Knowledge Base

Export Oriented Industrialization (EOI) is also called export substitution industrialization (ESI), export led industrialization (ELI) or export-led growth. This is a trade and economic policy. Its main aim is to speed-up the industrialization process of a country through exporting goods for which the nation has a comparative advantage. Export-led growth means opening domestic markets to foreign competition in exchange for market access in other countries.  

EOI influences the Global market to a large extent as it straightens the following objectives: 

• to promote exports through subsidies and industrial strategies by educed tariff barriers, floating exchange rate, devaluation of national currency to facilitate exports;
• to rely on strong state policies to mediate the fears of exploitation and dependency;
• to emphasize “comparative advantage” in specific sectors of the economy—export.

Many developing countries, such as Mexico, South Africa and Sudan use this economic strategy in trade development. EOI strategy strives to find a niche in the world economy for a certain type of export. Industries producing this export may receive governmental subsidies and better access to the local markets. By implementing this strategy, countries have the possibility to enrich the internal budget and import commodities manufactured abroad. 

EOI divides export in two types:

1. MANUFACTURED GOODS. This types of products are produced by local manufacturers with one single aim: to be delivered on the international market. Manufactured goods include electrical equipment, durable medical equipment, sporting goods, various food products, gasoline, computers, electronic products, machines and appliances. These products are tangible ones, created from the conversion of raw materials into consumable or useful products. Usually, the goods from this category are manufactured for both household consumption and business use. 
2. RAW MATERIALS. These are materials or substances used in the primary production or manufacturing of goods. Raw materials are often referred to as commodities, which are bought and sold on commodities exchanges around the world. They are usually sold in what is called the factor market, because raw materials are factors of production along with labor and capital.

EOI can be considered as one of the key processes for developing countries export economy. However,  this process is very complex, as it depends on large number of variables such as political system, social and economic structure, capital accumulation, trade, price fluctuations, and income distribution. Geographical characteristics, also, influences the country’s economy and international export level. As such, while export oriented industrialization contributes to economic growth, it is not necessarily indispensable to the growth and development of developing countries.

EOI played a significant role in economic development of the Asian Tigers: Hong Kong, South Korea, Taiwan and Singapore in the post World War II period. However, though the role of export oriented industrialization in economic development is undeniable, countries have to also carefully consider its share in the gross domestic product, as larger export dependence has a negative effect on economic growth.