This study analyses the post-independence industrial development of Sri Lanka in a historical perspective. Overall one could assert that from independence in 1948 until 1977, Sri Lanka pursued an inward looking industrialisation strategy. State enterprises were regarded as the dominant force of the industrialisation process. However, following a dramatic political transformation in 1977, there was a change from an inward looking strategy to an outward looking strategy.
A controlling body known as the Greater Colombo Economi6 Commission (GCEC) was established in 1978 and it was empowered to implement the export oriented industrialisation strategy of the new government. This study evaluates the performance of the GCEC, since its inception two years ago, within the context of the stated objectives and in the light of the pressing economic and social problems of Sri Lanka. The nature of manufacturing activities, investment patterns, capital flows, employment creation and other aspects have been examined to evaluate the success and failure of the GCEC.
The GCEC was established against a background of far-reaching political transformations. Consequently, the evaluation of its industrialisation programme was hampered by the veil of secrecy and confidentiality surrounding the disclosure of information. Nevertheless, the gaps in the information used in this appraisal have been bridged, based on various anecdotal and cross-country evidence on the operation of export processing zones.
The GCEC, the transnational corporations and the 'footloose' industries have been the main elements of the export oriented industrialisation strategy in Sri Lanka. The findings, on the basis of the two years of operation of the GCEC, reveal that the growth of the export processing zone has been spectacular. Sri Lanka has been successful in attracting foreign capital, through investments by 'foot-loose' industries, in creating employment opportunities and in acquiring appropriate technology. Nevertheless, the type of industrialisation has neither created linkages nor made a significant dent in the massive unemployment problem nor resulted in the establishment of an indigenous technology base. This study focuses attention on the direct effects of the export oriented industrialisation programme and also examines several indirect effects such as those on domestic industries, the uncertainty and dependency effects, the social and income distribution effects and the political effects, and the likelihood of conflict between a basic needs oriented development strategy and economic growth.