e

the foreign partner manipulates the management agreements.
Since the statistics are ‘top secret’ in this area, it is difficult to com-
pute the amount of loss involved. Van de Laar, in the study
already cited, estimates that Tanzania may have lost over 25
million in 1966 through fees for management agents, payment for
patents, trade marks, etc. This figure is certainly an underestimate.
If one were to arrive at even a rough approximation of the total
costs, one would have to take into account, besides the
management fees, such other costs as: overpricing of raw
materials, machinery and equipment supplied by the foreign part-
ner; fees for patents, trade marks licences, etc.; fees for feasibility
surveys, market research, etc.; inflated salaries and such facilities
as housing®® for the expatriate staff; and so on.

While, therefore, it is difficult to estimate exactly the extent of
surplus drainage or capital-export resulting from the exploitation
by foreign capital, there is no doubt that this is substantial. Based
on Van de Larr’s estimates, one can safely say that this may be
anything between 30 and 50 per cent of the gross national in-
vestment. This is by no means a small figure. In fact, the retention
of such an amount of economic surplus within the country and its
productive investment could decisively and critically affect the rate
of economic development. Thus partnership with foreign capital
substantially reduces the size of economic surplus available for in-
vestment.

Next we propose to discuss how this association with foreign
capital effects the mode of utilisation of the economic surplus and
therefore the direction of economic development.

PATTERN OF INVESTMENT

The main criterion by which private investors make their in-
vestment decisions is, of course, profit; if not in the short-run
definitely in the long-run. Public corporations in most un-
derdeveloped countries are no different in this respect. Their in-
vestment decisions too are based on the criterion of profit as is
clearly illustrated in the case of the National Development Cor-
poration of Tanzania.?® In fact, they can hardly do otherwise.
Most of these public corporations function in the overall un-
planned liberal economy. Therefore, their project evaluation and
investment decisions which are not based on profit would in fact

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