STRATEGIC INDUSTRIES

The Strategic Industries and Government Policies

The Strategic Industries and Government Policies

Strategic Industries - A Historical Perspective

After the end of world war, some industries were seen as having high strategic importance. The Government implemented 1921 safeguard of Industries Act to protect the strategic industries from foreign competition. The main focus of this act was industries with military importance including optical glass and instrument industry, chemical industry. Import duty was applied to these industries. When in 1926, British Pound was depreciating, the government extended import duties on other industries, as well.

The Great Depression gave rise to a new era of protectionism. Import tariffs were used as protection tools, to protect British Industries. In order to remain protected from countries which implemented import tariffs, the industrialist supported this step. The Act of Custom Duties (1932) marked an end of British liberal regime era by the imposition of 10% import duty on manufacturing also established the IDAC (Import Duties Advisory Committee). Afterwards, the duty was increased to 20% on the recommendations of IDAC. This decision effected industries such as chemical and others (Yang 1993, pp.387).

Successful Ventures through Industry Protection

The government was emphasizing consolidation and rationalization of newer industries with strategic importance. The protection of the electricity sector was crucial to the modernization of British Economy during the war period. The Weir committee measured electricity distribution and supply, in mid 1920s. The reports published by Weir committee resulted in Electricity Supply Act of 1926, which led to the development of CEB (Central Electricity Board). Municipalities were responsible for much of electricity supply, which helped in the consolidation process. The establishment of National grid and supply related negotiations were due to the efforts of the CEB.

The BBC (British Broadcasting Corporation) was a state sponsored non-profit and successful monopoly. It was established in 1922. The company won 9 million radio licenses in 1926, which shows the success of the corporation. The London Passenger Transport Board was established in 1933. The BOAC (British Overseas Airways Corporation) was established in 1939. There was strategic importance in the establishment of BOAC for Royal Air Force and Military Aviation (OECD 1991, pp.7).

The Case of Taiwan

Governments of less developed countries (LDCs) generally adopt policies that will stimulate economic growth in their countries. The effects of these policies, therefore, should be evaluated. In its process of economic development, Taiwan has adopted several different economic strategies. In the 1950s, an import-substitution policy was followed to reconstruct the economy after the Second World War. In the 1960s, an export-promotion policy was put forward to stimulate exports and economic growth. At that time, labour-intensive industries were comparatively advantageous and became the key industries that gained the support of the government. After the oil crises of the 1970s, capital intensive and technology-intensive industries became the latest key industries. In the 1980s, because higher wages resulted in a loss of comparative advantage in the production of labour-intensive products, and because the technology level of Taiwan was still far behind that of the developed countries, bottlenecks occurred in Taiwan's ...