A date arose in the 1950s and 1960s amongst policy makers and academics regarding the advantages of import substitution which is also known as inward oriented policy and export promotion which is also known as outward oriented policy. The topic of the debate also included the effects of these policies on economic growth in developing countries. The conclusion of the debate came out stating that the outward oriented policies had a deep effect on the domestic economy which in turn helped to extensively improve the growth rates. This comparison can be found and read in various import export courses online
For the countries that chose export-led growth, three main points could be derived from their experiences. Firstly, the impeccable rate of growth which they achieved was associated with the rapid growth of exports. Secondly, the growth rate jumped multiple times after the countries adopted the export-oriented strategies but it was possible only for those countries who could contrast performance before and after the policy changes and thirdly, the data of the consistent high growth rates showed that outward-oriented policies did not only produced temporary gains by improved resource allocation but created dynamic effects in the economies of those countries.
Understanding export-led growth
Countries that have been successful in developing their export markets considerably are associated with the terms like export-led growth, export promotion and import substitution. While different countries might have different policies but no discrimination against any commodity groups is the one policy that almost all the countries follow. Also, every country wants to earn at least the amount of incentive so as to save their foreign exchange.
The marginal rate of transformation of domestic production must always be equal to the international marginal rate of transformation and this is one of the major criteria for the optimal allocation of resources. An export-oriented set of policies can never be biased towards the sales in the domestic market. The export-led development worldview supplanted the import replacement industrialization worldview. This is the thing that numerous deciphered as a weak advancement technique. While a export-led development methodology met with relative accomplishment in Germany, Japan, and East and Southeast Asia, current conditions recommend that another advancement of the worldview is required.
Export-led development has a ton to do to occupy self time adequacy. Import substitution, then again, is the inverse. It is a work by nations to become independent and lower their reliance on created countries. They do this by fostering their own ventures so they can contend with different nations that depend on exports.
Some of the major points that could be noted regarding export-led growth strategy are as below
- One of the major factors that shows a country has adopted a Export-led development strategy seeking economic development is that it opens itself to international trades
- Just opposite to Export-led growth development is the import substitution where the country instead of opening itself to international trades, makes itself self-sufficient by developing their own industries, engaging their manpower on in-house projects and giving increasing employment in their own countries.
Export-led growth Era
The time frame between 1970 to 1985 saw the reception of the export-led growth worldview by the powerful countries like Hong Kong, Singapore, South Korea, and Taiwan which prompted their resulting monetary achievement. While an underestimated conversion scale made products more cutthroat, these nations acknowledged there was a much more prominent requirement for unfamiliar innovation procurement assuming they needed to contend in automobile assembling and hardware industries. A lot of their success has been credited to their securing of unfamiliar innovation and its execution contrasted with their rivals.