Multinational Oligopoly in Poor Countries: How East Africa Got its Petroleum Refineries

Abstract

We claim here that the major institutional features of direct foreign investment (i.e., that large multinational firms operate in "imperfect" markets) have implications for the nature and conditions under which direct investments are made and lead to a suggested methodology for studying specific cases. Some of these implications for import-substitution manufacturing investments in poor countries are briefly described, followed by a demonstration that this approach facilitates explanation of direct foreign investment behavior in one sample industry, petroleum refining, and, in particular, explains oil refinery investments in East Africa. Finally, the inefficiency of LDC policies to use foreign investment to obtain oil refinery investments in the 1960s is discussed in the light of realistic alternatives, again using the East African refineries as cases in point.