Abstract:
With globalization and the disintegration of the socialist block of countries, FDI as a
source of foreign investment has been accepted as a crucial factor in accelerating
economic growth, especially in developing countries. Economic liberalization could be
considered a turning point of FDI policies in the recent history of these countries even
though it has consequently been checked by political uncertainties, especially civil
wars. There have been increases and decreases of FDI in post-independence Sri Lanka
due to political perceptions of various regimes. Sri Lanka has not succeeded in
attracting sufficient FDI yet, even though the war has been over for sometimes. Sri
Lanka is a small, open economy, and FDI makes a considerable impact on its macroeconomic
variables.
