Determinants of Exports in Developing Countries

Publication Year : 2006

According to the orthodox classical economist as well to the modern liberal view trade is equivalent to an engine of economic growth. Exports promotion strategy is often in accordance with the principle of comparative advantage, when a country specialises in a product, which it can produce competitively. The goods become available to the community of the world at cheaper prices. The markets are extended. The internal and external economies are attained. Income and employment levels expand. Consequently process of economic development is facilitated. In a nutshell, putting more emphasis on the promotion of exports would permit the optimal allocation of world resources and, therefore, returns from trade sector depend upon accelerating growth of exports. The proposition of FDI led exports growth is controversial in empirical literature. But the role of domestic investment is believed to be much important for export expansion strategies. In any case the importance of FDI, if any, cannot diminish the role of productive investment from the domestic economy. While private domestic investment can be regarded as a permanent and reliable channel to enhance production capacity, investment in public sector has been considered important, for example in roads, communication and other public goods and services that are essential to stimulate private investment. Furthermore, government has a decisive role through support for research and contract with foreign buyers as well as in facilitating access to credit to both directly and indirectly exporting terms.