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Export Promotion Strategy Vs. Import Substitution Strategy By: Import Substitution Strategy 1. Meanwhile, many other developing countries such as Latin America countries had committed to an alternative strategy, import substitution IS.
The IS strategy yielded disappointing results: There is no doubt that EOIs outperformed countries that adopted IS strategy in terms of economic development. However, are there any other aspects that EP is better than IS? In this essay, the detailed comparisons between these Essay export promotion strategies will be discussed in three main parts: Essay export promotion, the merits of IS and the limits of EP will be mentioned.
Comparisons between EP and IS 2. The IS strategy prescribed by structuralists such as Presbish and Myral favored expansion of the industrial sector in the domestic market to substitute for imports. The structuralists believe protection is necessary for most developing countries to establish a strong base for domestic industry while it develops into a mature local industry.
The government can make this protection not only via tariffs, quotas but also via exchange rates, prices of the factors of production and interest rate.
Opposite to the IS strategy, EP is a trade and economic policy aiming to speed-up the industrialization process of a country through exporting goods for which the nation has a comparative advantage.
Export-led growth implies opening domestic markets to foreign competition in exchange for market access in other countries. Reduced tariff barriers, floating exchange rate devaluation of national currency is often employed to facilitate exportsgovernment support for exporting sectors and attracting FDI are all examples of policies adopted to promote EOI, and ultimately economic development.
Various protection measures and incentives were provided to domestic industries. Typical practice included direct subsidies to tax exemptions, direct government investment in establishing new industries, preferential treatment in bank credits, as well as preferential treatment in imports.
For example, in Turkey, the State Economic Enterprises SEEwhich was established for the purpose of industrialization, accounted for about half of the total value of industrial production.
Furthermore, the losses of state enterprises were generally financed by Central Bank credits. Private industrial firms that were at the verge of bankruptcy were often consolidated to form a state firm. At the beginning, they worked well to help the infant industries grow.
The state acted as engine of development for the economy. It tried to set up the required infrastructure roads, dams, electrification, communication system, energy etc.
Real GDP grew and unemployment decreased. However, when starting an IS strategy it is supposed that the protection is temporary, because it is assumed that the protected industry will in turn progress and will be able to compete with the foreign industries.
But in practice the results are opposite to this view. Studies show that many industries could not reach maturity even after 20 years of protection. Moreover, according to Bell et al. This phenomenon indicates the failure in the application of infant industry theory and thus the failure of IS strategy.
Under the IS strategy, the degree of government intervention was unprecedently high, rivaling that of the central planning economies. Import Substitution Strategy and other term papers or research documents.What a essay looks like examples essay importance of teachers natural resources, essay ielts simon ideas essay in russian language ritual the fun they had essay letter what is fate essay your dream essay rubrics example in science, essay der oder das jour fixer a unusual day essay winter.
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Import Substitution vs. Export Promotion Essay Import Substitution vs. Export Promotion Econ Term Paper Group (19) Members: Amjad Hussain () Awais Javed () Fahd Mukaddam () Haider Shah () Hassan Jamil () Muhammad Bilal Ayub () Words (using page 2): *7 = IS vs.
Export promotion Vs Import Substitution Essay In the present day world, every country is trying hard to develop its economy at a faster pace so as to improve the standard of living of the people and along with that earn respect from the rest of the world.
In conclusion, this essay compared two common development strategies in international trade often adopted by countries, i.e. import substitution and export promotion.
Import substitution indicates one country adopt many approaches that create high barriers to some foreign final goods in order to protect domestic industry.