Effects of the Asian financial crisis on transnational capital

Whereas international capital flows into Asia were once thought to drive the region's modern economic development, the 1997/1998 financial crisis would appear to have suggested the opposite. The volatility of capital flows over this period, however, fails to reveal that a significant engine fuelling past economic growth of Asia has been the more spatially immobile investments of transnational corporations. In this paper, we argue that a positive impact of the crisis has been potentially to attenuate the negative attributes of the Asian production system resulting in political economic reorganization now on-going in some Asian countries. Drawing from a survey of transnational firms that was conducted in Hong Kong and Singapore in 1998, we show that foreign firms are responding positively to the expected changes, suggesting that the crisis could lead to greater embedding of transnational capital in the region in the long run.