IDEAS home Printed from https://ideas.repec.org/a/mth/jad888/v4y2018i2p88-106.html
   My bibliography  Save this article

The Effect of Foreign Direct Investment on Industrial Sector Growth: Evidence from Sri Lanka

Author

Listed:
  • NPG Samantha
  • Haiyun Liu

Abstract

The development of the industrial sector stimulates economic growth and development by reducing poverty and regional disparity, increasing export income, generating quality employment, as well as developing technological capabilities and productive capacities. It has been more than four decades since removing trade-related barriers, and tax incentives liberalized the Sri Lankan economy offered to foreign investors to attract FDI and promote the industrial sector. Hence, the objective of this study is to investigate the relationship between inward FDI and industrial sector performance of Sri Lanka at the aggregate level for the period 1980-2016. We use the Auto Regressive Distributed Lag (ARDL) model to identify the long-run relationship and short-run dynamics of the selected variables. ARDL bounds test verifies the existence of co-integration among the selected variables. The study fails to find a significant relationship between FDI and industrial sector growth of Sri Lanka in the long run as well as in the short run. The attraction of vertically integrated FDI that consists with advanced technology and value-added production is one of the solutions for overcoming the issue of low technology and knowledge of Sri Lankan industrial sector. Sri Lankan FDI strategy associated with industrial sector should consider the pull and push factors related to recipient and source country respectively. To promote the industrial sector via FDI, the government policy should focus on attracting more FDI that could be channeled into those sectors that would contribute to national competitiveness.

Suggested Citation

  • NPG Samantha & Haiyun Liu, 2018. "The Effect of Foreign Direct Investment on Industrial Sector Growth: Evidence from Sri Lanka," Journal of Asian Development, Macrothink Institute, vol. 4(2), pages 88-106, November.
    • Handle: RePEc:mth:jad888:v:4:y:2018:i:2:p:88-106
    as

    Download full text from publisher

    File URL: http://www.macrothink.org/journal/index.php/jad/article/view/13339/10694
    Download Restriction: no
    File URL: http://www.macrothink.org/journal/index.php/jad/article/view/13339
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Daniel Sakyi & Richmond Commodore & Eric Evans Osei Opoku, 2015. "Foreign Direct Investment, Trade Openness and Economic Growth in Ghana: An Empirical Investigation," Journal of African Business, Taylor & Francis Journals, vol. 16(1-2), pages 1-15, January.
    2. M. Tahir Suleman, Muhammad Talha Amin, 2015. "The Impact of Sectoral Foreign Direct Investment on Industrial Economic Growth of Pakistan," Journal of Management Sciences, Geist Science, Iqra University, Faculty of Business Administration, vol. 2(1), pages 151-165, March.
    3. M. Tahir Suleman & M. Talha Amin, 2015. "The Impact of Sectoral Foreign Direct Investment on Industrial Economic Growth of Pakistan," Journal of Management Sciences, Geist Science, Iqra University, Faculty of Business Administration, vol. 2(1), pages 102-123, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Taguchi, Hiroyuki & Batool, Bushra, 2024. "Emigrant’s remittances, Dutch Disease and capital accumulation in Pakistan," MPRA Paper 124941, University Library of Munich, Germany.
    2. Serfraz, Ayesha, 2017. "Foreign direct investment inflows and labor productivity in Pakistan: A sector-wise panel cointegration analysis," ZÖSS-Discussion Papers 65, University of Hamburg, Centre for Economic and Sociological Studies (CESS/ZÖSS).
    3. Syed Tehseen Jawaid & Abdul Waheed, 2017. "Contribution of International Trade in Human Development of Pakistan," Global Business Review, International Management Institute, vol. 18(5), pages 1155-1177, October.
    4. Muhammad Imran & An HuSen & Muhammad Kaleem & Arshad Khan Bangash & Nizam Ud Din & Sobia, 2020. "Effect of regional factor productivity on manufacturing sector: The case of Sino-Pak economic ties," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 6(1), pages 1-14, December.
    5. Shuibin Gu & Gigamon Joseph Prah, 2020. "The Effect of International Financial Reporting Standards on the Association between Foreign Direct Investment and Economic Growth: Evidence from Selected Countries in Africa," Journal of Accounting, Business and Finance Research, Scientific Publishing Institute, vol. 8(1), pages 21-29.
    6. Iti Vyas, 2020. "Whether the Economic Growth of India is Trade Openness Led?," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 8(1), pages 38-53.
    7. Charles Shaaba Saba & Nicholas Ngepah, 2022. "ICT Diffusion, Industrialisation and Economic Growth Nexus: an International Cross-country Analysis," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(3), pages 2030-2069, September.
    8. Chenghong Xu & Mingming Han & Toyo Amegnonna Marcel Dossou & Festus Victor Bekun, 2021. "Trade openness, FDI, and income inequality: Evidence from sub‐Saharan Africa," African Development Review, African Development Bank, vol. 33(1), pages 193-203, March.
    9. Boachie, Micheal Kofi, 2015. "Effect of health on economic growth in Ghana:An application of ARDL bounds test to cointegration," MPRA Paper 67201, University Library of Munich, Germany.
    10. Yosra Saidi & Anis Ochi, 2023. "Estimating relationships among foreign direct investment, governance quality, and economic growth in developing countries using the threshold auto‐regressive model," Regional Science Policy & Practice, Wiley Blackwell, vol. 15(2), pages 403-424, April.
    11. Kwakwa, Paul Adjei, 2015. "An investigation into the determinants of hydropower generation in Ghana," MPRA Paper 68033, University Library of Munich, Germany.
    12. Ofori, Isaac K. & Asonngu, Simplice A., 2021. "Foreign Direct Investment, Governance and Inclusive Growth in Sub-Saharan Africa," MPRA Paper 108178, University Library of Munich, Germany.
    13. Muhammad Salah Uddin & Zobayer Ahmed, 2021. "Privatization policy, entrepreneurship, and economic development: the dynamics in Bangladesh economy," Journal of Global Entrepreneurship Research, Springer;UNESCO Chair in Entrepreneurship, vol. 11(1), pages 329-336, December.
    14. Isaac K. Ofori & Camara K. Obeng & Simplice A. Asongu, 2024. "What Really Drives Economic Growth in Sub-Saharan Africa? Evidence from the Lasso Regularization and Inferential Techniques," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(1), pages 144-179, March.
    15. Hlalefang Khobai & Nomahlubi Mavikela, 2017. "The causal linkage between trade openness and economic growth in Argentina: Evidence from the ARDL and VECM techniques," Working Papers 1712, Department of Economics, Nelson Mandela University, revised Oct 2017.
    16. Hou Renyong & Aman Ali Sedik, 2023. "Environmental Sustainability and Foreign Direct Investment in East Africa: Institutional and Policy Benefits for Environmental Sustainability," Sustainability, MDPI, vol. 15(2), pages 1-22, January.
    17. Attila Jambor & Nuno Carlos Leitao, 2017. "Economic Growth and Sustainable Development: Evidence from Central and Eastern Europe," International Journal of Energy Economics and Policy, Econjournals, vol. 7(5), pages 171-177.
    18. Sayef Bakari & Sofien Tiba, 2019. "The Impact of Trade Openness, Foreign Direct Investment and Domestic Investment on Economic Growth: New Evidence from Asian Developing Countries," Economic Research Guardian, Mutascu Publishing, vol. 9(1), pages 46-54, June.
    19. Qamruzzaman, Md & Jianguo, Wei, 2020. "The asymmetric relationship between financial development, trade openness, foreign capital flows, and renewable energy consumption: Fresh evidence from panel NARDL investigation," Renewable Energy, Elsevier, vol. 159(C), pages 827-842.
    20. Megha Chhabra & Arun Kumar Giri & Arya Kumar, 2023. "What Shapes Economic Growth in BRICS? Exploring the Role of Institutional Quality and Trade Openness," Economic Papers, The Economic Society of Australia, vol. 42(4), pages 347-365, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mth:jad888:v:4:y:2018:i:2:p:88-106. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Technical Support Office The email address of this maintainer does not seem to be valid anymore. Please ask Technical Support Office to update the entry or send us the correct address (email available below). General contact details of provider: http://www.macrothink.org/journal/index.php/jad .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.