Question:
Which one of the following is not a major obstacle to attracting foreign direct investment in Sri Lanka?
(1) Unstable macroeconomic conditions
(2) Labour market rigidities
(3) Uncertainty of policies
(4) Corruption and weak regulations
(5) Lack of diversification in export sector
Correct Answer:
(5)
Answer Explanation:
Foreign investors are primarily deterred by operational and systemic risks: volatile inflation/exchange rates (1), hard-to-fire union laws (2), shifting tax policies (3), and red tape/corruption (4). A lack of export diversification is a macroeconomic symptom or outcome of poor trade policy, not a direct operational obstacle for an incoming investor setting up a factory.
Topic: Global Economy Year: 2017
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