Export Oriented Industrialisation Strategy

This paper reviews the history and economics that underlie the shift en masse of developing countries from import substitution industrialization (ISI) to the pursuit of export oriented industrialization strategies (EOI) leading to stellar growth performances. The central message of EOI strategies is that newly industrialized countries should harness the prospects offered by international trade by specializing in industries that have a comparative advantage. ISI in contrast violated the dictates of comparative advantage because it required the implementation of protectionist policies to survive. A regression analysis of 45 nations showed that counties that pursued ISI stratgies under protectionist barriers recorded lower growth rates than countries that pursued EOI strategies under free trade. The pursuit of EOI policies overcame anti-export bias and moved the economies from the adoption of inappropriate capital intensive projects that was a hall mark of counties pursuing ISI strategies. The main vehicles for implementing EOI strategies were free trade zones (FTZ) in which Transnational Corportations (TNCs) played a key role in delivering foreign investment and technology. The role of TNCs in promoting EOI in developing countries can have adverse effects and predatory market behavior leading to eventual establishment of monopolies or oligopolies in the host nations.There are costs and benefits in adopting EOI strategies and developing nations that adopted EOI increased their manufactured exports at the rate of 18% per annum leading to a neo-protectionist back-lash from the advanced countries.The failure of advanced countries to play by the rules of the game of international trade has been chastised in GATT and UCTAD fora. Advanced countries have been accused of hypocrisy in advocating free trade when the country is strong and protectionist policies when the country is weak in relation to export competitiveness