Industrial development is crucial for sustainable growth of developing countries. However, it has been neglected in development cooperation due to experiences of failed development policies after the World War II and a critical stance toward industrial policy in the academia. However, the rapid growth of emerging industrialized countries has rekindled interest in the role of government in industrial development. Recently, the G20 Seoul Summit recognized the importance of effective development and strengthening industrial capacities of poor countries to combat poverty in the long run. As a country that achieved rapid development based on industrial competitiveness, Korea may possess comparative advantage in building industrial capacity of developing countries in various areas of development cooperation.
This study investigates the issues in development cooperation for building industrial capacity to elucidate promising areas for Korea. In addition, it proposes the direction of ODA in industries and challenges in assistance, to ensure their effectiveness. In particular, this study discusses the scope and issues in terms of development cooperation for industrial capacity building and explores the current activities of international organizations and major donor countries. Based on these discussions, the current status of Korea’s assistance related to industrial areas is evaluated. The study  
concludes by recommending promising programmes related to industrial capacity building and suggests the direction and tasks for development cooperation.
This study recommends that Korea invest more effort in developing concrete programmes at the intermediate level of industrial capacity building, such as technology, human resources, financial system, and trade facilitation. Korea should focus on building technical and managerial capability of the manufacturing sector in lower middle-income countries in Asia and Latin America. The promising programmes could be found in the area of promoting global value chain participation, which could stimulate increased trade among recipient countries and also foreign direct investment into those countries.
To make cooperation more effective, first, the industrial capacity building programmes should be planned at the inception/designing stage of CPS, which will enhance the alignment of programmes with industrial development strategies of recipient countries. Second, Korea should select promising programmes to focus on, to assure a significant and sustained impact. Third, closer cooperation between industrial policy consultation, capacity-building programmes, and hardware construction projects is required. Fourth, a more systematic and specialized cooperation is needed to resolve the fragmentation of assistance. Therefore, cooperation in this area should actively utilize the currently available policy resources in public and private organizations. Fifth, the programmes should be designed so as to induce the participation of the private sector, particularly the business sector. It will enhance the overseas CSR activities of firms and elicit expert inputs from firms into ODA programmes. Finally, greater effort should be devoted to strengthening the effectiveness of training and consulting activities.