NAMA : ILMI FURQONIYAH

NIM : 050669262
PRODI : MANAJEMEN
BAHASA INGGRIS NIAGA
QUESTION
Read the following scenario and then answer the question in your own words. Your response
should reflect your understanding and analysis of the concepts of export and import,
demonstrating original thought and critical thinking.

Scenario :
A small country, Nation X, has a thriving agricultural sector but lacks the technology to
process raw materials into finished goods. As a result, Nation X exports a significant portion
of its agricultural products to other countries, where these goods are processed and then re-
imported as finished products. Recently, the government of Nation X has been considering
investing in technology to develop a local processing industry, potentially reducing its
dependency on imports and increasing the value of its exports.

Question :
Discuss the potential benefits and challenges Nation X might face if it decides to invest in
developing its local processing industry. How could this shift impact the country's trade
balance, employment rates, and overall economic growth?

ANSWER
If Nation X decides to invest in developing a local processing industry, it could experience
both significant benefits and notable challenges, especially in terms of its trade balance,
employment rates, and overall economic growth. Below, I'll explore the potential advantages
and obstacles of such a move, while also analyzing the impact on key economic indicators.

Benefits
1. Improved Trade Balance :
Currently, Nation X exports raw agricultural products and imports the same goods in
processed form. If Nation X establishes a local processing industry, it could add value to its
exports by turning raw materials into finished products. This would not only increase the
value of exports but could also reduce the need to import processed goods, improving the
country's trade balance. A positive trade balance, where exports exceed imports, strengthens a
nation's currency and reduces its reliance on foreign goods, leading to a more sustainable
economic position.
2. Economic Growth
By creating a processing industry, Nation X could diversify its economy, which raight
currently rely heavily on agriculture. Developing an industrial sector could stimulate
economic growth by expanding production capabilities, increasing domestic value-added
products, and opening up new markets. Furthermore, increased export value due to higher-
value finished goods can boost national income and create opportunities for reinvestment in
other sectors.

3. Job Creation :
Building a processing industry would likely create a significant number of jobs in both the
short and long term. Jobs would be generated not only in the processing plants themselves but
also in supporting industries, such as infrastructure, logistics, and supply chains. Employment
in the manufacturing sector would provide a stable source of income for a broader segment of
the population, which could belp reduce poverty and improve standards of living.

4. Technology Transfer and Skills Development :

Developing a local processing industry would likely involve importing or creating new
technologies, which could help transfer knowledge and technical expertise to local workers.
This could lead to the development of new industries over time, further diversifying the
economy and fostering innovation in other sectors.

Challenges
1. Initial Investment and Financing :
The government would need to secure substantial investment to develop the necessary
infrastructure, acquire technology, and train workers. This might require borrowing, foreign
investment, or reallocation of existing public funds. If not properly managed, the costs of
establishing a processing industry could initially outweigh the economic benefits, leading to
financial strain in the short run.

2. Technological and Skill Gaps :

Nation X currently lacks the technology for processing raw materials. Acquiring or
developing the necessary technologies could be a lengthy and complex process. Furthermore,
the workforce might lack the technical skills needed for the new industry, requiring extensive
training and education programs. This could delay the realization of benefits and increase the
overall cost of the project.
3. Risk of Overproduction :
Depending on global market demand, Nation X might face the risk of overproducing
processed goods, especially if its processing capacity grows faster than international demand.
This could lead to lower prices for finished products, reducing the expected benefits from the
new industry and even harming the economy if the country cannot sell its increased output.

4. Environmental and Sustainability Concems :

The expansion of processing industries may place a greater strain on local resources, such as
water and energy, and could lead to environmental degradation if not properly managed.
Nation X would need to implement sustainable practices and regulatory frameworks to ensure
that the industry grows in an environmentally responsible manner.
Impact on Trade Balance, Employment, and Economic Growth

1. Trade Balance :
As mentioned, investing in processing technology could reduce Nation X's reliance on
importing finished goods. This would likely result in an improvement in the trade balance,
with exports of higher-value processed goods replacing raw material exports and finished
goods imports. Over time, the reduction in imports and the increase in higher-value exports
could create a more favorable trade position, strengthening the local currency and boosting
national wealth.

2. Employment Rates :
Developing a local processing industry would likely lead to higher employment in both the
manufacturing sector and ancillary industries (eg., transportation, retail, and services)
Employment growth would benefit workers with varying skill levels, from low-skilled
laborers to highly skilled technical workers. This could reduce unemployment rates and
contribute to a more equitable distribution of income.

3. Economic Growth :
The shift from an agricultural-export-based economy to one with a more diversified industrial
base could stimulate long-term economic growth. While the initial stages might be marked by
high investment costs and technological challenges, the longer-term growth potential could
be substantial. Higher-value exports, increased employment, and technological advancement
would all contribute to a rising GDP and improved economic stability. Additionally, as the
processing industry becomes more competitive, Nation X could even see increased foreign
direct investment (FDI) in its emerging industrial sector.
Conclusion :
The decision to invest in a local processing industry offers Nation X significant opportunities
for economic diversification, improved trade balances, and job creation. However, the
transition comes with challenges, including high initial costs, technological gaps, and the risk
of overproduction. Careful planning, investment in skills development, and sustainable
practices will be critical for ensuring that the shift leads to sustained economic growth. If
managed well, this strategic move could enable Nation X to leverage its agricultural base
more effectively, turning it into a more industrialized and resilient economy in the long term.

Reference :
BMP Bahasa Inggris Niaga ADB14201
https://www.investopedia romienna/e/export.asp
https://coc.investopedia.com/terms/import.asp
World Bank (2021) World Development Report 2021. Data for Better Lives. World Bank Group.