By: Staff Writer
February 24, Colombo (LNW): The shutdown of garment operations at the Methliya plant in Thulhiriya by MAS Holdings may represent more than corporate restructuring it could mark an early indicator of production migration driven by global tariff headwinds.
On 19 February, 2,200 employees were informed that garment manufacturing at the facility would cease, with the plant repurposed for fabric production. Management cited declining global demand and persistent market softness in the US, EU, and UK. However, analysts argue that trade policy uncertainty particularly evolving US tariff structures has compounded cost pressures for exporters.
For Sri Lanka, whose apparel exports heavily depend on Western markets, tariff fluctuations can decisively alter sourcing decisions. When buyers compare duty structures across suppliers in Vietnam, Bangladesh, and China, even marginal differences influence large-scale production shifts.
The Methliya plant’s strategic relocation of garment capacity to other MAS factories and offers for workers to transfer to overseas operations in Jordan highlight the growing mobility of apparel capital. Production can move where tariffs, logistics, and labour economics align more favourably.
MAS has pledged generous severance terms exceeding statutory requirements and assured regulatory compliance. Yet the broader economic narrative is less reassuring. Apparel exports generate critical foreign exchange needed for Sri Lanka’s debt servicing and import financing. Any sustained contraction in garment assembly could weaken dollar inflows and strain the balance of payments.
The company’s prior exits from Haiti and the Dominican Republic reflect an ongoing global rationalisation strategy. Such moves illustrate how multinational manufacturers continuously recalibrate footprints to mitigate geopolitical and tariff risks.
The pivot toward knitting, dyeing, and finishing operations at Methliya suggests a bid to enhance upstream value addition. Vertical integration may offer resilience, allowing Sri Lanka to supply fabrics even if final garment assembly shifts elsewhere. However, fabric production typically employs fewer workers than garment stitching, potentially reducing labour absorption capacity.
Economists warn that if US tariff barriers tighten or preferential access erodes, Sri Lanka’s apparel competitiveness could decline relative to regional peers with broader trade agreements. The result may be incremental factory downsizing or outward relocation.
For policymakers, the Methliya case becomes a cautionary study. Retaining apparel manufacturing requires not only productivity improvements but also strategic trade diplomacy and cost reforms in energy, logistics, and taxation.
MAS maintains that other facilities remain operational and stable. Yet the restructuring sends a clear signal: in a tariff-sensitive global industry, production flows toward certainty and cost advantage.