& Palmer Patrick. The ADF test is used in time series to test for unit roots. Between 1975 and 1978 the real value of total imports fell by an average of 1.1% (Raul, 1982). 65 0 obj <> endobj The result of the Breusch-Godfrey serial correlation LM test is contained in Table 6. Also, local industries often cannot take advantage of economies of scale in manufacturing their products. The relationship between the dependent variable and LIMPORT is also in the negative territory, however, not statistically significant. In conclusion, this revelation provides the impetus for developing countries to rethink the sequencing of their macroeconomic policies. We showed how the tariff-based policy has led to welfare losses in comparison to the free trade situation, and we discussed how the optimal intervention policy is conditioned by the different formulations of the emergency restriction in agriculture. More specifically, South Africa complemented the ISI policy in April 1990 with an exports regime, when the General Export Incentive Scheme (GEIS) was introduced. This initial effort failed due in large part to the relative inefficiency of 3rd world production facilities and as a result their inability to compete in a globalizing marketplace. This period falls within the second presidency of Getulio Dornelles Vargas, who ruled Brazil between 1951 and 1954. While the coefficient of CURR exhibits strong negative relationship and statistically significant, the negative relationship between GDPPPP and INFLATION is low, however, statistically significant. Its energy saving initiatives involved weatherization techniques, use of efficient electric motors, appliance replacement rebates, etc. Import-Substitution Industrialisation in South Africa. 8 It is pertinent to note that Brazil and South Africa did not adopt ISI in the same calendar year. 7 Cruzeiro was the former currency of Brazil, before it was renamed ‘real’. More so, the residuals of the regression in Table 5 are stable throughout the time (t) at 99% confidence level. The government made available large subsidy for import substitution. However, none of the regressors was dropped from the analysis. United Nations Conference on Trade and Development (UNCTAD) World investment report 2007 Accessed 15 April 2010 Available at http://www.unctad.org/Templates/Page.asp?intItemID=3198&lang=1. http://www.planning.unc.edu/courses/261/drucker/history.html, http://www.mtnforum.org/resources/library/kinsm97a.htm, http://www.umassvegetable.org/food_farming_systems/CSA/csa_site/index.html#What_is_CSA, http://www.terrainc.com/solutions/businessadvantage.htm, http://greenleaf.uncg.edu/CSA_farmer_to_limited_resource.html, http://www.wku.edu/echo/archive/2003dec/stories/energy.htm. Two domestic elements are crucial to understand this outcome. Taylor Aalan On the costs of inward-looking development: Historical perspectives on price distortions, growth, and divergence in Latin America from the 1930s to the 1980s 1996 (NBER Working paper no. Guimarães A. Queiroz State capacity and economic development: The advances and limits of import substitution industrialisation in Brazil 2004 Accessed 11 December 2009 Available at http://ideas.repec.org/p/anp/en2004/020.html. Lessons for Latin America”, Employment trends and opportunity (South Africa), State capacity and economic development: The advances and limits of import substitution industrialisation in Brazil, Applied time series modelling and forecasting, “Economic nationalism as a challenge to economic liberalism? The “leak” in the bucket that allows money to escape from the community is created when goods and services from outside the region are purchased with local money. For example, a manufacturer who mass produces shoes with streamlined processes and exports them all over the world may be able to sell shoes at a lower price than a local shoemaker and as result the local shoemaker may not be able to compete. From 1940 to 1980, the economy of Brazil grew by an average of 7%, and the economy was emancipated from the desolation of the 1980s – inflation and debt (An economic superpower, and now oil too, 2008). In terms of the leaky bucket, it focuses on ensuring that money continually flows into the local region so that there will be at least some available for circulation. This requires that some money exists in the bucket to begin with—one way this happens is when local goods and services are purchased by consumers outside the region. Those communities however are unlikely to be able to produce such energy for themselves so one cannot hope to substitute externally produced energy for locally produced energy. Growth can be thought of as expanding the size of the community through the use of land and other natural resources. for the order of integration of the unit root variable . 1 John Williamson coined the term ‘Washington Consensus’ in 1989 to describe a set of 10 specific economic policy prescriptions that he considered should constitute the ‘standard’ reform package promoted for crisis-wracked developing countries by Washington, DC-based institutions such as the International Monetary Fund (IMF), the World Bank, and the US Treasury Department. Despite these drawbacks, if we assume that the import substitution strategies described earlier are able to plug the leaks of capital from the local economy and provide more dollars that could potentially be spent locally, can we know for sure whether that money actually will be spent locally? Perkins, Dwight H. Radelet, Steven, Snodgrass, Donald R., Gillis, Malcolm and Roemer, Michael (2001), © Hans C. Blomqvist and Mats Lundahl 2002. Although, the country’s inflation rose to a record 2 500% in 1993, the situation was reversed to 4.7% in 2008. 4 The Cairns Group is a coalition of 19 agricultural exporting countries. The impact of policy reforms beehived on the launchpad of ISI initiatives (such as Creswell’s nationalisation policy, Frederik Willem de Klerk’s economic liberalisation and Nelson Mandela/Thabo Mbeki’s capital market liberalisation) have helped to catapult South Africa into the league of economic powerhouse in the developing economies – a testimony to the appropriateness of ISI strategy in a developing economy. While literature suggests that the efficiency of government institutions is essential to the success of ISI policy in these two countries, this research investigates the institutional apparatus that supports this policy in both countries, and juxtaposed the socioeconomic effects of the policy against the political agenda of the rulership. The Breusch-Godfrey serial correlation LM test contained in Table 6 also allay the fear of serial correlation in the model specified, because the functional form of the model was well specified and all the variables pass through the diagnostic test, just as in the case of Brazil. Lessons from the 19th century” International Studies Quarterly 2002 46 3 307 329, Hill W.L. For the sake of simplicity, the classification used in this article covers the following periods: 1950-1961, 1962-1967, 1968-1973 and 1974 onward, as documented in literature. The preliminary estimation process required a test for unit roots in the variables used. The local manufacturing of basic consumer goods was promoted, and the importation of such items was constrained (Abreau et al., 1996). The literature survey supports this assumption, as the swings in the GDP per capital at purchasing power parity of Brazil and South Africa positively correlates to imports, export and inflation; and negatively correlates to national reserves and current account balance. However, this test is generally not reliable for small sample data sets due to its size and power properties (Dejong, Nankervis and Savin, 1992; Harris and Sollis, 2003). The result in Table 4 is very similar to the one obtained in Table 1. It aims at locally producing things that a nation has capacity or comparative advantage to produce in other to protect local industries and to prevent… Over 10 million scientific documents at your fingertips. While the two views were founded on quite opposite premises, neither the import substitution industrialization nor the Washington Consensus managed to deliver sustained economic development to Latin American countries. More specifically, the South African economy was crafted on manufacturing activities that revolve around natural resources such as gold, diamond, platinum, iron and steel, and other precious commodities (GGCG, 2006). It was found in the relevant study that ISI has helped some developing countries (especially Brazil and South Africa) to establish institutional frameworks and manufacturing mechanisms that eventually catalysed the advancement of their manufacturing sectors, though in varying degrees. BBC news, Efficient tests for an autoregressive unit root, Comparing Brazil and South Africa: Two transitional states in political and economic perspectives, “Building ‘state’ autonomy in Brazil, 1930-1964”, “The South Korean Export miracle: Comparative Advantage or Government Creation? The electoral victory of this alliance shifted the economic philosophy of the government from economic liberalisation to economic nationalism in the form of ISI. PDF | On Sep 29, 2010, Thom-Otuya, Vincent Chinyere Thom-Otuya published THE ROLE OF IMPORT SUBSTITUTION INDUSTRIALIZATION POLICY IN THE ECONOMY OF NIGERIA | …