Unproductive import substitution

At the early stage of industrialization, import substitution takes the form of reducing imports of non-durable consumer goods, as well as their inputs, so as to permit indigenous manufacturing to develop and to save foreign currency needed for the imports of producer goods. At the later stage, import substitution involves replacement of producer goods and intermediate inputs, as well as consumer durables, so as to increase the reliance for economic growth on the supply of domestically produced goods. Excessive and prolonged protection of import substitution industries has often adverse consequences on efficiency and competitiveness and impedes export promotion.