Countries differ in their economic performance due to the way their respective science, technology and production systems interact. The creation, adoption and transmission of knowledge are at the core of each of these systems. In developing countries knowledge is not uniform, but combines indigenous skills and know-how with modern ones. Policies promoting the prevalence of modern over traditional knowledge have resulted in the dependence on imported knowledge and the incapacity to create an endogenous knowledge base. At the same time these policies have accelerated the loss of valuable indigenous knowledge that would otherwise help improve the capacities and quality of life of vast sectors of the population. Technical cooperation can play a critical role in building an endogenous science and technology base as well as in promoting the integration of indigenous and modern knowledge, technology and production. Three sets of policies are required to fulfil that purpose: those related to the domestic integration of knowledge, technology and production; those that establish links with the global knowledge, technology and production systems; and those that create a favourable policy environment for the other two.