Contribution of foreign direct investment to the agriculture sector in Sri Lanka

Abstract

There is growing evidence that investing in developing country's agricultural sector is among the most efficient ways to reduce poverty and hunger. Therefore, attraction of foreign direct investments has been deserving attention for many governments worldwide. FDIs are widely acknowledged to be crucial engines of growth especially in the developing countries in creating empioyment, transferring technology, increasing government revenues and contributing to the capital formation process of host economies. Maior objectives of this study are identifying bottlenecks to attract Foreign Direct Investment in to agriculture sector and make best suggestions to overcome those bottlenecks. Primary and secondary data were used for this analysis. Primary data were collected from selected agriculture companies while secondary data were gathered from central bank reports, Export Development Board reports and B.0.1 publications. Both descriptive and inferential statistics were used for this analysis. Findings on the Wilcoxon sign rank test showed that uncertainties about the economy, high level of taxes, lack of skill labors, lack of land availability, less government support, lack of infrastructure, inadequate granting of the incentives, unavailability of tax incentives for the new expansions, labor turn over, inability to invest on new technologies by medium and small-scale farmers are the major factors significantly creating bottlenecks to the FDI in agriculture sector. The empirical results further confirm that lack of land availability as a major bottleneck and supplying enough land for agriculture is the best suggestion of this study.