Question

Explain in 3-5 sentences why the following statement is false.

A greenfield investment is generally more politically sensitive than the acquisition of an existing foreign firms.

Answer 1

A greenfield investment is generally less politically sensitive than acquiring an existing foreign firm because of following reasons
1. Investment in existing foreign firm leads to privatization in the domestic country. There usually lot of political activity when a local industry is sold to foreign industry. They may protest against foreigners buying their national assets.
2. Political opposition and public generally do not support acquisition of their domestic firms as they are against utilization of their natural resources.
3. Moreover the documentation ,lengthy procedures ,red tapism and poor policies makes acquiring of foreign firm difficult. Hence greenfield projects are easily achievable in such scenario.