Impact of Outward-Looking Market-Oriented Policy Reform on Economic

Since the early 1980s, when many developing countries experienced severe economic difficulties because of excessive market regulation and trade protection, a number of them have initiated extensive policy reforms These reforms have been designed to free up markets and to move these countries in a more outward-oriented direction. A major objective of the reforms has been to increase the importance of trade in Gross Domestic Product (GDP) by reallocating resources away from inefficient production of import-competing goods and nontradables, and towards production of exports. This should lead to increased growth of GDP not only because of static economic gains associated with the exploitation of comparative advantage and economies of scale but also because of a number of dynamic ways in which trade contributes to economic growth. The empirical evidence for developing countries largely supports the theoretical arguments concerning the favorable impact of outward-looking, market-oriented policy reform on trade and growth. Nevertheless, recent experience in some countries, especially in Africa, has been disappointing. This may reflect the failure of reforms to be fully implemented or sustained. It may also be because of structural factors such as landlocked location, deteriorating terms of trade, o