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Development in Practice, Volume 11, Number 1, February 2001

TNCs: aid agents for the new millennium?
Karen T. Fisher and Peter B. Urich
Until very recently private capital flows to developing countries have been growing rapidly. In the wake of the 1997 East Asian financial crisis, foreign direct investment has been identified as a vital ingredient to restore and invigorate the economies inthe Asian region and beyond. In an attempt to attract overseas capital and to stimulate economic development, countries such as the Philippines have stepped up the adoption of policies that allow for greater access by foreign investors. Increasingly, it appears that foreign capital, provided through transnational corporations, is set to replace official aid and to promote economic development firstand foremost, with ‘trickle-down’ social benefits to follow. This study examines the role of one transnational corporation called the Alliance, in the promised development of Bohol in the Philippines, as a by-product of a water treatment and supply proposal linking the island provinces of Bohol and Cebu. The findings suggest that economic objectives tend to take priority over social development.The Alliance seemed to expound its economic and technical ability, with less effort given to involving and consulting with affected communities. This resulted in residents being disenfranchised from the development process, and gave rise to a feeling of mistrust and resentment.

It is estimated that private capital flows to developing countries quadrupled during the 1990s
( UNCTAD1999 ). Of these capital flows, foreign direct investment (FDI) to developing

countries has been experiencing significant growth: around 40 per cent from 1990 to 1993, 17 per cent in 1994, and 13 per cent in 1995 ( Rollasen 1996). However, FDI flows are unevenly distributed over different groups of developing countries, with over 75 per cent directed to only 12 countries, and the regions ofAsia and Latin America receiving the largest amounts ( Lensink and White 1998 ). The impact of private capital flows to developing countries is significant when one considers the relative decline of official development assistance ( ODA) from OECD donors. The UN aid target of 0.7 per cent of GNP is yet to be reached by Development Assistance Committee donor countries. Aid contributions steadilydeclined from 0.09 per cent in 1985 to 0.05 per cent in 1996 ( OECD 1997). Increasingly, transnational corporations ( TNCs) are being hailed as development agents able to provide assistance to developing countries through an arsenal of economic, technical, and other managerial resources ( Ozawa 1996 ). As a corollary, it follows that FDI ( and other forms of private investment) can be seen as a newform of ( private) development assistance. There have even been suggestions that FDI is set to replace
ISSN 0961-4524 print/ISSN 1364-9213 online 01/010007-13 © 2001 Oxfam GB Carfax Publishing DOI: 10.108010961452002001991 1


Karen T. Fisher and Peter B. Urich
6000 5000 4000 Net private flows from all sources Official flows from all sources

US$ (millions)

3000 2000 1000 0 –1000 –20001986 1987 1988 1989 1990 1991 1993 1994 1995 1996 1997 1992


Figure 1: Official and private flows into the Philippines, 1986–1997.
(Source: < > net private flows from all sources, 27 October 1999, and < rt38ki99.htm > , official flows from all sources, 27 October 1999)official aid flows from developed to developing countries ( Encarnation 1998; Ozawa 1996 ). Even after the Asian economic crisis, FDI is still perceived as a vital ingredient for economic growth in developing economies, and as a potential solution in the wake of the crash ( Encarnation 1998 ). FDI facilitates technology transfer and access to foreign markets ( Encarnation 1998; Ozawa 1996; UNCTAD...