EDB: A Strong Industrial Base Is Key for Developing Economies to Reach High-Income Status
Almaty, August 2026 – The Eurasian Development Bank (EDB) has presented a new analytical report, The Architecture of Industrial Transformation in Developing Economies, which analyses how developing countries can transition into the high-income category and secure a stable position within that group. Drawing on historical industrialisation experience, modern industrial policy theories, and approaches of the World Bank and the IMF, EDB analysts propose a three-stage architecture of industrial transformation that enables the conversion of external technologies and investment into domestic production competencies, human capital, and innovation.
Key takeaways from the report:
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Domestic industry is the foundation for transitioning to high-income status. Manufacturing accounted for 64% of economic growth episodes over the past 50 years, and one industrial job supports another 2.2 jobs in related sectors.
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Human capital turns industrial production into a source of innovation. Industry accounts for 53% of global R&D activity, and industrial companies own almost 60% of green patents.
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The state creates infrastructure conditions; the private sector validates commercial viability. The state plays a key role in developing hard infrastructure (energy, transport, water, logistics, industrial parks) and soft infrastructure (standards, workforce training, risk-sharing mechanisms). Private companies invest and compete, while government support is provided with co-financing and measurable results.
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The three-stage architecture offers developing countries a practical and adaptable path from investment to innovation. Its modules are applied to specific "country–industry" combinations, so the overall logic holds under different starting conditions.
More about the report:
The scale of the challenge is enormous. Today, 108 economies with a combined population of around 6 billion people belong to the middle-income group. Since 1990, only 34 economies have transitioned from it to the high-income group. These figures show how difficult the transition is from growth driven by capital accumulation, urbanisation, commodity endowments, and technology borrowing to growth based on productivity and domestic technological capabilities.
The EDB views industry as one of the central mechanisms of this transition. It creates not only output and jobs but also an environment of continuous technological learning: demand for engineers and technicians, standards and metrology, production management, suppliers, and applied research. According to data cited in the report, manufacturing accounted for 64% of economic growth episodes over the past 50 years, and one job in manufacturing on average supports another 2.2 jobs in related sectors.
The report's main analytical novelty is not another list of "right" industries but an applied architecture of solutions. The EDB combines in a single working system the historical experience of industrialisation, modern industrial policy theories, World Bank and IMF approaches, and requirements for practical project implementability. The market selects and validates the viability of solutions, while public institutions remove infrastructure, skills, coordination, and financial barriers that an individual company cannot overcome on its own.
The architecture is organised around three stages and incorporates the World Bank's 1i–2i–3i logic: investment → technology absorption → innovation. At the first stage, a basic production foundation is formed – reliable energy, transport, water, industrial parks, quality infrastructure (standards, metrology, certification), and professional skills. At the second, individual productions are combined into an industrial platform: suppliers, engineering competencies, deeper processing, standards, and project finance are developed, and external technology is transformed into local competence. At the third, applied R&D, pilot lines, intellectual property, and commercialisation of domestic solutions are added to this platform. The stages may overlap, but broad-based technological upgrading is impossible without a production platform, workforce, suppliers, and standards.
For the Eurasian region, the EDB translates this logic into a concrete portfolio of opportunities. Russia and Belarus can develop complex links – equipment, components, engineering, standards, and certain technological niches. Kazakhstan and Uzbekistan can more deeply connect their resource and energy base and growing demand with chemicals, high-value-added metallurgy, electrical engineering, and mechanical engineering, consistently raising the level of processing in industry and capturing more added value. Armenia, Kyrgyzstan, and Tajikistan can strengthen regional chains through specialised component, service, and niche productions. The principle of this configuration is "different competencies – a single industrial system," in which the regional market provides scale while external openness preserves access to technology and competitive validation.
The scale of untapped opportunities is demonstrated by a scenario estimate from a previous EDB study: the development of four interconnected complexes – chemicals, mechanical engineering, high-value-added metallurgy, and food processing – could generate over USD 510 billion in additional annual output in 2019 prices. This is not a GDP forecast or a guaranteed result but an estimate of potential, including export expansion, substitution of part of critical imports, and indirect effects in related sectors.
To transition to high-income status, a developing economy cannot simply increase investment and buy modern equipment. It is critically important to turn external technology into domestic production capability – into engineers and technologists, suppliers, standards, services, and the ability to improve processes. It is industry that creates the environment where such learning becomes widespread. When enterprises can not only operate but also adapt and improve technologies, the transition from imported knowledge to domestic innovation begins. This is the qualitative change in the growth mechanism – from capital accumulation to productivity and technological development.
The authors emphasise that industrial transformation is not just about new factories. hard infrastructure – energy, transport, logistics, warehouses, water, and industrial parks – must develop simultaneously with soft infrastructure: standards, certification, metrology, professional and engineering education, applied science, and supplier development programmes. Priority areas must pass five filters: market demand; resources and competencies; technological adjacency; infrastructure readiness; and financial feasibility. Large-scale support is justified only after pilot testing and market validation.
A special role is assigned to multilateral development banks. Their task is to translate industrial strategy into a financeable portfolio: prepare complex projects, reduce early-stage risks, provide long-term financing, mobilise private capital, and connect national initiatives into regional production chains.
The practical meaning of the EDB's new architecture is to give developing economies a navigation tool from ambition to implementation. The success of industrialisation is determined by the ability to turn resources, investment, and external technologies into productivity growth, engineering competencies, local added value, and domestic innovation. It is this change in the growth mechanism that creates the foundation for transitioning to high-income status and securing a stable position in that group.
The full text of the analytical report The Architecture of Industrial Transformation in Developing Economies is available at the link.
Additional Information:
The Eurasian Development Bank (EDB) is a multilateral development bank investing in Eurasia. For 20 years, the Bank has worked to strengthen and expand economic ties and foster comprehensive development in its member countries. By the end of June 2026, the EDB’s cumulative portfolio comprised 348 projects with a total investment of US $22.1 billion. Its portfolio consists principally of projects with an integration effect in transport infrastructure, digital systems, green energy, agriculture, manufacturing and mechanical engineering. The Bank adheres to the UN Sustainable Development Goals and ESG principles in its operations.
The EDB is implementing three mega-projects as part of its 2022–2026 Strategy: the Eurasian Transport Network, the Eurasian Commodity Distribution Network and the Central Asian Water and Energy Complex.
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