Why would export promotion be a better development strategy than import substitution?
- Export promotion industrial strategy increases the foreign earnings therefore improves the balance of payment position of a country while Import substitution only save foreign exchange
- Establishment of labour intensive export promotion provides labour to the people
- It encourages diversification to increase on the volume for export.
- Promotion of foreign market increases the market for the goods and services promoting economies scale. In import substitution small sized domestic market may not exploit the economies of scale from production which hinders growth
- It leads to domestic resource utilisation since raw materials are used in production
- Export promotion expose local industries to foreign competition, technology and marketing that lead to improvement of manufacturing sector to cater for quality standards of international market. Lack of external competition in import substitution reduces efficiency of infant domestic industries.
- Skill development is encouraged to enable production of quality products and services
- Promotes international cooperation
- Leads to development of infrastructures like roads, electricity
- Promotes entrepreneurship.
- Leads to economic growth due to increased earnings
- Increased tax earning from export tax but failure by local industries to meet the customers demand can lead to black market and financial leakage reduce government revenue.
- Exporting products boosts the local economy and helps local businesses increase their revenue
- It improves research, development and innovation because it may necessitate a change in existing products to suit new markets.
- Lead to value addition to agricultural output thereby attracting high income.
- Exports allow access to imports that can be purchased with the foreign exchange they generate such as superior technology that allows productivity gains
- Increased profitability because export is done in big quantities
- Exporting protects business against fluctuations in the domestic business cycle, thereby protecting your revenue and employees.
- Import substitution may lead to monopoly
CATEGORIES Economics
TAGS Dr. Bbosa Science
