Can India, Indonesia and Saudi Arabia be the next great economies?
developing countries’ ideas for growth are staggeringly ambitious. India and Indonesia hope to become high-income countries within 25 years. Muhammad bin Salman, Saudi Arabia’s crown prince, wants to diversify and develop its economy just as rapidly.
Refreshingly, such plans are more outward-looking than many development strategies of old. But they contain pitfalls, too. In many ways, the developing world is choosing to bank on globalisation.
Indonesia wants a bigger role in green supply chains. It seeks to do everything from mining and refining nickel, even to building the electric vehicles that run on it. It then wants to export the finished products to the rest of the world.
Countries in the Gulf want to become attractive homes for global business, and are opening up to flows of people, cargo and cash. Narendra Modi envisions India as a high-tech manufacturer for the world, churning out microchips and smartphones. That is a welcome shift.
Less than 50 years ago India hoped to grow by closing itself off from the global economy. It turned out to be an approach that failed miserably. Some still suggest that India’s domestic demand could carry its growth.
But serving foreign markets plays a vital role in development. It keeps firms honest, by forcing them to compete in markets that their governments do not control. It lets them reach the largest possible scale.
And foreign customers can teach firms how to serve them better. In East Asia export performance was also a useful yardstick for policymakers, because it revealed which industries deserved their continued backing. Nonetheless, today’s development strategies also hold dangers.
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