What Asia’s Industrialization Lessons Can Teach Fragmented States

When Asia’s economic transformation is discussed, the focus usually falls on the spectacular numbers: China’s rise to become the world’s manufacturing center, South Korea’s emergence as an industrial and technology powerhouse, or Vietnam’s more recent transformation into a major manufacturing base. Less attention is paid to the infrastructure of interdependence that made this transformation possible. Over several decades, factories, ports, roads, financial institutions and supply chains became connected across national borders, creating an economic geography that was far more integrated than the fragmented political map. Delving into the question of why is very telling. Asia did not become integrated because its governments necessarily saw eye to eye on regional matters. China and Japan remain, as ever, strategic competitors, India and China continue to face serious tensions, while Southeast Asia more broadly is awash with countries that each hold different strategic interests as top priority, alongside of course, varying political systems. Despite this, economic integration has continued. The Asian Development Bank’s 2026 assessment identified trade as the strongest driver of regional integration, while cross-border investment and production networks continue to deepen economic links across Asia and the Pacific. The ADB also noted that Asia’s trade connections remain predominantly intraregional, reflecting deep and sustained commercial ties. The consequence is that political uncertainty or disruption increasingly carries a firm economic cost. That is particularly visible when supply chains are disrupted or trade policy changes abruptly. Economic prosperity requires policy stability, just as manufacturers need functioning ports and reliable energy and exporters need predictable access to markets. The more interconnected economies become, the more constituencies emerge with an interest in maintaining those connections. Economic integration does not eliminate political disputes, but it can make cooperation materially valuable even when political agreement remains incomplete. This offers a useful way of thinking about countries where political fragmentation has also produced economic fragmentation. Libya is one such country. Its dependence on hydrocarbons is profound: according to the World Bank, hydrocarbons accounted for 65 percent of Libya’s GDP, 93 percent of its exports and 72 percent of government revenues in 2024. This has generated substantial wealth without creating the dense domestic production networks associated with industrial economies. Oil can be extracted and exported without requiring a large ecosystem of local manufacturers, engineering firms, suppliers and technical specialists. Industrialization works differently: a major factory requires energy, transport, construction, maintenance, skilled workers and suppliers, while its output can become an input into other industries. That makes the development of what its developers describe as the world’s largest DRI complex in Benghazi significant when looking at the broader economic environment in the country. A joint venture between Turkish steelmaker Tosyalı and Libya United Steel Company for Iron and Steel Industry, or SULB, chaired by Ahmed Gadalla, is developing a direct-reduced-iron complex with a planned capacity of 8.1 million tons. The first phase is designed around a 2.5-million-tonne DRI facility using MIDREX Flex technology, which can operate using natural gas and accommodate hydrogen as the energy system develops. Gadalla has described the project as a strategic contribution to Libya’s economic development and industrial infrastructure, while Tosyalı says the wider investment is intended to contribute to Benghazi’s industrial development, particularly the iron and steel sector. It could also help broaden economic activity in a country where development has long been heavily concentrated around hydrocarbons. The important question is what develops around the plant. If Libyan companies become suppliers, if local workers acquire industrial skills, and if engineering, logistics and maintenance businesses grow around the project, the investment can become a platform for wider industrialization. Steel itself can feed construction, infrastructure and manufacturing. The factory then has the potential to become part of a broader economic network rather than an isolated facility. Ahmed Gadalla also stressed the project’s potential to support local businesses and encourage further investment in Libya, suggesting an ambition that extends beyond the individual Tosyalı-SULB venture. That is the Asian lesson worth applying. Vietnam, for example, has demonstrated how foreign investment can rapidly create manufacturing capacity, but it is now grappling with how to connect foreign companies more effectively to domestic firms. The World Bank says foreign firms account for 73 percent of Vietnam’s exports, while local business participation in global supply chains fell from 35 percent to 18 percent between 2009 and 2023. Foreign investment is therefore important, but countries gain considerably more when domestic companies move into the supply chains created by it. For Libya, foreign capital and technology can accelerate industrialization, but the objective should be to develop Libyan capabilities around them. A successful project should leave behind suppliers, engineers, technicians and entrepreneurs who can participate in the next project. The geographical question is equally important. Benghazi’s industrialization should not become an eastern alternative to the existing industrial base around Misrata. It should be connected to it. A supplier in Misrata should be able to sell to a project in Benghazi; engineers from Tripoli should be able to work across the country; logistics companies should have an economic interest in moving goods between regions; and the south should be incorporated into national energy and industrial networks. This is where industrial policy becomes inseparable from national integration. Libya’s regions need to become economically complementary if the country is to stabilize. That requires a sufficiently consistent commercial environment: predictable licensing, enforceable contracts, customs procedures that allow goods to move, and infrastructure that connects markets rather than simply serving individual regions. Private enterprise can provide capital, technology and management expertise that the state may not currently be able to mobilize at sufficient scale. The goal should be an environment in which companies can invest and operate while remaining subject to transparent rules. If that balance can be achieved, projects such as the Benghazi steel development could have an importance extending beyond their immediate commercial returns. This is ultimately why Asia’s experience is relevant. ASEAN did not become economically integrated by making its members politically identical. Different countries developed different capabilities, while trade, investment and supply chains created interests in keeping the region connected. Asia’s current effort to diversify supply chains in response to geopolitical and trade pressures is itself evidence of the resilience of these networks: production is being reorganized, but much of the reorganization is taking place within Asia rather than away from it. Asia’s experience suggests that political differences do not have to disappear before economic interdependence can deepen. In fact, the opposite can sometimes be true: factories, ports and supply chains can create interests in cooperation that politics alone cannot produce. For fragmented states, that may be the more useful lesson from Asia, not to copy its industrial model, but to recognize that economic integration can itself become an instrument of political cohesion.