key term - Export-oriented industrialization

Definition

Export-oriented industrialization (EOI) is an economic strategy aimed at accelerating a country's economic growth by focusing on producing goods for export rather than for domestic consumption. This approach often involves adopting policies that encourage foreign investment, promote manufacturing industries, and increase exports to global markets, leading to higher levels of economic development and integration into the global economy.

5 Must Know Facts For Your Next Test

1. Export-oriented industrialization gained prominence in the late 20th century as a successful strategy for economic growth in several East Asian countries, notably South Korea and Taiwan.
2. EOI typically involves government support through policies like tax incentives, subsidies, and infrastructure development to create a favorable environment for export industries.
3. Countries employing EOI often develop specific sectors, such as textiles or electronics, to leverage comparative advantages in global markets.
4. By focusing on exports, nations can achieve economies of scale, leading to reduced production costs and increased competitiveness internationally.
5. While EOI can drive rapid economic growth, it also poses risks such as vulnerability to global market fluctuations and reliance on external demand for economic stability.

Review Questions

• How does export-oriented industrialization differ from import substitution industrialization in terms of economic strategy and goals?
  • Export-oriented industrialization focuses on producing goods primarily for international markets, aiming to integrate into the global economy and benefit from foreign demand. In contrast, import substitution industrialization seeks to reduce reliance on foreign imports by promoting domestic production of goods. While EOI can lead to rapid economic growth through increased exports and foreign investment, import substitution often emphasizes self-sufficiency and protection of local industries.
• What role does government policy play in the success of export-oriented industrialization, particularly in the context of East Asian economies?
  • Government policy is crucial for the success of export-oriented industrialization as it provides necessary support through incentives, infrastructure development, and investment in human capital. In East Asian economies like South Korea and Taiwan, governments actively promoted key industries by facilitating access to credit, providing subsidies, and establishing trade agreements that opened up global markets. These policies created a conducive environment for businesses to thrive and enhance their export capabilities.
• Evaluate the long-term implications of relying on export-oriented industrialization for a country's economic growth and sustainability.
  • Relying on export-oriented industrialization can lead to significant short-term economic growth and job creation; however, it raises concerns about long-term sustainability. Countries may become overly dependent on volatile global markets and vulnerable to shifts in international demand. Additionally, there is the risk of neglecting domestic needs and social inequalities if resources are primarily directed toward export sectors. A balanced approach that also addresses domestic consumption and social development is essential for ensuring sustainable growth over time.

Related terms

Import Substitution Industrialization:

An economic policy that emphasizes reducing foreign dependency by encouraging domestic production of goods that were previously imported.

Trade Liberalization: The removal or reduction of trade barriers, such as tariffs and quotas, to facilitate free trade between countries.

Foreign Direct Investment: Investment made by a company or individual in one country in business interests in another country, often by establishing business operations or acquiring assets.