Correct Option (1
only):
Statement 1 is correct. The passage emphasizes that while the impact of Foreign Direct Investment (FDI) is "not always pro-competitive," the implementation of an effective competition law is crucial to mitigate adverse consequences and ensure a level playing field. This context implies that the desired outcome of FDI, particularly when regulated by competition law, is to enhance competition within the domestic market.
Incorrect Options:
Statement 2 is incorrect. The passage describes specific scenarios where the entry of foreign investors might lead to inflated prices, such as when a foreign corporation acquires a domestic enterprise and gains a dominant position, or when parent company mergers eliminate competition between their affiliates. However, the passage does not state that inflated prices are an "invariable" consequence of foreign investor entry. It highlights potential adverse outcomes that can be avoided with effective competition law, rather than universal effects.