Import Substitution Industrialization The import substitution industrialization is characterized by the creation of local industries to manufacture modest and low-cost consumer goods. The aim of import substitution industrialization is to safeguard local industries by forbidding the importation of traditional consumer products. The protective measure is achieved by imposing several measures such as direct government control, subsidies, exchange controls, and higher tariffs. Therefore, the import substitution industrialization approach is costly since it is implemented by the public sector without consideration for efficiency or cost. 1 Import substitution industrialization strategies were adopted by developing countries in South America, Asia, and Sub-Saharan Africa as a means of accelerating self-reliance and economic growth via the strengthening of the domestic market. As stated earlier, import substitution industrialization is based upon extremely protective trade policies, subsidization of key industries such as electricity generation and agriculture, active government involvement in economic activities. However, the import substitution industrialization policy was replaced by structural adjustment programs (SAP) in the 1990s by developing countries as a precondition for accessing foreign aid from the World Bank and International Monetary Fund. In an influential article, Werner Baer argued that import substitution industrialization was an economic strategy employed by third world countries to free their economies from world division of labor that began in the late 19 th century and early 20 th century. Under this approach, most parts of Africa, Asia, and Latin America specialized in the importation of manufactured products from the United States and Europe while exporting raw materials and food. It follows that import substitution entailed the establishment of local manufacturing facilities to produce goods that were previously imported. As a result, countries that achieved industrialization after Great Britain passed through the import substitution industrialization phase. In other words, these countries went through a phase where a substantial part of the investment in domestic industries was carried out to replace imports. The import substitution industrialization phase ended when considerable investments were directed towards building the capacity of the domestic industry. 2 The wave of import substitution industrialization in the United States and Europe took place in the mid-19 th century. It is highly acknowledged that the government played a key role in shielding and boosting the growth of infant industries during the formative phase of import substitution industrialization. Another typical feature of the 19 th -century import substitution industrialization relates to its national character. In spite of the fact that some countries acquired finance from abroad to invest in infrastructure, local industries were mainly owned by domestic investors. However, domestic industries relied on machines and skilled labor imported from England in the formative period of industrialization. 3 Werner Baer asserts that the adoption of import substitution industrialization approach in