A fast-growing form of foreign direct investment is sovereign wealth funds (SWFs). Why do these investments by governments with surplus cash flows worry trade experts?
A) SWFs invest in high-risk start-ups with no proven history of producing goods and services that developing or developed countries need. They may likely undermine the years of development of growing economies.
B) SWFs have a greater risk of going bankrupt than other investments because governments are not good at running businesses.
C) Some fear that governments investing their SWFs in large firms may gain control of natural resources, sensitive technologies, and the decision making of management.
D) Some trading experts believe that SWFs are supported by terrorist organizations, and their strategy is an indirect way to undermine the creation of U.S. jobs.

Question

Quizplus · Accepted Answer

As a fast-growing form of foreign direct investment, sovereign wealth funds (government-owned funds) have invested in several multinational corporations. Some international trade experts fear that the substantial size of these investments may place undue pressure on companies to make management decisions that may undermine U.S. political efforts and individual freedoms. These economic strongholds could gain control of important natural resources and sensitive technologies that could threaten the security of nations.

A Fast-Growing Form of Foreign Direct Investment Is Sovereign Wealth