Determinants of foreign direct investments in Sri Lanka

Abstract

As far as the acceleration of the Global economic growth is concerned the growth in flow and stocks of FDI has been vital. It has been revealed that the Foreign Direct Investments (FDI) serves as an engine of economic growth through various channels such as enhancing employment opportunities, increasing per capita income, trade promotion and poverty alleviation. However, the distribution and the size of FDI are unequal as various factors determine the flow of FDI from home country to host country. Especially, the less-developing countries face difficulties in attracting FDI despite the fact that FDI is immensely important to these countries. A numerous factor possibly determines the FDI in host as well as in home countries that can be classified as pushing and pulling factors. Pushing factors are responsible to move the FDI from the home countries whereas pulling factors in host country side are responsible to attract the FDI. The direction and magnitude of the influence of these factors are depending on the socio-economic, demographic, institutional and environmental factors of home and host countries.