Question

Critically assess the export-orientated industrialisation strategy

Answer 1

export-orientated industrialisation strategy is a type of economy policy which is undertaken to boost the industrialisation through increased domestic exports. It is also known as export led growth. Major focus is on increasing the demand for domestic goods and services in rest of the world. A nation does so by freeing up the trade barriers, pump in more government expenditure or by devalue its domestic currency so that the goods become cheaper to the foreigners.

Higher exports lead to higher income and productivity. It improves the trade balance and overall GDP growth. So, nations export those goods in which it has comparative advantage.

However, such economic policy has been criticised on many parts.

Exploitation of goods to be exported in which a country has a comparative advantage involves huge investment. Also, the government must have good knowledge of foreign and domestic markets and should be able to identify the goods for which the demand is going to increase in future. Such predictions involve huge expenditure and search cost.

Such policy becomes ineffective when a domestic country faces fall in its terms of trade. Prices of the exports increases at a slow pace than the import price when terms of trade are negative trend. In such case, it is not beneficial for a nation to do industrialisation through increased exports