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what is import-substitution industrialisation (ISI)? what are the motivations behind implementing it?

ISI is a trade and economic policy which advocates replacing foreign imports with domestic production.

it is based on a premise that a cty should attempt to reduce its foreign dependency through the local production of industrialised products.

Underlying motivations for substituting imports with production of consumer gds:
- relatively healthy local consumer market
- pressure to nurture local industries in order to allow greater local ownership of economy
- stiff competition against affordable and better quality imports from East Asian economies


the pros and cons of ISI

ISI was impt in helping to establish healthy ec growth
- focus on expanding the manufacturing sector
- providing a key source of employment for the early indep states

however ISI may not necessarily be the most sustainable of ec strategies
- often bred long-term inefficiencies & stagnation; bc of
- ISI's over-reliance on gov support and the saturated local market


what are socialist, centrally-planned industrialisation strategies? what are the motivations behind implementing it?

focuses on heavy government intervention in controlling the economy through state enterprises. extreme cases see the discouraging of private enterprises e.g. in Vietnam

underlying motivations for implementation:
- responding to colonial ec model of exploitation, so the gov here chooses to adopt a more active role in "addressing" the gap in ec ownership)
- Ideological reasons and motivations of leaders (Viet: Communist ideology; Sukarno's Indo: fear of neo-colonialism; Ne Win's Burma: Socialist leanings)
- lack of skilled ec bureaucrats in providing advice to inexperienced govs


pros & cons of socialist, centrally-planned industrialisation

- efforts to ensure some degree of socio-ec equity
- greater emphasis on ensuring transfer of ec ownership into local hands

cons: failure to even ESTABLISH sound ec growth in the first place
- ill-advised policies led to misdirected industrialisation strategies, and lack of incentives among the labour force
---> use as contrasting CS to prove the imptance of effective ISI strategies under capitalist ecys in ESTABLISHING ec growth


what is export-oriented industrialisation (EOI)? what are the motivations behind implementing it?

EOI is a policy aiming to speed up industrialisation process of a cty by exporting gds for which the nation has a comparative advantage.

motivation: to sustain the long-term efficiency of ec growth

prevalent in ecys like SG, M'sia & Thailand, a lesser extent in Indo and Philippines, making the shift to EOI relatively later.


stages of ec dev in general

stage 1: establishing ISI or socialist, centrally planned industrialisation
stage 2: establishing EOI
stage 3: ability to sustain stability of economic growth
- effective regulation of fin. sector as bulwark agnst ext fin. shock
- ineffective regulation of fin. sector, crony capitalism resulted in greater susceptibility of ext fin. shock