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Import Substitution

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Running head: KOREAN IMPORT SUBSTITUTION EXPERIENCE 1
Korean Import Substitution Experience
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KOREAN IMPORT SUBSTITUTION EXPERIENCE 2
Korean Import Substitution Experience
Although import and export, as international trade exchanges are important, a country
must be master of its fate by developing an internal capacity to produce the goods and
services that are essential for its survival and growth. Import Substitution Industrialization
(ISI) is a concept that was created to fit and direct this need for independence. ISI refers to a
set of economic and trade policies intended to reduce the foreign dependency of a nation by
promoting local production to substitute imports (Nurmuhametov & Smirnov, 2016). This
paper discusses the import substitution experience of Korea by discussing the main arguments
and policies of Korea ISI before assessing the efficacy of this set of policies.
Brief Historical Context
Korea import substitution policy originates from the war that the country experienced
and from its separation from North Korea. In 1945, the Korean peninsula is divided into two
parts (Vodzvizhensky, 2015). Unfortunately, in this separation, North Korea went with 95
percent of chemical production, 99 percent of the fertilizers, and 97 percent of the steel
production (Vodzvizhensky, 2015). In other words, Korea was left with almost no production
capabilities capable of sustaining the country’s growth. For more than twenty years, the
country subsisted through international aid coming mainly from the United States. However,
the switch to an import substitution approach occurred between 1953 and 1960 and was
marked by the reduction of the international aid, an increase of the country’s production
abilities, and the control of the imports among other policies (Vodzvizhensky, 2015).
Arguments for Korea ISI
Three main arguments supported the Korean import substitution policy. These
arguments are, the disruptions cause by the war in the country’s international trade changes,
some severe difficulties in the country’s balance of payment, and the growth of the country’s
internal market. During the 1950s, after the war and the division of the peninsula, Korea was

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Running head: KOREAN IMPORT SUBSTITUTION EXPERIENCE Korean Import Substitution Experience Student Name University Course Title Date 1 KOREAN IMPORT SUBSTITUTION EXPERIENCE Korean Import Substitution Experience Although import and export, as international trade exchanges are important, a country must be master of its fate by developing an internal capacity to produce the goods and services that are essential for its survival and growth. Import Substitution Industrialization (ISI) is a concept that was created to fit and direct this need for independence. ISI refers to a set of economic and trade policies intended to reduce the foreign dependency of a nation by promoting local production to substitute imports (Nurmuhametov & Smirnov, 2016). This paper discusses the import substitution experience of Korea by discussing the main arguments and policies of Korea ISI before assessing the efficacy of this set of policies. Brief Historical Context Korea import substitution policy originates from the war that the country experienced and from its separation from North Korea. In 1945, the Korean peninsula is divided into two parts (Vodzvizhensky, 2015). Unfortunately, in this separation, North Korea went with 95 percent of chemical production, 99 percent of the fertilizers, and 97 percent of the steel production (Vodzvizhensky, 2015). In other words, Korea was left with almost no production capabilities capable of sustaining the country’s growth. For more than twenty years, the cou ...
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