Sri Lanka is moving toward a significant restructuring of its industrial governance framework with Cabinet approval to draft legislation establishing the Industrial Transformation and Innovation Authority (ITIA). The proposed apex body will merge three existing institutions—the Industrial Development Board, the National Enterprise Development Authority, and the Small Enterprise Development Division into a single centralized entity. While the initiative signals a push for modernization, it also raises critical questions about implementation, efficiency, and long-term impact.
The reform comes at a time when Sri Lanka’s industrial sector is struggling to regain momentum. As of early 2026, the country’s industrial base includes an estimated 1,200 large-scale industries and over 75,000 small and medium enterprises (SMEs), which collectively contribute nearly 27% to GDP and employ a significant portion of the workforce. However, growth has been uneven, with SMEs facing persistent barriers such as limited access to finance, outdated technology, and weak market linkages.
Proponents of the ITIA argue that consolidating fragmented institutions will reduce duplication, improve coordination, and create a more coherent policy environment. Backed by technical support from the Asian Development Bank, the initiative is expected to streamline decision-making and provide stronger support for innovation-driven industrial growth. The involvement of multiple stakeholders in drafting the legal framework suggests an effort to align the authority with global best practices.
However, the centralization of power within a single authority also presents risks. Critics warn that merging multiple agencies could create bureaucratic bottlenecks rather than eliminate them. There are concerns about whether the new body will have the operational capacity to effectively manage diverse sectors ranging from large-scale manufacturing to micro-enterprises.
The policy direction under the National People’s Power (NPP) government emphasizes state-led coordination and inclusive economic development. However, translating policy into practice remains a challenge. Industrial zones continue to face infrastructure gaps, energy costs remain high, and export competitiveness has yet to fully recover following recent economic disruptions.
Another key issue is the readiness of SMEs to benefit from such reforms. While the ITIA aims to strengthen enterprise development, many small businesses operate informally and may struggle to engage with a centralized authority. Without targeted outreach and capacity-building programs, the benefits of reform could remain concentrated among larger, more established firms.
In essence, the establishment of the ITIA represents a bold attempt to reset Sri Lanka’s industrial strategy. Its success will depend not only on legislative approval but also on effective execution, transparency, and sustained support for businesses across all scales. The coming months will be crucial in determining whether this reform delivers meaningful transformation or adds another layer to an already complex system.
By a special correspondent