Industrialization for an export-driven economy

Industrialization for an export-driven economy

 

Analysis by Ahmed Kamel

Egypt's sustainable development and real economic reform rely on the turning of this nation into an export-driven economy through industrialization. Located at the juncture of three continents – Europe, Asia and Africa – Egypt has the potential to become a global hub for industrialization and trade.

Last week’s article focused on how the Covid-19 pandemic has impacted world trade. The coronavirus pandemic should be an eye opener for decision-makers to concentrate on ways to transform the economy from import-dependent to export-driven.  

The objective is to increase exports to reduce the deficit in the nation’s balance of trade. From a macroeconomic perspective, an increase in exports will boost local investments as exporters seek to scale up their businesses.

That would lift economy growth and push up gross domestic product (GDP).

In time, when exports overtake imports, the balance of trade would post a surplus, raising the nation's foreign reserves. 

Definitely, global trade banks on market openness. Protectionism negatively impacts the world economy in general. 

Global efforts

There should global coordination when it comes to trade, closing the door to protectionist or dumping practices which undermine a smooth exchange of goods.

The role of World Trade Organization (WTO) is essential to ensure balance and justice. Fair trade system that protects poor nations is a must.

To this end, cooperation on a variety of trade-relevant policies is increasingly important. Integrated global production structures, involving the exchange of components, services, investment, and technology among interlinked global production networks, requires reforms across several policy areas. 

Boosting industrialization

Industrialization is a must to increase exports in the long run. Exports of finished products are of high added value for the economy as a whole. Industrialization mobilizes the nation's economic resources, particularly labor and capital. Therefore, the real challenge facing the government is how to increase domestic production via industrialization, which should be the objective in the medium and long terms.

Industrialization is both a means and an objective for sustainable development in a country that is redrawing its socioeconomic priorities and making headway in its economic reform program.

The government should adopt a full-fledged program for industrial modernization as the process of growth and development necessarily involves the replacement of outdated production methods with new technologies, the creation of new products, the opening of new markets, and the discovery of new applications for existing products.