

In the past two decades developing countries have invested an increasing proportion of their resources in new industries and the infrastructure needed to support them. Many of the new industries have been light, simple and con¬sumer-oriented. But a significant number of LDC’s, mostly the larger or richer ones, have established heavy, more complex capital-goods industries. Both sectors of industry have been largely domestic-oriented, although there are some LDC’s which have succeeded in sharply increasing their industrial exports, mostly of light and simple products. The absence of export success may, in itself, cast a doubt on the effici¬ency and competitiveness of the new industries. The question has been raised in several quarters whether, in fact, the resources spent on industrialization have been well spent or whether the LDC’s could have achieved more growth—in domestic product or export earnings—by a different design of industrialization or by more emphasis on other sectors. These questions are of special relevance for the newly-established capital-goods industries, because: