Export-oriented industrialization
수출주도 공업화
A trade and economic policy that seeks to speed up industrialisation by exporting goods in which a country has a comparative advantage. The counterpart of import substitution industrialization, which produces imported goods at home, it channels subsidies, cheap credit and a low exchange rate to exporting industries and uses the world market as the engine of growth. It characterised the post-war development of Hong Kong, Singapore, South Korea and Taiwan, the "Four Asian Tigers".
In depth
Right after the Second World War many developing countries, having seen foreign markets close and wartime shipping become dangerous, started with import substitution industrialization, producing at home the manufactures they had imported. Latin American and Asian countries all took this path at first, but in the 1950s and 1960s Taiwan and South Korea turned their development outward and moved to a strategy of export-led growth, while many Latin American countries continued with import substitution. In principle export-oriented industrialization means opening the domestic market to foreign competition in exchange for access to other markets, but in practice East Asian countries kept strong barriers to imports from the 1960s to the 1980s, protecting nascent industries that might later gain a comparative advantage while backing their exporters.
In South Korea the regime of Park Chung-hee, which took power in a military coup in 1961, launched the first Five-Year Plan in 1962. It aimed to build basic industries such as power, fertiliser, cement, oil refining and steel and infrastructure such as roads, railways and ports, and to promote exports to improve the balance of payments. In the 1970s heavy and chemical industrialization changed what Korea exported, and from 1970 to 1996 the economy grew by an average of 8.4 percent a year, passing a per capita income of $10,000. The World Bank's 1993 report The East Asian Miracle credited export-oriented policies, low taxes and minimal welfare states, but other analyses argued that extensive state intervention and industrial policy had a much greater influence.
Because it places the engine of growth in outside markets, the strategy is vulnerable to outside shocks. Export-oriented industrialization has been criticised for increasing market sensitivity to exogenous factors and for being partly responsible for the damage the 1997 Asian financial crisis did to the countries that used it, a pattern repeated in the global recession after the 2008 financial crisis. Its success is also limited when the terms of trade decline, that is, when export prices rise more slowly than import prices. Marxist analyses saw global overproduction and declining competitiveness producing a profitability crisis in export-led economies.