Paper 1 · foreign direct investment
A cost to a host economy of foreign direct investment by a multinational is that
Athe government must pay the multinational's wage bill
Bthe country loses its membership of regional trade blocs
Cprofits may be repatriated instead of reinvested locally
Dlocal firms are barred by law from entering the sector
Explanation: A multinational answers to shareholders abroad, so much of the profit earned locally is sent out of the country rather than put back into the local economy. Smaller local firms may also be unable to match its scale and prices, and heavy reliance on one foreign investor weakens the host's bargaining position.
Derived from ZIMSEC Business Enterprise Skills Paper 1, Specimen Paper (edition B), Q1