Before the transition from a socialist to a market economy in 1990, the manufacturing sector generated a quarter of total GDP and modern sector employment. By 2000, the sector had shrunk to a third of its former size, contributing less than 7 per cent to GDP and employment. Its formerly high labour productivity had been reduced to the average for the whole economy, due to underutilized industrial capacity and the emergence of a low productivity household and small industrial segment. However, the manufacturing sector showed signs of recovery in 2001 and 2002, although it faced difficult trading conditions due to the global downturn and international competition. Nevertheless, the recent revival of the manufacturing sector provides hope that it can once again become the engine of growth, and contribute to higher standards of living for the entire population. This study reviews past developments in manufacturing and trade for 1985-2002 period, as well as the major issues facing these sectors, including barriers to export-oriented manufacturing. The main factors responsible for the demise of the once thriving manufacturing sector are identified, as well as the impact of the changing international environment and the current business environment. This is followed by a review of the various industrial and trade policies adopted by the government, and an assessment of their implementation.