Thanks. I would assume FDI would tend to follow institutional investors if the macro conditions are right. I hypothesize that any kind of conflict undermines FDI confidence. While a violent conflict is an obvious one, I would think even the sense that a conflict is not resolved permanently is a high enough risk factory for FDI investors. And the negative international attention on the island through UN others. If you are to look for the kind of off shoring that come with technology transfer, it is a much bigger commitment with a longterm ROI in mind. I don’t want to be seen as harping on the conflict angle but wanted to understand if there is a constituency in Sri Lanka that sees this kind of FDI as necessary for Sri Lanka. it would be difficult o imagine that an FDI investor would see Oligarchy as conductive environment and vice versa. I hope your article brings forth more discussions. and I hope you will also write about the economic ( windfall to certain section of population ) impact of militarization.

Thanks for your comment Ealapalan. The question of foreign interest in GoSL bonds is not surprising, and not particularly linked to the issues raised above. Sri Lanka still remains a relatively attractive market to be included in emerging market securities’ baskets. Portfolio investment – foreign investment in government securities or stock markets – consider different issues as important, than do FDI investors. Sri Lanka’s favourable recent macro developments (reigning in budget deficit, higher dollar reserves, etc.) the gradual further opening of the capital account (investors confident of pulling money out in the event of a crisis or liquidity need), and the global trends in availability of int’l capital, can all explain foreign bond buyers interest in LK, even at competitive yields. FDI, unlike portfolio investors, will look at these issues and more (as mentioned in the article), as they look to physically locate in the country.

Question on militarization is a good question, but requires a whole other article – was beyond the scope of this one – and I may not be able to tackle it fully in a comment here. Will certainly aim to tackle it in a future piece.