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in the product group of Textiles and Textile based industries. By the mid 1970’s wage/ pries inflation and imposition of trade quotas on exports of traditional Asian Suppliers of made-up garments such as Hong Kong , Taiwan, South ,Korea and Singapore made Sri Lanka more attractive location for the industry. New units began to be established in collaboration with foreign capital/Marketing, while production was being upgraded through import.

4.The period after the late 1970s saw a rapid expansion of the clothing industry in Sri Lanka. The impressive growth witnessed during this period can be attributed to two major factors. The first is the market-oriented liberal economic policies introduced in 1977. The market friendly economic reforms, which identified the private sector as the engine of growth, places greater emphasis on the export-led industries.

5.The second important factor which contributes to the remarkable expansion of the Sri Lanka textile and clothing industry is the Multi Fibre Arrangement ( MFA ). Sri Lanka is one of the countries that benefited from the quota hopping investments. The overseas manufactures of garment who relocated their production facilities in Sri Lanka include firms from both and Newly Industrialize Countries ( NICs) in East Asian and Europe. While the NIC firms moved their operations mainly as a means of “quota hopping” the motivation for producers of countries such as Germany and the UK to move into Sri Lanka was the rising production costs in their home countries. Given the ability to separate to different stages of the clothing industry, these overseas producers were able to disintegrate their production lines into low-cost countries like Sri Lanka without much difficulty. Investments by these two categories of foreign manufacturers fuelled the growth of the Sri Lankan clothing industry to a large extent. In fact, the factories set up as joint ventures and wholly owned foreign companies account for almost half of the total exports earning from garments.

MULTI FIBRE ARRANGEMENT

6.The Multi Fibre Arrangement (MFA) is a system of quotas designed to protect garment industries in first world countries by slowing down the pace of globalization. The MFA does not apply to the expanding garment trade between rich countries.

7.The MFA has had a complex but crucial impact on the development of the garment industry. In the Third World, by imposing limits on poor country exports, it encouraged investors to shop around for new countries. This because of the increase in volumes of ready made garment entering developed countries caused concern and eventually led the developed countries to seek the occurrence of The General Agreement on Tariffs and Trade ( GATT) to protect their markets. The reason for this concern was due to the fact that the industrialised countries never caused to be textile and garment manufactures because the industry employed a large number of women specially minorities and immigrants in the USA and Europe. GATT,s solution to the dilemma of the industrialised nations was the Multi Fibre Arrangements (MFA) which imposed quota restrictions on certain garment categories, there by limiting the quantity of apparels that could be exported to the developed countries by any single developing country. This curtailed the potential of countries like Hong Kong, South Korea, Mexico and Yugoslavia which were advanced text