Abdullah Adil

Abstract

 

This study has focused generally to examine the possibility of Import Substitution (IS) strategy and its potentials and risks for Afghanistan. It seeks to evaluate theoretical rationality based on past experiences of IS and draw lessons for Afghanistan. Furthermore, it attempts to rank the sectors with higher Comparative Advantages (CA) by using Revealed Comparative Advantage Index (RCAI), and then select the most promising sectors among them for IS. The analysis is followed by complementary measures such as falling Import to GDP ratio. This study was set out to analyse the foreign trade data of the country over one decade and examine the possibilities of IS. Based on the experiences of the most successful countries, it has concluded that they used mixture of IS and Export Promotion (EP) strategies in the right time along with good implementation plans. Empirical findings of the study showed that Afghanistan has higher comparative advantages in the sectors with low-skilled labor, this result has been confirmed by adverse argument that there are revealed comparative dis-advantages in capital-intensive or high-skilled labor intensive sectors. The empirical result of the study showed that in Afghanistan during the last decade the IS has taken place in the right direction.

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