ABSTRACT
This chapter examines state industrial promotion in the context of law and development. Economists have debated the economic efficiency of government involvement in the economy. While state-led development policies in some of the most successful development cases, such as South Korea, Taiwan, Singapore, and, more recently, China, have been effective, many have doubted the wisdom of government involvement in the economy. Where the availability of information is limited and the financial market is imperfect (which are the inherent conditions of less-developed countries), the government can provide useful initiatives in productive industrial pursuits, as demonstrated in the cited successful development cases. Adoption and management of industrial promotion policies are indeed a hallmark of developmental states. However, industrial promotion by the state, which might be useful in the early stages of economic development, may not be sustained indefinitely, and at some point, those industries promoted by the state would have to sustain themselves in the market environment without continuing government support. This chapter attempts to clarify the conditions for successful state industrial promotion as well as the legal frameworks that enable the government to provide effective assistance to meet the development needs, which may vary in different stages of economic development.
