import substitution


Also found in: Financial.

import substitution

the process whereby countries begin to produce certain goods for themselves instead of importing them. Given the heavy reliance of many THIRD WORLD countries on importing manufactured goods, one strategy they have tried to adopt is that of import-substitution industrialization. This has been successful where the goods can be produced with simple machinery and low capital costs. However, many countries have run into problems when such manufacturing involves high capital costs, complex machinery which they do not produce themselves, or labour and technical skills which they do not possess. In such cases, instead of diversifying their economies, and becoming less reliant on manufactured exports, they have often witnessed a new set of problems with dependency on foreign capital and technical knowledge. Further, since the 1970s, the experience of starting up industries and the provision of the necessary infrastructure has led to the creation of INTERNATIONAL DEBT. see also DEPENDENCY THEORY.