A Study of foreign direct investment (FDI) inflows into the Sri Lankan construction industry

Abstract

Foreign Direct Investment (FDI) plays a vital role in any industry as it provides several advantages in many aspects. This research attempted to find out the impact of FDI on the construction industry in Sri Lanka. Accordingly, the aim of the study was to analyse the relationship between construction FDI and the construction industry development. The prime objectives of this research were to identify the trend of FDI in the Sri Lankan construction industry, to find out the relationship between construction FDI and the construction industry development and to provide strategies to promote FDI into the construction industry. A mixed research method was used to achieve the objectives of the study. Data required for this research were obtained from the archival of Central Bank of Sri Lanka for the year 2005 to 2019 and through semi-structured interviews. MS Excel and SPSS software were used to generate the results of quantitative analysis and content analysis was used analyse the qualitative data obtained through the semi structured interviews. Initially, it was studied the trend of FDI in the construction industry within the study period and analysed it with other key economic sectors of Sri Lanka. It was identified that there is a considerable FDI inflow into the construction industry in Sri Lanka within the study period and the second highest average FDI inflow was in the construction industry. It was also identified that, there are various factors such as economic conditions, policy changes and the social and environmental factors made a considerable impact on the FDI inflows into the construction industry in Sri Lanka. Moreover, it was analysed the relationship between the economic development parameters and the construction industry development parameters using the graphical analysis and the correlation matrix and found out that there is a positive relationship between construction industry development and the national economy in Sri Lanka. Further, it was analysed the relationship between construction FDI and construction industry development using graphical analysis and correlation matrix and found out that, FDI inflows into the Sri Lankan construction industry makes a considerable positive impact on the development of the industry which ultimately makes a positive impact on the economic development of Sri Lanka. Finally, some recommendations are provided to promote the FDI inflows into the Sri Lankan construction industry through the semi structured interviews carried out among six professionals who involved with FDI. Accordingly, proper implementation of government policies, improving the technical knowledge of construction professionals, developing infrastructure facilities, creating international banking facilities and giving flexibility and confidence for the foreign investors were the key recommendations.