Salomon Samen's blog

This new paper provides a basic understanding of: (i) the concepts of Export Development and Export Diversification, (ii) what the theory says about Export Development and Diversification? and (iii) what empirical evidence shows on the links (correlates) between export diversification, exports growth, and overall growth.

The role of export development and diversification in growth in developing countries has received considerable attention in development literature over the last 50 years. During the 1950s, 1960s, and 1970s, and largely influenced by R. Presbish (1950) and H.W. Singer (1950), the prevailing development strategy in many developing countries and particularly in Latin America, Africa and South Asia, was in favor of import substitution and extensive use of restrictive trade polices for economic diversification. In the light of the success of China, India, and the East Asian “Tigers”, this view of economic diversification through import substitution evolved considerably towards export promotion and outward orientation in the 1980s, 1990s, and early 2000s.

Because many developing countries are heavily dependant on commodity exports, making them extremely vulnerable to external shocks, a key challenge confronting policy makers in those countries is that of expanding export revenues, stabilizing export earnings, and upgrading value added in a changing North-South trading structure.

A Paper for Discussion

In recent decades, export competitiveness in a changed and increasingly changing world has been at the heart of growth and development debates in almost all countries. Drawing upon the lessons of experience of the most successful exporters in the developing world¹, this paper provides an overview of institutions and policy practices successfully experienced for the expansion and diversification of exports, and the strengthening of industrial competitiveness in some developing countries.

Although exports are important for growth and development, developing countries have been struggling with the challenge of expanding and diversifying their export baskets beyond their primary product bases for a long time. Based on research in recent two decades, it is now well established that, openness to trade and integration into global markets is a central element of successful growth strategies; and higher and sustained economic growth is associated with export growth (Dollar and Kraay (2001).

Against the background of growing disparity in income between the developed and the developing world due in large part to divergence in industrial competitiveness, the central question has always been: what can and should be done in developing countries to boost their export growth, accelerate their export diversification and enhance their competitiveness in international markets? While there is considerable agreement on some of the policy lessons learned from successful exporters of the developing world (need for sound macroeconomic management, appropriate exchange rate and general encouragement to exporters), there is more controversy on the role and usefulness of some other policies and particularly on selective policies targeted to specific activities. However, a look at the experience of the most successful exporters of the developing world that were able to reverse more than a hundred years of sluggish development and achieve unprecedented manufacturing performance, suggests that they may have done something right.