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Outward-Looking Development Policies Burhanettin Noğay 2010-2011 The Faculty of Economics and Administrative Sciences
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Outward-Looking Development Policies
Burhanettin Noğay 2010-2011
The Faculty of Economics and Administrative Sciences
What are we going to discuss today?
1.Defination of Outward-Looking Development Strategies
2.Washington Consensus
3.Import-Substitution and Export-led Growth
4.Trade Reform in Selected Developing Countries
5.The Four Asian Tigers
6.How did the Four Asian Countries Achieve ?
7.And Turkey
0.The Origin of Export-led Growth Strategy
The origin of export-led growth strategy is based onA. Smith and D. Ricardo’s thoughts.
• A. Smith suggests to increase exports to least developed countries (colonialcountries) needed for the development.
• And D. Ricardo’s "Comparative Advantage Theory (CAT)”, the main starting point of today's export-led growth strategy
0.The Origin of Export-led Growth Strategy
Outward-Looking Development Strategies
Government support for manufacturing sectors in which a country has potential comparative advantege.
• There are some tests about the relationship between economic growth and export in economic literature.
• Some of them say that export affects economic growth
The main of these studies are as follows:
Tyler (1981), Kavoussi (1984), Rivera-Batiz and Romer (1991), Grossman (1991), Bahmani-Oskooee and Alse (1993), Sengupta and Espana (1994), Kwan and Kwok (1995), Doraisami (1996), Bahmani-Oskooee and Niroomand (1999).
• And some economists say that there is no significant relationship
Akbar and Naqvi (2000), Ahmed et al.(2000), Panas and Vamvoukas (2002).
Some important effects on economic growth of exports can be summarized as follows:
• First, export increases competitiveness.
• Second, productivity growth in foreign trade, as well as to obtain new technologies(technology imports) and providing the spread of technologies.
• Third, specialization and benefit from comparative advantages
• Fourth, some economies has narrow domestic market but they can getopportunities to make the economic scale of production with exporting
• Fifth, by increasing foreign exchange inflow reduces pressure of foreign exchange payments. Thus allows an increase in imports of goods and services.
Properties of Outward-Looking Development
Universität Hohenheim, Institut 490a
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Criterion Outward looking strategy Inward looking strategy
Problems Production of primary goods as bases for outward looking strategyVulnerability due to world market developments (ToT, price shocks) Initiation of new industries
orientation according to cost disadvantagesProtectionism and inefficiencyNarrow domestic marketsHigh share of imports in inputs (no absolute foreign exchange use, but only change of imported goods)Reduction of protectionism and moving towards export-orientation
• After the oil crises of 1973, economies in the world went into a quest.
• In August 1982, Mexican crisis
Washington Consensus
• in 1985 the US Treasury Secretary, James Baker
• by Washington, D.C.-based institutions such as the IMF, World Bank, and the US Treasury Department
• the term was initially coined in 1989 by John Williamson to describe a set of ten specific economic policy prescriptions that he considered should constitute the "standard" reform package promoted for crisis-wracked developing countries
The causes of the economic crisis:
• The overgrown with protectionism and excessive state intervention in the public sector
Economic crisis management:
• reduce government intervention in the medium term
• a growth strategy based on exports to support the market economy
• some countries tried to apply this package which is about freee market
and a growth strategy based on exports
• Argentina experience resulted in the crisis(1999-2002), this is not the only example
- in next slides we will see exprience of Turkey
• At that time economy of Argentina was not ready yet to apply these changes
• Turkey applied without creating thenecessary regulatory mechanisms and without taking adequate protective measures.As a result Turkey met two of the crisis(1994 and 2001)
• Turkey had in a large public sector deficits and trade deficits before the crises
• for example, in 1993 foreign trade deficit increased by 72.7% to$14.1 billion
• Similar to the same indicators in 2000, foreign trade deficit increased by 89.9% to $26.3 billion
The Four Asian Tigers
How did the Four Asian Tigers achieve?
• The Four Asian Tigers pursued an export-driven model of economic development with the exportation of goods to highly-industrialized nations.
• All four Asian Tigers have a highly educated and skilled workforce and have specialized in areas where they had a competitive advantage. For example, Hong Kong and Singapore became world leading international financial centers, while South Korea and Taiwan became world leaders in information technology.
• and these countries(NICs ;Hong Kong, Singapore, South Korea, and Taiwan) also produce and export high-tech products
• The highest concentration on labor-intensive exports( primarily textiles and garments) is currently in Pakistan(94%) , followed at some distance by China(58%) , India(50%), Indonesia(49%).
• The lowest wages are probably in China and Indonesia, while Hong Kong is a high-wage economy.
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Hong Kong
Singapore
South Korea
Pakistan
China
Turkey
Indicator: High-technology exports (% of manufactured exports)
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Exports of goods and services (% of GDP)
Exports of goods and services (% of GDP)
in Japan
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GDP per capita (current US$)
GDP per capita (current US$)
in Japan
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Exports of goods and services (% of GDP)
Exports of goods and services (% of GDP)
in Hong Kong
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100
150
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19
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62
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GDP per capita (current US$)
GDP per capita (current US$)
in Hong Kong
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2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Exports of goods and services (% of GDP)
Exports of goods and services (% of GDP)
in Singapore
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GDP per capita (current US$)
GDP per capita (current US$)
in Singapore
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Exports of goods and services (% of GDP)
Exports of goods and services (% of GDP)
in South Korea
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GDP per capita (current US$)
GDP per capita (current US$)
in South Korea
DEVELOPMENT OF EXPORTS in TURKEY
• Year 1980 was a turning point for the Turkish economyand foreign trade policies.
• At that year, decisions on January 24, known as acomprehensive economic package to be implemented.
The main purpose of this package;
• ensure the functioning of the national economy, according to therules of free market mechanism
• and achieve integration with the world economy
With this programme
• Turkey abandoned the import substitution industrialization strategy that makes the country’s economy outside a closed so that Turkey adopted "export-oriented industrialization" strategy.
• With liberalizing Foreign Exchange Regime in 1990and further strengthened Turkish Liras' convertibility features, and the TL was released with the export and import.
• January 24, 1980 within the framework of decisions, made as a result of the devaluation of TL against the U.S. dollar value has been reduced by 49% and is intended to give impetus to exports with domestic demand is trapped.
• Application of fixed exchange rate was abandoned and set on a daily basis so that a realistic exchange rate policy and flexible exchange rate system was introduced and tried to be applied.
• Government has been supporting to exporters with a varity ways such as legal regulations, tax refunds, income tax exemption, allocation of foreign exchange, imports of raw materials and export credits as a customs deductible, some monetary and fiscal incentives provided.
• in 1987 the Turkish Eximbank was established to improve the competitiveness of Turkish exporters in foreign markets and to support Turkey export-oriented strategy
• Turkey’s export was 2.3 billion $ in 1979 in 1990 was 12.9 billion $
For 2010, in medium-term program(2010-2013), exports of Turkey were estimated $111.7 billion
For 2013 in medium-term program(2010-2013), exports of Turkey were estimated $160 billion
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in Turkey
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GDP per capita (current US$)
GDP per capita (current US$)
in Turkey
1950 1960 1970 1980 1990 2000 2010 2020
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GDP growth (annual %)
in Turkey
Thank you!!!!
