The shortage of foreign exchange has been one of the major constraints to the economic growth of most developing countries. At the same time, the role of the sources of foreign exchange - export and foreign capital - in the process of economic development has been a provoking issue in the field of development economics. Foreign capital augments the total availability of resources of a country, but the degree of its contribution to economic growth varies significantly. Both the Philippines and Korea have depended on foreign capital to a considerable extent for financing capital formation. However, the development strategies adopted by the two countries are different from each other. Korea has taken an outward-looking strategy but the Philippines has adopted an inward-looking strategy. The two countries have demonstrated a big difference in economic growth. This study examines the roles played by the two sources of foreign exchange - foreign capital and exports - on the economic development of the Philippines and Korea and the implications of the differences, if any in such roles.