Essay Sri Lankan Apparel Industry : Mas Holdings Post Mfa

5181 Words Oct 26th, 2009 21 Pages
Sri Lankan Apparel Industry :

MAS Holdings Facing The Post MFA Era

Prepared By:
Sulatha Gengatharan
Schulich School of Business
York University, Canada
April 18, 2009
Executive Summary

With the phasing out of the Multi Fiber Agreement[i] in 2005, China & India have bombarded the market with low cost mass produced apparel. Exports from India and China have grown over 100% with the expiration of the MFA whilst other countries such Sri Lanka and Pakistan have seen a loss of market share in terms of volume traded. (Christoph, Alfons Hernández, & Daan, 2005). MAS Holdings Ltd (MAS) one of the largest apparel manufacturers is faced with this intense global competition and a constellation of other issues. The macro-economic
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Over the last 2 decades Sri Lanka’s political structure has been highly volatile, with weak majority and coalition governments.
In spite of their differences, all governments have favored foreign direct investment (FDI) & have provided a variety of incentives starting from 10 year tax holidays and tax exemptions, encouraging foreign investments. A highly supported venture over the years has been the apparel industry. The government set up of free-trade-zones (FTZ) for apparel manufacturing in the early 1990’s. Unto today, most of these free-trade-zones are operational. The apparel industry receives tax exemption on raw material imports, and receives tax credits for infrastructure set up. The government’s liberal views on international trade makes Sri Lanka a lucrative place to invest.

2 Economic Landscape

Sri Lanka has experienced healthy growth rates since the early 90s in spite of unabated ethnic violence. Robust private consumption demand and greater industrial production propelled by the labor-intensive textile and garment industries and growth of the domestic tea industry have been the driving force behind this economic growth. Fiscal deficits are a major concern of the government; but have been showing improvement in recent years. The services sector is largely driven by the tourism industry which

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