The slide is about the link between export & import substitution industrialization.Hope you will be benefited by it.

1. IMPORT SUBSTITUTION &
EXPORT ORIENTED
INDUSTRIALIZATION
ARE THEY TWO SIDES OF THE
SAME COIN?
Presented By:
Mohammad Kawsar Ahammed

2. OBJECTIVES
Import Substitution
Export Substitution
Are they two sides of
the same coin?

3. Import Substitution

4. OBJECTIVES OF IMPORT
SUBSTITUTION
 Promotion of domestic industry
 Employment generation
 Promotion of industrialization.
 Improvement of balance of payment.

5. IMPORT SUBSTITUTION
 Import substitution industrialization (ISI) is a
trade and economic policy which advocates
replacing foreign imports with domestic
production.
 Key idea:
‘Produce it rather than import it’

6. IMPORT SUBSTITUTION
Inward-oriented strategy.
Strategy:
“ that a developing country should,
whenever possible, produce goods
domestically, rather than import them”

7. IMPORT SUBSTITUTION
In order for it to work there need to be some
necessary conditions:
 the government needs to adopt a policy of
organizing the selection of goods to produce
domestically.
 Subsidies are made available to encourage
domestic industries
 Government need to implement a protectionist
system with tariff barriers to keep out foreign
goods.

8. ADVANTAGES: IMPORT
SUBSTITUTION
 Protects jobs in domestic market
 Protects local culture and habits
 Protects the economy from power and bad
influences of MNC’s

9. DISADVANTAGES: IMPORT
SUBSTITUTION
 May only protect jobs in short-run
 Lack of specialization and comparative
advantage
 May lead to inefficiency in local firms
 High rates of inflation due to domestic
aggregate supply constraints
 May cause retaliatory measures

10. Export Substitution

11. CONTENTS OF EXPORT
ORIENTATION
 Definition
 Advantages of export oriented
industrialization
 Constraints for increasing exports
 Guiding policy

12. DEFINITION OF EXPORT
ORIENTATION
 The commodities (goods & services) sold to
foreign country is called export.
 “Export-oriented industrialization (EOI)
sometimes called export substitution
industrialization (ESI) .
 Export led growth is an economic strategy
used by some developing countries.

13. DEFINITION OF EXPORT
ORIENTATION
 There are two types of exports :
manufactured goods and raw materials.
 The economy of Bangladesh is largely
dependent on agriculture but the Ready
Made Garment (RMG) has emerged as the
biggest earner of foreign currency .

14. ADVANTAGES OF EXPORT-
ORIENTED INDUSTRIALIZATION
 Increasing sells and profits.
 Reducing risk balancing growth.
 Gain new knowledge and experience.
 Help to reduce poverty.
 Promotes effective external trade in
developing countries.
 The export value will increase and help to
bridge the trade gap.

15. ADVANTAGES OF EXPORT-
ORIENTED INDUSTRIALIZATION
 Generate technological progress in response to
consumption abroad.
 Increased employment in labor surplus
developing countries like Bangladesh, India,
Thailand.
 Enlarged size of the market.
 The production of export is a necessary
precondition for increases in import, specially
import of new technologies needed for the
industrialization process.

16. CONSTRAINTS FOR
INCREASING EXPORT:
 Overvalued exchange rate
 Dominance of import substituting Export
risky
 High Tariffs(Developed countries against
least developed countries)
 High cost of incentives

17. CONSTRAINTS FOR
INCREASING EXPORT:
 Selling higher price(capital goods and
equipments)
 Neglect of factors other than price
 Wasteful formalities
 Wrong focus
 Production problems

18. GUIDING POLICIES:
 Provision of foreign exchange risk
protection
 Reduction in indirect taxes for export
 Import replenishment
 Priority allocation of foreign exchange for
exporters

19. GUIDING POLICIES:
 Giving tax reduction
 Privatization of state activities to reduce the
role of the state in direct
 Production and generally to increase the
role of the market in economy

20. EXPORT-ORIENTED PLASTIC
INDUSTRY OF BANGLADESH :
OPPORTUNITIES AND CHALLENGES
Bangladesh export commodity
 Garments
 Frozen fish and sea food
 Jute and jutes goods
 Leather

21. Are they two sides of
the same coin?

22. THERE IS A PROVERB GOES…..
“There is nothing in this world
unmixed for blessing”
So, whether it is Import Substitution
Industrialization or Export Oriented
Industrialization both have some shortfall.

23. SIMILARITIES & DISSIMILARITIES
BETWEEN ISI & EOI
 Import Substitution Industrialization
substitutes externally produced goods with
locally produced ones.
 Export Oriented industrialization industrializes
through exporting which has a comparative
advantage.

24. SIMILARITIES:
IMPORT SUBSTITUTION
INDUSTRIALIZATION
 Increase in domestic employment .
 Reduced dependence on labor non intensive
industries.
 Generate Technological progress

25. SIMILARITIES:
EXPORT SUBSTITUTION
INDUSTRIALIZATION
Grater capacity
utilization
Allocation of
resources through
comparative
advantage.
Generates
technological
progress
Increases
employment with
accelerating
growth of the
economics.

26. DISSIMILARITIES BETWEEN ISI
& EOI
The IS industries are inefficient in
international competitiveness.
Worldwide increased unemployment
decreases GDP.
Local companies are forced to select and
replace technologies in use.
Comparative Advantage must be defined
clearly
Economy should ensure conditions for
enhancing the quality of development.

27. ARE ISI & EOI BOTH SIDES OF THE
SAME COIN?
Considering the above mentioned Sectors we can
say that for accelerating economic growth ISI & EOI
Generation of technological progress
Allocation of resources
Increased amount of Employment

28. CONCLUSION
 Trade policy developing countries is concerned
with two objectives : promoting industrialization
and coping with the uneven development of the
domestic economy
 So, for a country’s ultimate development both the
import substitution and export oriented
industrialization are equally important

29. THANK YOU