Asian Angle | To win the future, Southeast Asia must rewrite its industrial rule book

How can developing economies in Asia raise productivity, create jobs and align growth with decarbonisation and energy efficiency? According to the United Nations Industrial Development Organization’s (UNIDO) latest report, the answer lies in more innovative and targeted industrial policies. The report offers timely lessons for Southeast Asia.

UNIDO’s study lays out a comprehensive framework grounded in “foresight” and “megatrends” analysis, calling for an industrial push that could reshape national development trajectories through 2050 – Southeast Asia included. Its case studies, soon to be published, are led by Keun Lee from the Centre for Economic Catch-up with the Khazanah Research Institute (on semiconductors), Shanghai University of International Business and Economics (on China’s mobility sector), and UNIDO’s Indonesia office (on nickel and electric vehicle batteries).

As industrial policy returns to the centre of economic strategy across many nations, long-standing approaches to industrial development are also being revived. Among these is “foresight”, a buzzword once used by business consultants anticipating corporate trends that has now been embraced by the OECD and UN to underpin strategic planning. By reintroducing concepts such as “megatrends”, popularised by futurists and social commentators like Alvin Toffler and John Naisbitt, the report captures today’s widespread sense of disorientation. Yet it tempers futurist exuberance with a more grounded realism.

The report identifies three interlinked gaps that industrialisation must address.

• An intensity gap, requiring developing economies to expand their share of global manufacturing output.

• A productivity gap, demanding faster technology adoption and industrial upgrading.

• And an environmental efficiency gap, calling for greener industrial ecosystems through decarbonisation, resource efficiency and circularity.

These goals must be pursued against the backdrop of megatrends that are reshaping the global industrial landscape, from the green energy transition and the rise of artificial intelligence to shifting demographics and reconfigured supply chains. Each trend carries with it both risks and opportunities that vary widely across regions, requiring context-specific policy responses.

The report warns that current development trajectories are inadequate. Under business-as-usual scenarios, more than 30 per cent of the global population would still live below the poverty line by 2050, with 300 million people suffering daily from hunger. Such projections make clear that incremental policy shifts will not achieve the UN’s Sustainable Development Goals or meet climate targets.

To explore alternative pathways, UNIDO models a series of development scenarios. The “industrialisation-only” push envisions ambitious, coordinated interventions to accelerate growth across seven priority areas, from digital and physical infrastructure upgrades to stronger institutions and workforce skills for the green and digital transitions.

A second scenario – “clean energy and industrialisation” – builds on the first but adds sustainability and equity objectives. Expanding renewable energy and phasing out coal could help decouple industrial growth from carbon emissions, enabling developing economies to cut emissions faster than advanced ones.