Financial Times

Sri Lanka’s first privately managed industrial zone dedicated to producing apparel and fabric was initiated this week. On Wednesday, the BOI signed over infrastructure management rights of the Thulhiriya textile facility to MAS Holdings Pvt Ltd. With the change of management Thulhiriya will be renamed the Asian Apparel and Fabric Technology Park (AAFTP) and be developed to operate as a dedicated fabric and apparel industrial zone.

“As an apparel exporter headquartered in Sri Lanka, MAS Holdings intends to set up the first apparel and fabric technology park in the island at the 175-acre industrial site at Thulhiriya,” said a statement from MAS Holdings.

“MAS will invest $25 million (Rs 2.5 billion) and is consulting Atelier Management, a Singapore based industrial zone architectural company, to design a state of the art industrial zone to enable the Sri Lankan fabric and manufacturing sector to compete with the giant industrial zones, and technology leap in China, Vietnam and India,” it said.

MAS Holdings is one of the world’s leading providers of design-to-delivery solutions to the international apparel trade and specialises in intimate apparel, sportswear and leisurewear. The Sri Lankan based apparel exporter has 28 manufacturing operations in 10 countries and employs over 35,000 people. Customers of the MAS group include major international brands like Victoria’s Secret, Triumph, Marks and Spencer, Banana Republic, GAP, Speedo and Nike.

The industrial zone for apparel and textile, says the company, is part of its Chairman, Mahesh Amalean’s vision of positioning Sri Lanka as a regional apparel hub. The technology park is expected to help Sri Lanka, first retain export market share in the face of post quota competition and later attract new apparel manufacturing business.

In March 2006 MAS Holdings negotiated an agreement with the government to take over the Thulhiriya textile complex that was out of operation since late 2003. Accordingly the government agreed to take over all of the facility’s previous liabilities, estimated at over Rs 7 billion. In return MAS Holdings will purchase, upgrade and develop the complex and will attract $100 million worth of investments into the site.

The hand over of management control on Wednesday, allows MAS Holdings to act as the infrastructure solution provider for local and foreign fabric and apparel companies that will set up operations inside the complex.

Supply chain city

Under the Asian Apparel and Fabric Technology Park banner, MAS plans to transform the complex into Sri Lanka’s first ‘Supply Chain City,’ to meet garment industry needs. MAS holdings points out that Sri Lanka’s competitors in the global apparel trade, like China and India, are evolving towards such dedicated textile and apparel zones.

The Supply Chain City is expected to boost backward integration of Sri Lanka’s apparel industry. Compared to many readymade garment supply countries, Sri Lanka is at a disadvantage because of low domestic backward integration. At the moment Sri Lankan garment exporters import most of their fabric. While this was not a major problem when garment quotas were available to Sri Lanka, now, the import time and costs are making Sri Lankan garments uncompetitive against producers like India. To resolve this problem Sri Lanka is trying to attract fabric investments into the island and the government is already offering incentives for the sector.

“The vision, endorsed by the Sri Lankan Government, is to transform Thulhiriya into Sri Lanka’s first ‘Supply Chain City,’ to meet apparel industry needs,” says MAS Holdings. The location – within easy reach of Kandy, Katunayake and Dambulla – is expected to make it easier for the complex to function as an industry service centre. The proposed Kandy highway and airport highway are also expected to network the region for convenient logistics movement.

“We will now embark on renovating the site to international standards and market the location to attract fabric and accessory manufacturers from across the globe, to set up within the zone,” says MAS.

As part of the agreement with the government to pull in $100 million worth of investments into the site, MAS Holdings has already clinched a $30m deal to locate a state of the art warp-knit facility at the technology park. The warp knit fabric production plant is a joint venture with Dogi International Fabrics and Elastic Fabrics of America, the world’s top two producers of warp knitted material. The factory that will come up in Sri Lanka will be the first export scale unit of its kind in South Asia.

“This will be a world class facility that will cater to the leading intimate wear brands,” says Dhananjaya Rajapaksha, CEO of DogiEFA Pvt. Ltd – the joint venture that will supply Sri Lanka with warp knit technology.

Construction on the warp knit unit is expected to start in August this year and production is planned to start by mid 2007. This synthetic, stretch fabric, is in demand among Sri Lankan apparel exporters producing high quality intimate apparel, active wear and sportswear. These product categories have also been identified as areas for the apparel industry to focus on, under the five-year strategic plan for the industry. However, at the moment Sri Lanka’s garment industry imports all its warp knitted fabric - mainly from China.

Once warp knitted fabric production starts at the technology park, Sri Lankan exporters will be able to source at least part of their requirements locally. This will help the apparel industry by cutting down lead times and import costs.

“The warp knit technology will give Sri Lanka a competitive advantage for intimate apparel in the region. It will also strengthen our swimwear and active-wear exports,” says Dulindra Fernando CEO, MAS Investments – a new company entrusted under the MAS group to promote the infrastructure project at the technology park.

“Local supply chain facilities lend you speed and flexibility to experiment with samples and designs, in addition to reducing cost and lead time. Our aim is to facilitate raw-material manufacturers to “plug and play” with regard to resources and services at the Thulhiriya zone, and enable them to focus on their core manufacturing specialization,” said Fernando.

MAS Holdings says that on top of the warp knitted fabric production plant, the technology park will house a number of other investments, all aimed at strengthening backward integration of Sri Lanka’s apparel industry. Other anticipated investments are in knit fabric production, fabric printing, embroidery, and washing and dying.

Part of the MAS investment into the site will go to revamp the existing training college into a Technology and Management Training Institute. The new institute will work with local and foreign universities to position itself as a knowledge centre for textile and garment technology and lean manufacturing.

The company says it will generate 3,000 jobs over the next three years through projects inside the technology park. On top of the jobs, MAS Holdings says it will also build accommodation for workers of the technology park. Currently the lack of decent board and lodging is a major problem faced by garment workers at many of Sri Lanka’s trade zones.

In its list of good deeds MAS holdings also says it will promote a Sports Academy to cultivate sporting talent of the region and will be sensitive to environmental concerns and women’s empowerment.