This paper is concerned with the debate about the role of industrial policy in promoting growth in the East Asian NICs, and its findings contradict the neoclassical views that industrial policy has not contributed much to the East Asian growth. Using the case of Taiwan's petrochemical industry as an example, this paper evaluates the role of industrial policy in the earliest stage of the industry's development. The main findings are the followings: 1) the industry would not have emerged at that time without intervention; 2) the intervention had been effective; 3) the demonstration effect was the crucial one in fostering private investment; 4) the neoclassical model cannot be applied in this case. The importance of demonstration effect, though related to the institutional setting in Taiwan at that time, does reconfirm the traditional perception of development as nonmarginal change.