|Figure 9.1: Regional shares of world manufacturing value added (MVA). Source: International yearbook of industrial statistics 1997, UNIDO.|
|Figure 9.2: Development of manufacturing value added (MVA) as function of GDP in various regions. Source: IMAGE data supplied by rivm, The Netherlands.|
As countries develop from an agrarian society to an industrial urban economy the economic structure of a developing nation goes through a transition process, as described by Kuznets (1971). The structure of the economy is strongly dependent on the stage of development, and hence the technology needs. A World Bank study confirmed the transition patterns for a large number of economies (Syrquin and Chenery, 1988). The transition process may not be smooth (especially in short periods), and may follow various paths. Syrquin and Chenery (1988) showed that the performance of the economy is associated with large size, a manufacturing orientation and with a higher degree of openness. The smaller the economy, the more it relies on the open character of the economy. However, alternative paths may be successful too, as evidenced by the development of economies as in Korea, where industries matured under economic protection (Lee, 1997).
The rate of technological change strongly affects the rate of investment and the productivity and vice versa. Investment in modern equipment, evidenced by the economic growth in newly industrialised economies in East Asia, is seen as a more important contribution to growth than other investments (UNIDO, 1997). The growing industrial production in Asia, especially China (5% of world manufacturing value added (MVA) in 1995), is shown in Figure 9.1. Figure 9.1 also shows that world MVA is still dominated by the industrialised countries, while MVA of the economies in transition has decreased. The share of MVA from other regions of the world has remained stable. The regional development of the industrial sector is depicted in Figure 9.2. It shows that the importance of the industrial sector in the regional economy is increasing in most developing regions.
Although the growth pattern of the industrial sector may differ between countries, generally the growth is associated with the use of capital intensive technology such as in the raw material based industries. China, India (Kaplinsky, 1997) and Korea are examples of this pattern, though in different stages of development. There is, however, considerable debate about the importance of the industrial sector in the economic development process. The growing importance of the services sector in some developing economies (Asia, Latin America) generates an increasingly larger part of total economic growth (World Bank, 1998). Different investment patterns influence industrial growth, structure and technology adoption.
We use investment flows as an indicator for investments and technology transfer. While, recognising that investment flows do not consider differences in the 'quality' of investments made, there is no other simple indicator for the magnitude of technology transfer taking place.
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