The Effect of Import Substitution Policy on Manufacturing Industries in Iraq

This paper examines the possibilities for import substitution in manufacturing industries in Iraq. To do this, it devises three measures of import substitution and applies them to 14 defined industries for the period 1978–88; this period, in turn, is divided into sub‐periods, 1978–82 and 1982–88. The paper also evaluates the effects of substitution on patterns of growth in these industries. The results range from high to low levels of substitution, as well as negative ones. The paper, in particular, highlights the agricultural sector as needing to be subsidised and encouraged to increase production. Generally, the analysis suggests that, in the period under review, the Iraqi economy succeeded in the first state of import substitution, namely the manufacture of consumer goods, and displayed good potential in the second, namely the manufacture of intermediate and capital goods. It concludes by saying that international pressures played an important role in encouraging substitution in 1978–88.