Export-oriented industrialization (EOI)

Definition

Export-oriented industrialization (EOI) is an economic development strategy aimed at promoting the production of goods for export rather than for domestic consumption. This approach encourages countries to integrate into the global economy by focusing on producing competitive goods that can be sold in international markets. EOI is often supported by government policies that incentivize foreign investment, improve infrastructure, and enhance the skills of the workforce.

5 Must Know Facts For Your Next Test

1. EOI was notably implemented in East Asian countries such as South Korea, Taiwan, and Singapore during the late 20th century, leading to rapid economic growth.
2. Governments adopting EOI typically provide incentives for exporters, including tax breaks and subsidies, to make their products more competitive internationally.
3. A strong focus on education and skill development is critical in EOI strategies, as a skilled workforce can adapt to the demands of global markets.
4. EOI often results in a shift from agriculture-based economies to manufacturing and service sectors that prioritize exports.
5. Success in EOI can lead to increased foreign exchange reserves and improved balance of payments, providing countries with more financial stability.

Review Questions

• How does export-oriented industrialization differ from import substitution industrialization in terms of economic strategy?
  • Export-oriented industrialization (EOI) focuses on producing goods primarily for international markets, aiming to integrate into the global economy. In contrast, import substitution industrialization (ISI) prioritizes developing domestic industries to reduce reliance on imports. While EOI encourages competitiveness and innovation through exposure to global markets, ISI may lead to protectionist policies that can stifle competition and innovation over time.
• Discuss the role of government policy in supporting export-oriented industrialization and how it influences economic development.
  • Government policy plays a crucial role in export-oriented industrialization by creating an environment conducive to exports through incentives like tax breaks and subsidies for exporters. Additionally, governments often invest in infrastructure improvements, such as transportation and communication networks, which facilitate trade. By prioritizing education and skill development, governments ensure that the workforce can meet the needs of competitive industries, ultimately leading to sustained economic growth and development.
• Evaluate the long-term impacts of export-oriented industrialization on a country's economic structure and societal changes.
  • The long-term impacts of export-oriented industrialization can significantly reshape a country's economic structure by transitioning it from agriculture-based activities to manufacturing and services focused on global markets. This shift often results in urbanization as people move towards cities for jobs in newly established industries. Societal changes may include improved standards of living due to increased income opportunities, but also challenges such as income inequality and environmental concerns. Evaluating these impacts requires understanding both the economic benefits and social ramifications that come with rapid industrialization.

Related terms

Import Substitution Industrialization (ISI):

A strategy where a country attempts to reduce its dependence on foreign imports by fostering domestic industries to produce goods locally.

Foreign Direct Investment (FDI): Investment made by a company or individual in one country in business interests in another country, often seen as crucial for EOI.

Economic Liberalization: The process of reducing government regulations and restrictions in an economy to encourage free-market activity, often essential for EOI.