Examine the limitations of import substitution strategy in your country.
- Limited domestic market to sustain development of industries.
- Import substitution requires a lot of protection and subsidies rarely affordable by government.
- Lack of competition make infant domestic industries leading to poor quality goods and services
- Industries to produce import substitutes require very high capital (such as machinery) not affordable by local investors
- The use of capital intensive techniques reduce employment opportunities
- Cause imported inflation due high cost of inputs
- Low technology and skilled manpower fail to produce import substitutes
- Import substitution industries in urban area because of availability of market lead to rural-urban migration
- Decrease in government revenue to reduce import duties
- Import substitution encourages foreign investors resulting in profit repatriation
- It requires stable political environment to attract foreign investors.
- Import substitution leads to poor quality goods due to lack of competition and poor technology
- Import substitution industries tend to concentrate on production of consumer goods instead of capital assets. This limits future investment
- It encourages monopolies
- Import substitution requires a lot of skilled labour that cause high expense for training abroad.
CATEGORIES Economics
TAGS Dr. Bbosa Science
