CAREC Institute Report Explores CAREC Region’s Transition to Advanced Technologies and the Role of Foreign Engagement and Industrial Policies

The CAREC Institute has released a new report titled The CAREC Region’s Transition to Advanced Technologies and the Role of Foreign Trade, Foreign Firm Engagement, and Industrial Policies. Authored by Dr. Hans Holzhacker, Consultant to the CAREC Institute, the report examines the CAREC region’s economic growth and its shift towards advanced technologies. It explores how foreign trade, foreign investment, and industrial policies will shape the region’s future.

Over the past 30 years, the CAREC region has made significant economic progress, with the median gross national income (GNI) per capita rising from a low of 33.4% of the global GNI per capita in 1996 to as much as 77.1% in 2024. To sustain this growth, the region must adopt emerging technologies such as artificial intelligence (AI), new electrification, and low-carbon technologies.

The report highlights that to manage industrial change and capitalize on new opportunities, CAREC governments must play an active role. Key priorities include fostering innovation, developing skilled talent, improving the investment climate, and enhancing regional and international cooperation. Foreign trade and foreign investment will continue to be crucial drivers of sustainable growth and higher productivity.

The author suggests that industrial policies should focus on advanced technologies. While there might be reasons to support traditional sectors for some time to help them adjust to the new realities without too fast, too painful, not manageable, not financeable disruptions, policies should not shield firms from competition indefinitely and include sunset clauses or clear benchmarks for ending support when objectives are not met. The author also emphasizes the need for governments to assist those affected by the transition through retraining programs, infrastructure investment, and temporary income support, while ensuring fair working and living conditions during the economic shift.

For more information, please read the full report.