Competitive Industry Policy for Economic Developmentin Sri Lanka: Lessons from East Asia

This study evaluates Sri Lanka's position by early2000s in terms of Newly Industrialized Country (NIC)status, and explores the lessons which it can learnfrom the East Asian NICs.Accordingly, it has developed a policy strategy toenable Sri Lanka to converge into a more dynamicgrowth path leading towards the NIC status in theforeseeable future. This exercise was deemed usefulbecause Sri Lanka had a superior position over manyless developed countries (LDCs) including the EastAsian NICs four decades ago, but having attemptedvarious economic policy regimes over this period, itstill remains a LDC. The study compared Sri Lanka's post-1977 policyperformance with those of South Korea and Taiwan indetail. The main thrust of the rapidindustrialization and growth in these countries wasidentified as originating from the CompetitiveIndustry Policy (CIP) strategy they used. Theirsuperiority over other LDCs including Sri Lanka wasattributed to the way they used policies such assector targeting, directed credit, foreigninvestment, export processing zones, infrastructuredevelopment, human resource development, and R&Dalong with trade reforms.