This chapter reviews how Southeast Asia in general, and the MIT (Malaysia, Indonesia, Thailand) economies, in particular, have somewhat different developmental states and industrial policies compared to the first-generation newly industrialized economies (NIEs). Flaws in the World Bank's treatment of industrial policy are pointed out. The chapter acknowledges the consequences of heavy reliance on foreign capital as well as the ersatz capitalism dominated by crony rentierism in Southeast Asia.

It notes the dangers of ill conceived and poorly sequenced financial liberalization in Southeast Asia leading to the 1997-98 financial crises. Although some important lessons can be drawn from the Southeast Asian experiences, the chapter warns that such lessons are best drawn from careful analysis, rather than more cavalier broad-brushed generalizations about a rather diverse region.

The chapter also identifies new challenges and roles for the state, in view of globalization and rapid technical change. In conclusion, although trade policy instruments in the region have been less well formulated and implemented, with rather mixed consequences, the chapter shows that the economies in the region would not have achieved as much as they have, without selective government interventions, including industrial policy.