The World Bank on Wednesday warned that technology advances and changes in trade are disrupting opportunities for low-income developing countries that intend to develop manufacturing as a way of getting out of poverty and promoting prosperity.
“Changing technologies and shifting globalization patterns call the feasibility of manufacturing-led development strategies into question,” the Washington-based institution said in its new report, “Trouble in the Making? The Future of Manufacturing-Led Development.”
With the booming trade, the manufacturing sector has created jobs for unskilled workers and increased productivity in the past, while recent advances in technologies and changes in trade are posing threats to manufacturing-led development, said the bank.
“Technology has the potential to introduce radically labour-saving processes, disrupt traditional scale economies, change the required skill mix of workers, and increase the need for complex, firm ecosystems to support production,” said the report.
“The resulting possibility of re-shoring to high-income countries could limit the production opportunities coming to lower-income countries,” it added.
Global trade is slowing as global value chains remained concentrated, China is re-balancing its economy from investment to consumption, and protectionism is on the rise, according to the report.
Slowing trade is also creating disruptions for low-income countries, it said.
“Countries can seize opportunities for productivity growth and job creation if policymakers pursue approaches that adapt to changing technologies and changing patterns of globalization,” said Mary Hallward-Driemeier, a senior economic advisor at the World Bank and co-author of the report.
The report suggested low-income countries pursue reforms that reduce labor costs, train workers with new skills, and provide new infrastructure and new rules to support the use of new technologies. It also called on countries to maintain an open attitude towards trade.