The industrialization gap in LICs and LMICs.

Industrial dynamics have differed considerably across countries and regions over the past decades. While some parts of the developingworld have succeeded in expanding their industrial sector and accelerating innovation, others are lagging behind (see Figure 3). 

Countries in the Asia-Pacific region, for instance, have experienced remarkable growth in terms of their manufacturing value added (MVA) per capita, particularly among upper middle-income countries (UMICs), with China leading the way. In stark contrast, Africa and Latin America have witnessed much slower growth across all LICs, LMICs and UMICs. These trends highlight the disparities in industrialprogress both across regions and income groups. Different industrial dynamics are leading to stronger concentrations of industrial production in specific regions and countries (see Figure 4). 

In 2000, high-income countries (HICs) dominated the share of global MVA, accounting for 75% of global industrial production. By 2030, this concentration is projected to shift, with countries such as China markedly increasing their share of global industrial production. This shift indicates a structural transformation, with a few countries emerging as industrial powerhouses while others struggle to keep pace. In addition to stronger concentrations of global industrial production, the gap between advanced and less developed countries is expected to continue growing. By 2030, all developing regions, except for UMICs in Asia-Pacific, are expected to have an average MVA per capita of 20 per cent or less of that in HICs (see Figure 5). For instance, LICs and LMICs in Africa are projected to have an average MVA per capita of just USD 211 compared to USD 6,344 in HICs. This widening industrialization gap highlights the urgent need for substantial investments and policy reforms to bolster industrial growth in less developed regions. It is now clear that a business-as-usual approach is not sustainable. Not only will industrial production continue to be concentrated in a few major players, while those countries that need industrial growth the most—those projected to have the highest levels of poverty, hunger and unemployment—are likely to experience the slowest industrial progress. Many of these countries are undergoing a process of deindustrialization or are witnessing only sluggish industrialization, which threatens to leave them behind. Without proactive interventions, these countries risk missing out on the transformative benefits of industrialization and facing prolonged economic stagnation.

In this context, shifting course becomes imperative. Developing countries must accelerate industrialization, but the very nature of industry itself is also changing. Megatrends such as the energy transition, The rise of artificial intelligence (AI) and The digitalization of production, GVC reconfigurations, and global demographic trends are reshaping the industrial landscape. These changes present both challenges and opportunities for developing countries; those that can adapt to these megatrends will be better positioned to achieve sustainable industrialization. The following section delves into the most important transformations currently reshaping the industrial sector and examines their potential impact on industrial development, focusing on the key challenges and opportunities these changes present, with a focus on how they may affect developing countries and their ability to harness these shifts for sustainable growth.