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This chapter examines the challenges of industrial policy in the era of liberalization in Tanzania and Vietnam. It starts by describing the major features of industrialization under socialism. Many of the challenges of industrialization related to the difficulties of adequately financing industrial expansion while maintaining effective supervision of the recipients of industrial rents. Under liberalization, important differences in the approach to industrial policy emerged. The chapter compares how the two countries approached privatization and establishing export processing and industrial zones. Vietnam retained a much larger state-owned industrial sector, while Tanzania engaged in an extensive privatization programme. The challenges of disciplining industrial policy rent recipients continued under liberalization in both countries but differed in ways that reflected the different distributions of power in the industrial sector and between the private sector and the state in each country.

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