Abstract:
Foreign Direct Investment plays a very important role in the growth of the country.
It is very much vital in the case of developing countries. A typical characteristic of
these developing economies is the fact that these economies do not have the
needed level of savings in order to meet the required level of investment needed to
sustain the growth of the economy. In such cases, foreign direct investment plays
an important role of bridging the gap between the available capital and the required
capital. It plays an important role in the long-term growth of a country not only as
a source of capital but also for enhancing competitiveness of the domestic
economy through transfer of technology, strengthening infrastructure, raising
productivity and generating new employment opportunities. This paper analyses
the impact of Foreign Direct Investment on economic growth and development of
manufacturing exports in Sri Lanka. Time series data were collected between 1980
and 2010. Simple linear regression was employed to analyses the relationship
between variables. Empirical results indicate that Foreign Direct Investment has
positive relationship with economic growth and manufacturing export and are
statistically insignificant in the Sri Lankan economy. The study seems to suggest
that other factors rather than Foreign Direct Investment determining economic
growth should be strength and to admire Foreign Direct Investment inflow,
country must take care on the political stability and infrastructure Development.
