Enhancing Sri Lanka’s potential as a destination for foreign Investment in post war scenario: Some policy issues that need to be addressed

Abstract

Introduction There is a long ± held belief that foreign direct investment (FDI) plays a vital role in the development process of recipient economies through spreading foreign capital, technology knowledge and managerial skills into the host economies and creating positive impacts on growth in trade, gross domestic product and social welfare of the host states. Hence, the need for developing countries to attract FDI is not in question and currently there is a mounting competition among the developing countries to attract FDIs. After introducing open economic policies in 1977, Sri Lanka also adopts a more targeted approach towards FDIs for the purpose of pursuing its national development goals. Nonetheless, the bygone internal arm conflict in the country was a huge obstacle to attract to FDI to the country. Because due to increased risks and uncertainties associated with war, foreign investors were induced to locate their investment projects beyond the Sri Lankan territories. However, the end of the internal strife offers new and more development opportunities to Sri Lanka. Improvement of economic growth in Sri Lanka has been given top priority in post war scenario. Furthermore, the end of the internal strife has increased the capacity of utilization of entire lands, natural resources and labour force in Sri Lanka in the context of SRVWZDUHFRQRPLF UHYLYDO $IWHUWKHLQWHUQDO VWULIH6UL/DQND¶VHFRQRPLF RXWORRNV KDYH become positive56 and its economic growth is anticipated to exceed six per cent in the year 56 www.sundayobserver.lk/2011/01/02/fin01.asp 172 of 2011.57According to the economic analysts, to arrive at over six percent economic growth rate at least country should attract investment up to forty percent of its GDP.58