Sri Lanka industrial policy strategy has evolved in accordance to the political and economic ideology of successive governments and changes in the international economic environment. Prior to independence, our industrial base consisted of primary export processing industries operating in a virtual free market policy framework. With the commencement of the Second World War in 1939 and the publication of the sessional paper No. 73 of 1947 by a Committee of the State Council, the government adopted a more interventionist industrial policy by establishing and reserving a number of basic industries for the public sector. During the post - independence period, state sector led industrial development continued with emphasis on import substitution industrialization. A wide range of incentives were given during the decade 1960-1970 with heavy protection for domestic industries. Export promoting industries were encouraged within an import substitution industrialization policy framework.
In 1970, the Government adopted a stringent import substitution industrialization strategy with direct government involvement in the production process. The government's industrial strategy attempted to promote industrial exports during this period while pursuing closed economic policies. A policy of nationalization of private enterprises under the Business Undertaking (Acquisition) Act of 1970 was also followed during this period.
The economic reforms adopted by the government in 1977 completely revamped the Government's industrial policy strategy Industrial policy was aimed at export sector as the engine of growth. The simplification of country's tariff system and the unification of the exchange rate had a significant impact on industrial sector activities.