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Import Substitution Industrialization (ISI) Policy and the East Asian Economic Model in Pakistan and Afghanistan

Import Substitution Industrialization (ISI) is a business-based program for development-oriented on protecting local infant industries through protective tariffs, exchange rate controls, special preferential licensing for the import of capital goods and subsidizing loans to local infant businesses. Protectionist approaches have epitomized the policy stance of the economies of Afghanistan and Pakistan. At more theoretical level strategies, the ISI model, in addition to the correlatives, have been proposed in Pakistani on two level grounds (Jackson & Jabbie, 2021). The first is the unfavourable environmental market that traditional exports face, originally emanating from short-run instability and long-term stagnant and inelastic state. Secondly, follow-up protectionism can be argued in terms of the basis of industry criterion. A closer analysis depicts that the initial argument is highly exaggerated while the view on export pessimism is unfounded. The argument that underlies the protectionism of infant industries based on high costs at initial phases is insufficient ground to protect infant industries. Provided that the initial losses exceed the compensated ones by a later profit generation, private investors are likely to engage in investments, given the existence of an effective capital market in Pakistan and Afghanistan.

Under this context, the East Asian economic model aims to secure a policy path for raising the Pakistanis’ living standards and reducing their dependence on Pakistan on other economies. Pakistan has not yet accomplished sustainable economic growth as viewed in East Asia. Two developments, particularly, advocate for examining the policy choices in Pakistan through economic growth perspectives. The first is short-term, which relates to the extreme despondency on the economic status quo. The second development concerns the technological and economic power shift from China to the West and India. Heller (2020) argues that on two successive instances, in more than six years, Pakistan has experienced two successive GDP years for growth rates of more than 7%. This was witnessed between 2003 and 2005. In decades of growth rates in GDP, Pakistan was almost reaching sustainable economic growth, while within 8 out of the years, the country’s economy improved by a magnitude of 6% annually (Heller, 2020). East Asia has made Pakistani’s economic growth a priority. East Asian policymakers have prioritized economic growth notwithstanding the Western expert’s advice. They have imbued Pakistan with the concept of transformation and modernization.

On the contrary, in the Asian Developmental Outlook (ADO) (2020), Asian Development Bank predicts Afghanistan’s economy would grow at 3% by 2020 but picked up to 4% based on the country’s situation, such as improved projections for long standing political security and stability (Heller, 2020). Such developments assure to increase the confidence of consumers and businesses by attracting higher private investment levels. Accelerating domestic revenue mobilization can assist Pakistan in being more self-sufficient to finance public expenditure and lower its dependence on foreign aid.


Pakistan and Afghanistan have embraced various growth strategies to diversify their economies. Pakistan has accomplished a significant decrease in poverty in recent years. The Pakistani government has implemented a policy range to constrain aggregate needs that involve the increase in the energy costs administered in addition to a contractionary budget. Afghanistan needs a recognized central and private Bank to provide access and authority to assets. Also, approaches likely to increase local procurement must be supported by attempts to enhance the capabilities for supply for the Afghan economy, like improving infrastructural investments, building on human capital in a demand-responsive way, and improving the private sector’s working environment. Based on the principles of the Washington consensus, the U.S and their associates inspired Afghanistan’s move into a huge state and a mixed pre-war hence causing an economic scheme to a market-based economy with external trade regimes.


Jackson, E. A., & Jabbie, M. N. (2021). Import Substitution Industrialization (ISI): An approach to global economic sustainability. In Industry, Innovation and Infrastructure (pp. 506–518). Cham: Springer International Publishing.

Heller, P. (2020). Entrepreneurship in the Context of Western vs East Asian Economic Models. Seoul Journal of Economics33(4).


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