SEOUL – Recently, I had the opportunity to speak about industrial policy at the International Monetary Fund, a topic that the IMF has traditionally been critical of in the past. However, as more countries begin to embrace industrial policy, the Fund has realized the importance of updating its stance on the matter.
While IMF economists have expressed concerns about the potential fiscal risks associated with industrial policy, they also acknowledge that certain tools, such as entry control, can be implemented without significant financial costs. Entry control, which limits the number of firms operating in strategic sectors, can actually be beneficial for the economy by allowing selected firms to earn profits that can be reinvested for further growth.
This approach can lead to higher rates of return, which in turn encourages private investment in manufacturing. The policy aims to boost the manufacturing sector, which often offers lower returns compared to services but plays a crucial role in long-term economic development.