Export Substitution and Multinational Enterprises

Abstract

The question of the distribution of the gains from foreign investment has become ever more important since Hans Singer first brought the subject to the forefront of development literature.² Analysis of the ‘nineteenth-century pattern’ of foreign investment in raw materials has been succeeded by appraisal of the role of private foreign capital in the process of import-substitution industrialisation. Now the third phase of private overseas investment is beginning with export-substitution — the promotion of non-traditional exports of processed primary products, semi-manufactures, and manufactures. This paper analyses the potential impact of this type of foreign investment, especially when it results from the activities of multinational enterprises.

I am especially indebted to the writings of — and conversations with — Max Corden and Paul Streeten. (They may, however, still have to re-educate me on some differences.) Portions of this paper were formulated during the tenure of a research grant from the Rockefeller Foundation and written while I enjoyed the hospitality of Queen Elizabeth House, Oxford.