Page 62 - rohana_journal_No_12-2020-final

Research Journal of the University of Ruhuna, Sri Lanka- Rohana 12, 2020

saw noticeable increases in FDI flows. According to Vidanapatirana (1993) and the
World Bank (2004), since 1990, with the implementation of the ESAPs, the

economy had an upsurge in FDI.

After the prolonged economic stagnation, the government set the stage for market
oriented policy reform in 1977. In comparison to the pre reform period, growth

performance over the 1977-2018 period was better in general and is inspiring in
12
some parts of the period, for example during the period from 1978-81. The
government which came into power in mid-1977 gradually reduced the restrictions

on pricing, investment and external trade and payments (Athukorala and Jayasuriya,
1994; World Bank, 1993). This high economic growth was mainly driven by the

adoption of open economic policies and the huge wave of investment. As revealed
by the figure 02 both indictors indicate a significant association during the period

concerned. FDI played an important role in stimulating economic growth in Sri

Lanka mainly through channelling capital, transferring modern technologies and
modern managerial skills. It is worth mentioning that larger the FDI inflows, the

higher the economic growth rate in the country.

15

10

5

0
1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
-5
FDI(%GDP) GDP's Annual Growth Rate

Figure 02: FDI (% of GDP) and GDP's growth rates in Sri Lanka (1985-2018)

Source: World Development Indicators-2020

12 Under the liberalized economic policy, high priority was given to growth against redistributive
justice of state-led economic policy. During the period 1978-1981 average growth was 6.5 per cent,
while that ratio was 8.5 percent for 2010 -2012.
53