Developing Traditional Manufacturing Sectors

Working with an noncompetitive industrial sector which is home market focused poses many challenges for a country’s industrial development policies and investment promotion agency.

There can be several factors causing a lack of export development including poor product design and engineering, production inefficiencies, poor cost competitiveness, logistics issues, skills, high input costs, finance, government regulations and red tape – and often lacking of confidence by the constituent players in the sector.
By their nature, some of these traditional sectors have followed the same incremental path as generations before them. To make a positive seismic change in an industrial sector takes learning, persuasion and knowledge of the sector. You must carry out a wide ranging study of the sector to learn all the key internal and external factors.

One must look to the a very small number of the better players in a sector with which you can focus your developmental attention. Over a period of time, the objective would be to create some first rate successful and profitable exporting role models which demonstrate possibilities to those who follow. This is one of the most powerful tool in industrial development. One will always find leaders in a sector. However these local businesses could be grossly uncompetitive compared to better international manufacturers.

Companies have the power to influence factors within their own domain.

It is generally the most successful businesses which embrace external expertise. The dynamics of growing businesses are well documented elsewhere. How companies respond to the various cycles of change determines its sustainability.

External inputs to effect change include looking at the full industrial environment including aspects outside an industry’s domain. These issues include education, training, Government encouragement, regulations and policies, logistics, input costs, stable economy and currency, etc.

Constituent role models would need a lot of assistance both financial and expert time to evolve to being profitable export focused manufacturers. During this exercise one will find individual companies from the next tier who aspire to better prospects. Selection should be flexible and fluid. Policies should be commercially focused and unambiguously clear. The spin off from such objectives should be growth in employment, exports and profitability.

Profitable businesses are those which are most likely to reinvest in key development aspects which in turn leads to further growth.