Introduction
Industrial policy encompasses government interventions designed to boost the competitiveness and growth of domestic industries through measures such as tariffs, trade restrictions, and subsidies.
Historically, industrial policy has deep roots, dating back to the 14th century. The practice gained significant momentum in the 20th century as many countries adopted policies to protect and develop their industries[1]. However, the rise of neoliberalism in recent decades emphasized free-market competition and the reduction of trade barriers, leading to a decline in the use of industrial policies. The establishment of the World Trade Organization (WTO) in 1995 further reinforced this trend by promoting deregulated global trade[2] [3].
Recently, industrial policy has seen a resurgence in response to the COVID-19 pandemic, geopolitical tensions, and the climate crisis. Both developed and developing nations are now actively employing industrial policies to secure supply chains, reduce greenhouse gas emissions, and enhance technological capabilities[4] [5].
Economists have long debated the pros and cons of industrial policy. On the one hand, such measures can address market failures, like those related to climate change. On the other hand, industrial policy is expensive and can lead to problems like corruption and poor resource allocation. It can also cause harmful effects across borders, increasing the risk of retaliation from other countries[6].
This raised a concern about the importance of monitoring the industrial policies implemented across different countries to evaluate their effect on businesses. Hence, The IMF recently joined forces with the Global Trade Alert to monitor developments through the New Industrial Policy Observatory (NIPO) as a first step to understand the new wave of industrial policy.
The NIPO results showed that there were more than 2,500 industrial policy interventions worldwide in 2023. Of these, more than two thirds were trade-distorting as they likely discriminated against foreign commercial interests[7].
One of the WTO’s primary goals is to reduce trade barriers and ensure a level playing field for all member countries. Trade-distorting industrial policies directly conflict with these objectives, as they can lead to trade disputes, retaliatory measures, and a breakdown of the cooperative trade framework that the WTO strives to maintain.
In essence, while trade-distorting industrial policies might serve immediate national interests, they are at odds with the broader goals of globalization and the WTO’s mission to liberalize trade and foster a stable, predictable trading environment.
This blog provides an in-depth analysis of the NIPO index and its insights into emerging trends in new industrial policies. It also examines Egypt’s performance within this framework and explores how the country can leverage the NIPO index results to envision and implement a more effective industrial policy, positioning itself for sustained growth and competitiveness.
NIPO Index: Monitoring Industrial Policies
Monitoring industrial policies is crucial as they have become a significant aspect of modern globalization. Traditionally, markets determined where to manufacture and sell goods based on efficiency. However, national governments are now increasingly concerned about securing critical technologies and components domestically. Hence, governments are turning to targeted policy interventions, known as industrial policies.
For businesses, keeping track of all changes in policies is a difficult task. The lack of an international organization to monitor industrial policy actions adds to the uncertainty.
The NIPO was a first step to overcome this issue. The NIPO database is a monitoring initiative that is designed to track developments in new industrial policies.
The primary objective of this undertaking is to enhance transparency regarding the implementation of industrial policies. While governments and analysts may find this information useful to evaluate the impact of industrial policy, corporate executives will find the contents a valuable input to strategic and operational decision-making.

Government measure is recorded in the NIPO database as an industrial policy if it meets the following criteria:
- The measure was announced or implemented on or after 1 January 2023.
- The measure is a strategic plan affecting commercial activity, or a policy or regulation enacted by that state, or involves firm-specific interventions arising from the implementation of a policy or regulation, such as decisions regarding Foreign Direct Investment (FDI) authorization or subsidy awards.
- The objective of the measure, as publicly stated by the implementing government, is rooted in national security concerns, geopolitical considerations, security of supply, domestic competitiveness, or climate change mitigation.

New Industrial Policy: Key Trends
In 2023, NIPO recorded a total of over 2,500 measures worldwide, of which 71% (1,806) were trade distorting measures that affect the international trade flows and economic efficiencies.[8]
Focusing on trade-distorting policies, the key trends shows that the majority of these distortive measurs are applied by developed countries. Moreover, both developed and developing country groups are heavely relying on domstic subsidy as key measure for trade-distoring policies. Stratigic competitiveness is the key motive for the new industrial policy trade-dostoring measures. When focusing on sectorial level, the data shows that the majority of the trade distorive measures are targeting the dual ise products or the products used for both civilian and military purposes.
I. Advanced Economies Vs Developing Economies
The US, China and India have been the top users of industrial policy over the last decade, followed by Germany and Brazil. Notable examples include the Inflation Reduction Act (IRA) and the CHIPS and Science Act in the US, the European Green Deal and the Digital Europe program in the EU, along with China’s Made in China 2025 program[9].
The NIPO database shows that developed economies are extensive users of industrial policy, as 71% of the trade distorting measures in 2023 were undertaken by developed countries. On the other hand, emerging markets and developing economies accounted for 29%[10].
On the contrary, Algeria came with the lowest measures recording only one. Egypt is one of the lowest countries adopting industrial policies with only five measures in the NIPO during the mentioned period.
Despite the growing emphasis on national security and resilience of supply chains, strategic competitiveness and climate-change mitigation were the primary drivers behind industrial policy in 2023. However, the national interests differ, the US put the largest emphasis on national security as 43% of measures implemented in 2023 in this category. The EU put the strongest emphasis on policies related to climate change mitigation (49%) and resilience of supply chains[1].
Among the 474 measures with stated industrial policy motives, those targeting strategic competitiveness impact the largest share of global imports at 8.6% equivalent to USD 1.51 trillion, followed by climate change at 5.8% (USD 1 trillion) and supply chain resilience at 4.6% (USD 813 billion). National security and geopolitical concerns account for the smallest share at 4.2% (USD 735 billion).

I. Sectoral Breakdown
Recent industrial policies are increasingly focusing on sectors critical for future growth, technological leadership, environmental sustainability, and economic sovereignty. These sectors include low-carbon technologies, metals (such as steel, aluminum, and critical materials), advanced technologies, semiconductors, and defense-related industries[1].
As the world moves towards a low-carbon economy, green technologies have become a primary focus, with low-carbon technology products accounting for 15.3% of industrial policy measures. Additionally, rising geopolitical tensions and conflicts have led to increased investments in defense technologies, with a shift in 2023 towards military and civilian dual-use products, which make up 25.7% of the measures[2].
Breakthroughs in AI and quantum computing have spurred significant R&D investments to secure a competitive edge. Simultaneously, countries are ramping up semiconductor production to support technologies from consumer electronics to military systems, countering China’s ambitions. The COVID-19 pandemic has also triggered a global surge in investments in medical technology, including basic products like protective masks. Consequently, advanced technologies, medical products, and semiconductors, along with critical minerals, are receiving substantial focus, with 27% of the total measures.
Steel and aluminum, a traditional target of industrial policy, has maintained a notable presence (10.1%) among the newly implemented measures.
Egypt: Current Status & Potential Benefits
As Egypt is a developing country it has followed the general pattern of industrial policy in this category with only five trade distortive measures captured by the NIPO between 1 January 2023 and 23 April 2024.
Egypt has relied on non-financial measures especially export ban, as the country banned the exportation of sugar, onion, and lead battery parts and separators. Egypt also approved EGP 150 billion scheme to support industrial and agricultural sectors[1].
Analyzing data from NIPO highlights that modern industrial policies among advanced nations prioritize strategic objectives such as environmental sustainability, political stability, and enhancing global competitiveness, rather than focusing on import substitution. For Egypt to align with these global trends, policymakers must shift away from traditional import substitution policies. Instead, they should aim to address broader challenges like strengthening Egypt’s competitiveness, green transition, participation and resilience in global value chain (GVC). This strategic pivot would position Egypt to respond more effectively to global economic shifts and advance its industrial growth.
Recent studies indicate a decline in Total Factor Productivity (TFP) across most economic activities in Egypt between 2013 and 2018, with exceptions observed in crude petroleum, motor vehicles, and select service sectors. This decline is also evident in key governorates, including Cairo and Alexandria[2]. Egypt’s industrial productivity remains below the global average, hindered by several factors. For instance, the gross fixed capital formation (GFCF) as a share of manufacturing value added stands at 15% in Egypt, compared to 22% in Malaysia and an OECD average of 18%, signaling the urgent need for targeted economic policy reforms. These reforms should focus on enhancing investments in industrial equipment modernization, improving productivity, and promoting job creation[3].
Additionally, the Carbon Border Adjustment Mechanism (CBAM), which entered its transitional phase on October 1, 2023, presents a significant challenge to Egypt’s industrial policy design. According to the World Bank’s CCDR Report on Egypt, exports, particularly in the electricity, oil, and chemical transport sectors (including fertilizers), are expected to face declines of 8.3%, 4.3%, and 3.9%, respectively, due to CBAM implementation. However, Egypt’s comparatively low carbon emissions—at only 0.6% of total global emissions, compared to China’s 18.8% and India’s 4.9%—offer a strategic advantage[4]. The potential for decarbonization within Egypt’s energy sector, coupled with its vast renewable energy potential, strengthens the competitiveness of domestic industries in greening exports. This enables Egyptian firms to produce cleaner products at a lower cost, improving efficiency relative to international competitors.
Egypt’s industrial policy must also leverage its comparative strengths in global markets, as identified by the UNCTAD Revealed Comparative Advantage (RCA) index. Industries where Egypt holds a comparative advantage, such as food products, beverages and tobacco, textiles and apparel, leather products, chemicals, non-metallic mineral products, and basic metals, are labor-intensive sectors. This creates an opportunity to boost employment, enhance productivity, and strengthen Egypt’s participation in global value chains (GVCs).
To accelerate progress, Egypt’s industrial policy should prioritize massive investments in technology, skills upgrading, and fostering linkages to global value chains through export development and FDI promotion. These efforts must be complemented by effective trade policies that open up new markets, enhance Egypt’s trade competitiveness, and mitigate external risks like those posed by CBAM.
Effective trade policies will play a pivotal role in navigating these challenges and maximizing the opportunities presented by Egypt’s strategic advantages. Trade policies should be designed to foster export growth, support market diversification, and ensure that Egypt’s goods remain competitive in global markets. By addressing barriers to trade, reducing tariffs, and enhancing market access through effective bilateral and multilateral trade agreements, Egypt can bolster its participation in global value chains (GVCs) and strengthen its trade relationships. Additionally, aligning trade policies with sustainability goals and environmental standards will be crucial in mitigating the impact of CBAM and ensuring that Egyptian exports meet international regulatory requirements.
Success in implementing this strategy will require integrating five key interconnected elements[5].:
- Embeddedness: Establishing a close, yet independent, dialogue between the government and the private sector to better understand investment barriers and opportunities.
- Coordination: Ensuring effective collaboration across government bodies to respond swiftly to emerging economic challenges.
- Monitoring: Continuously evaluating policies to make data-driven adjustments based on real-world outcomes.
- Conditionality: Holding firms accountable for government support, often measured by export performance and other productivity metrics.
- Institutional Development: Strengthening institutional frameworks to ensure the long-term sustainability of policies.
By focusing on these elements, Egypt can design a dynamic and adaptive industrial policy that addresses market failures, enhances productivity, and positions the country competitively on the global stage, while aligning with international best practices. Combined with effective trade policies, this approach will not only mitigate the challenges posed by CBAM and other external pressures but will also leverage Egypt’s strategic advantages to foster sustainable economic growth, secure its position in global markets, and boost its export potential.
[1] GTA. Latest State Acts. https://www.globaltradealert.org/latest/state-acts/implementing-jurisdictions_61/period-from_empty/period-to_empty
[2] Chahir Zaki “On Productivity Performance in Egypt: What is at Stake?” 2022
[3] OCED “Egypt Industrial capabilities” 2020
[4] World Bank “Country Climate and Development Reports (CCDRs)” 2021
[5] Dani Rodrik and Joseph E. Stiglitz. “A New Growth Strategy for Developing Nations.” 2024
[1] Allianz Research Industrial policy: old dog, new tricks? https://www.allianz.com/content/dam/onemarketing/azcom/Allianz_com/economic-research/publications/specials/en/2024/june/2024-06-19-Industrial-Policy-AZ.pdf
[2] Simon Evenett, “et al.”, “The Return of Industrial Policy in Data”, International Monetary Fund, Jan 2024, Available on: https://www.imf.org/en/Publications/WP/Issues/2023/12/23/The-Return-of-Industrial-Policy-in-Data-542828
[1] Simon Evenett, “et al.”, “The Return of Industrial Policy in Data”, International Monetary Fund, Jan 2024, Available on: https://www.imf.org/en/Publications/WP/Issues/2023/12/23/The-Return-of-Industrial-Policy-in-Data-542828
Industrial policy mobilizes a variety of tools. The NIPO shows that while advanced economies tend to rely on tools such as direct financial grants, state loans, and other state aid, developing economies opt for import tariffs, state loans and tax relief, and in general more trade restrictions on imports and exports policies which do not depend on direct expenditures from the government budget. This indicates the role of the fiscal gap between the two groups.
[1] Ira Kallsh, “et al.”, The return of industrial policy, Deloitte insights, June 12, 2023, Available on: https://www2.deloitte.com/xe/en/insights/economy/industrial-policy-us.html
[2] Bai Gao, The Renaissance of Industrial Policy: Developmentalism in the Era of Post Globalization, İstanbul Üniversitesi Sosyoloji Dergis, 2020, available on: https://dergipark.org.tr/en/download/article-file/1528800
[3] ELAINE HARTWICK and RICHARD PEET, Neoliberalism and Nature: The Case of the WTO, The Annals of the American Academy of Political and Social Science, November 2003, https://journals.sagepub.com/doi/pdf/10.1177/0002716203256721
[4] Anna Ilyina, “et al.”, Industrial Policy is Back But the Bar to Get it Right Is High, International Monetary Fund, April 2024, Available on: https://www.imf.org/en/Blogs/Articles/2024/04/12/industrial-policy-is-back-but-the-bar-to-get-it-right-is-high
[5] https://www2.deloitte.com/xe/en/insights/economy/industrial-policy-us.html
[6] Simon J. Evenett, Fernando Martín, Why the return of the industrial policy matters for business, IMD, January, 2024, available on: https://www.imd.org/ibyimd/strategy/why-the-return-of-the-industrial-policy-matters-for-business/
[7] Simon Evenett, “et al.”, “The Return of Industrial Policy in Data”, International Monetary Fund, Jan 2024, Available on: https://www.imf.org/en/Publications/WP/Issues/2023/12/23/The-Return-of-Industrial-Policy-in-Data-542828
[8]Hinrich Foundation, Trade distortion and protectionism, available on: https://www.hinrichfoundation.com/global-trade/trade-distortion-and-protectionism/
[9] Allianz Research Industrial policy: old dog, new tricks? https://www.allianz.com/content/dam/onemarketing/azcom/Allianz_com/economic-research/publications/specials/en/2024/june/2024-06-19-Industrial-Policy-AZ.pdf
[10] Simon Evenett, “et al.”, “The Return of Industrial Policy in Data”, International Monetary Fund, Jan 2024, Available on: https://www.imf.org/en/Publications/WP/Issues/2023/12/23/The-Return-of-Industrial-Policy-in-Data-542828
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