At a time when late-industrialisation opportunities are compressed, how can industrial policy be reconceived at the regional – rather than national- level? For developing nations that lack the domestic market scale to deploy demand-led industrial policy, unilateral strategies risk costly duplication, and a race to the bottom on social and environmental standards. Drawing on global lessons from ASEAN’s flexible institutionalism, Airbus’ negotiated division of labour, and the limits of EU-style cooperative maximalism, the paper reviews the merits and limitations of different regional industrial policy models within a three-level typology of minilateral, plurilateral, and supranational coordination.
Drawing on complex systems theory and game theory, we then introduce a new model of coordinative optimisation for industrial policy whereby optimal regional coordination is achieved through a coordinating body that functions not as a supranational authority but as an information broker: collecting feasible best responses from sovereign participants, aggregating distributed preferences, and returning coherent specialisation analyses that minimise total system duplication and address regional supply chain shortfalls to enable participants to adjust their strategy for optimal gains.
The model rests on three interlocking mechanisms. First, a principle of triple flexibility (compositional, longitudinal, and directional) allows the framework to accommodate political diversity, government turnover, and rapidly shifting technological and market conditions without disrupting ongoing collaboration. Second, the folk theorem logic of repeated interaction is embedded in the institutional design to enable iterative rounds of information revelation and preference adjustment towards building the trust necessary for sustained cooperation. Third, learning from historical failures, this model serves to protect national sovereignty within a cooperative regional space for industrial policy, thereby addressing a major political barrier in previous attempts at regional integration. By doing so, our model challenges traditional integration theory.