How might foreign investment be problematic for a transitioning economy?

How might foreign investment be problematic for a transitioning economy?

a. Foreign investment can temporarily slow economic growth.

b. A foreign government may seize control of the country.

c. The transitioning economy must adopt a foreign currency.

d. It may be difficult to adjust to another nation’s influence.

Answer: d. It may be difficult to adjust to another nation’s influence.

While giving an impetus to the growth of foreign capital can help address many problems, the experience of a country that is in a state of transition from one form to another can be challenged when faced with the encroachment of the economy and culture of another nation. Foreign investment can trigger a considerable level of affiliation as the foreign investor’s nation may be in a position to influence the youthful transitioning economy either positively or negatively through its policies, regulations, and business standards. This may be a problem for the transitioning economy is that it may compromise its sovereignty and independence as the result of pressure or demands of foreign investors. Also, there may be issues of culture and overcome as the transitioning economy struggles to integrate itself into a whole new economic model and practices that the foreign investors in the economy bring in new.