Comments on “Technology Policies and Learning with Imperfect Governance ” by Mushtaq H. Khan

1. The paper rightly emphasizes the key problems of technological, and particularly organizational, capabilities in the acquisition of tacit knowledge and organizing the relevant production and learning processes and their financing in the early stages of development. It gives illustrations from two successful cases of sector-specific financing mechanisms from countries otherwise quite deficient in economic governance-one from the car industry in India and the other from the garment industry in Bangladesh. 2. The contrast with the East Asian cases of industrial policy has been drawn in terms of state capacity which is often missing in South Asia. But the concept of state capacity is a little circular; one often measures state capacity ultimately in terms of some outcome variables, and, thus defined, capacity cannot explain those outcomes. The East Asian state often carried out a policy of contingent rents which induced private agents to act in certain ways. But the successful cases from South Asia cited in the paper are also linked to some arrangements of rents (largely generated by content protection in the case of the Indian car industry and quota rents in the case of the Bangladeshi garment industry), though clearly those rents were not by themselves sufficient in generating the private efforts and investment in learning.