Abstract:
Foreign Direct Investment (FDI) has been used by developing countries
as a tool to solve their economic problems in the recent past. Sri Lanka
is also not an exception to this practice. This research is aimed at tracing
the impact of Foreign Direct Investment in promoting Total Domestic
Investment (TDI) by using the Time series annual data from 1978-2009
in Sri Lanka. Multiple Regression analysis was used to estimate the
impact of FDI on Total Domestic Investment. Estimation method was
Ordinary Least Squares (OLS). The Minitab, SAS, Excel and EViews
software were used for data analysis. The empirical evidence shows that
there is a statistically significant positive impact of FDI and TDI.
However, this study further reveals that the actual impact on TDI was
realized immediately. Further, this research has identified various
problems faced in attracting FDI including ideal sector identification and
the appropriate recommendation have been presented in order to realize
the major benefits from FDI inflow into the country.
