AI as part of industrial and innovation policies.

 

AI policies can be seen as part of industrial and innovation policies. They foster the development of AI algorithms and applications to build new activities in the digital domain. At the same time, they encourage AI adoption to improve businesses, diversify the economy and improve productivity and living standards. These dual goals — development and adoption — can guide policymakers in integrating frontier technologies into existing industries. Around one third of the world’s population lacks Internet access, creating a digital divide that slows digital literacy and hinders full participation in AI use and development. Developing countries with weak digital infrastructure may not perceive AI as a national priority and simply react to rapid AI proliferation as it happens. 

Instead, they need to plan proactive AI policies. Some are concerned that greater regulation in developing countries might stifle AIinnovation. However, industrial policies can foster innovation by coordinating other policy areas to create supportive environments. Effective AI policies can also address public concerns about data protection and privacy, and raise awareness about AI’srisks and opportunities, to build trust and promote adoption. Traditionally, industrial policies have focused more narrowly on established industries and emphasized structural shifts, such as transitioning from agriculture to manufacturing or shifting within sectors to higher-productivity activities. 

A broader definition should encompass any government intervention aimed at improving the business environment or restructuring economic activity toward sectors, technologies or tasks that have better growth or societal welfare prospects. From this perspective, structural change is an innovation-driven transformation in how a country, industry or market operates. Efforts to transform sectors and economies should support technological learning and skill upgrading, prioritize supportive infrastructure, anticipate future needs and build capabilities that foster positive spillovers. This is more difficult near the technological frontier, which demands more knowledge and skills, and where there is greater uncertainty, with higher risk of failure or unintended consequences.