Recontextualising industrial policy: Lessons from the East Asian developmental state

This paper is authored by Srijan Shukla, ORF.

Since the COVID-19 pandemic, industrial policy has seen a rapid revival, thanks mainly to geopolitical crises spilling over into supply-chain disruptions and China’s surging exports, which are now actively deindustrialising countries as varied as Germany and Thailand. Yet, the rising discussion around and adoption of industrial policy is increasingly decontextualised from the sociopolitical and institutional bargains that underpinned its successful application in East and Southeast Asia. This brief outlines what a classic East Asian developmental state entailed—the bureaucratic, economic, and political arrangements that held it together, and the historical contingencies that made industrial policy work in specific countries. Going forward, industrial policy can be a highly effective tool for policymakers. However, the concept has to be fundamentally reinterpreted against the current realities of state efficacy and capacity, necessary political capital, global macroeconomic environment, and rapidly evolving geopolitical contours.

International Relations

As the post-World War II order recedes, the political and economic assumptions and certainties that policymakers across the world relied on have considerably weakened. A 2026 report by Global Trade Alert notes that the ongoing West Asia conflict has resulted in over 500 government actions and policy interventions worldwide. From consumer-friendly subsidies and import quotas to export barriers and austerity measures, governments everywhere are deploying all the policy tools at their disposal to mitigate the effects of the Strait of Hormuz crisis. Amid this frenzy, it is easy to miss some important shifts in the underlying economic policy thinking.

During the summer of 2026, two developments signalled a structural shift in industrial policy and the emergence of a new set of assumptions in the post-postwar era. The first was a new World Bank report that provided a comprehensive guide to deploying industrial policy for development in the 21st century. The second was the European Union’s (EU) plan to relax the regulations for corporate mergers to facilitate EU-based “global champions.”

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This paper is authored by Srijan Shukla, ORF.