Chapter 07 | Industrial Policy Versus Policy Towards Industry Debate: The Sri Lanka Case

Dr Sarath and Dhananath debate the distinction between industrial policy and policy towards industry within the context of Sri Lanka’s economic history. The participants distinguish between two fundamental approaches to economic management: Industrial Policy: Characterised as interventionist and “globalisation unfriendly”. It involves the government selecting specific industries to support through resource allocation, often driven by political ideology rather than market signals. Policy Towards Industry: Defined as “globalisation friendly” and neutral. It focuses on maintaining macroeconomic stability and providing a level playing field where any industry can compete for resources like land, labour, capital, and entrepreneurship based on merit. The discussion applies these concepts to various global and local contexts: East Asian Economies: Sarath argues that the success of countries like South Korea was rooted in solid macroeconomic fundamentals (policy towards industry) rather than purely state-driven selection. He uses the visual contrast between North and South Korea to illustrate this.