The Eurasian Development Bank (EDB) has released a new analytical report, “Architecture of Industrial Transformation in Developing Economies,” examining how developing countries can move into the high-income group and remain there on a sustainable basis.
The report’s central conclusion is that a strong domestic industrial base is a key condition for that transition. According to the EDB, 64% of economic growth episodes over the past 50 years were linked to the development of manufacturing, while one industrial job supports another 2.2 jobs on average in related sectors.
The study also highlights the role of human capital. The report says industry accounts for 53% of global research and development activity, while industrial companies hold nearly 60% of green patents. That is why industry is presented not only as a source of output and employment, but also as an environment for technological learning, engineering capability and innovation.
The EDB proposes a three-stage architecture for industrial transformation that combines the historical experience of industrialization, modern industrial policy theory, and the approaches of the World Bank and the IMF. The model follows the sequence of investments, technological infusion and then innovation.
At the first stage, the basic production foundation is built, including reliable energy, transport, water, industrial sites, quality infrastructure and vocational skills. At the second stage, individual facilities are integrated into an industrial platform: suppliers develop, engineering capabilities deepen, processing moves up the value chain, standards are strengthened, project finance expands, and external technology is turned into local capability. At the third stage, that platform is supplemented by applied R&D, pilot lines, intellectual property and the commercialization of domestic solutions.
The report argues that the state and the private sector should play distinct but complementary roles. Governments are expected to provide the conditions for energy, transport, water, logistics, industrial platforms, standards, workforce training and risk-sharing mechanisms. Private companies, in turn, invest and test the commercial viability of projects through competition. Public support, the EDB says, should be tied to co-financing and measurable results.
The bank stresses the scale of the challenge. Today, 108 economies with about 6 billion people belong to the middle-income group. Since 1990, only 34 economies have moved from that group into the high-income category. In the authors’ view, this underlines how difficult it is to shift from growth driven by capital accumulation, urbanization, commodity advantages and borrowed technologies to growth based on productivity and indigenous technological capabilities.
For the Eurasian region, the EDB translates this framework into a concrete set of opportunities. The report says Russia and Belarus can develop more complex segments such as equipment, components, engineering, standards and selected technological niches. Kazakhstan and Uzbekistan can connect their resource and energy base and growing demand more deeply with chemicals, advanced metallurgy, electrical engineering and machinery, capturing more value added in industry. Armenia, Kyrgyzstan and Tajikistan, the report says, can strengthen regional chains through specialized component, service and niche production.
The report also refers to an earlier EDB scenario assessment, under which the development of four interconnected sectors—chemicals, machinery, advanced metallurgy and food processing—could generate more than $510 billion in additional annual output at 2019 prices. The bank notes that this is not a GDP forecast or a guaranteed outcome, but an estimate of potential that includes export expansion, partial substitution of critically important imports and indirect effects in related sectors.
The EDB concludes that for developing economies, simply increasing investment or buying modern equipment is not enough. What matters is turning external technology into domestic production capability—in the form of engineers and technologists, suppliers, standards, service capacity and the ability to improve processes. According to the report, industry is precisely the environment where that learning can become broad-based.
