‘Garment industry can regain past glory’ - PK Pokhrel, MD, Ami Apparels

‘Garment industry can regain past glory’
eKantpur.com, 23-Sep-2007

Prashant K Pokhrel is managing director of Sunsari-based Ami Apparels, which is one of the leading exporters of readymade garment products. Pokhrel holds Master's degree in Economics and is the first Vice-President of Garment Association - Nepal (GAN). He talked to the Post about problems and prospects of the largest foreign currency spinning industry of Nepal. Excerpts

Tell us about the performances of Ami Apparels?

It is one of the few garment factories that are operating at this most adverse situation in decades. Despite the situation, our exports has maintained a moderate growth and hovered around US$4.4 million a year in the last few years. India, which is an emerging market for Nepal, consumes the major share of our exports. We have focused on product diversification in Europe and other countries, including India, where Nepal enjoys a duty free access. We contribute around Rs 3 million to the national coffer as income tax each year. We boast of being in a list of top five garment factories in the country, which are performing well amid hard time. Ami employs nearly 1000 workers at present and almost all of them are Nepalis. We commenced our business with the investment of Rs 10 million, which now has reached to around Rs 60 million.

What about the overall scenario of garment industry in Nepal?

Nepali readymade garment industry is facing a tough time at the moment due to impact of decade long conflict, labor problems and phase out of quota system in global apparel trading from 2005. Over the past five years, number of garment factories have dropped to about fifty from over 1200, dragging down the employment in the industry to meager 5,000 from around 100,000. Total export of garment slid down to US $47.7 million in 2006, from $105.9 million in 2002. It is expected to nosedive to around $30 million in 2007. In the past we were entirely dependent on the US market, but now we have diversified markets to Canada, Australia and India. As a result, share of exports to USA has dropped significantly compared to the past. Once the sector used to account for some 45 percent of total exports, but now, it is hardly contributing 15 percent. Out of the total investment of Rs 6 billion, only one billion is currently operational.

Do you see any possibility of Nepali garment industry regaining that past glow?

Despite all obstacles, I see a tremendous potentiality in the sector. India this week decided to lift 4 percent extra duty on Nepali garment exports. We can capitalize on it and tap the vast market of India, as Bangladesh is aspiring to recently. Geographical proximity with India will add advantage to Nepal. We will also get an opportunity to retrieve the lost US market, as USA is expected to provide duty free access to garment products of least developed countries like Nepal. We are also enjoying comparatively lower production cost compared to our competitor countries.

How will duty-free import agreement India signed with Bangladesh impact Nepali readymade garment exports to India?

I don't think it will pose any serious threat to the Nepali exports. India is a huge market. Besides, Bangladesh has received duty free export facility for just 8 million pieces, whereas we enjoy the facility for unlimited quantity. But still, there is no room for complacency in the business. We must build deeper business ties with diverse set of importers. Most importantly, we must settle all internal constraints to enjoy the benefits in the Indian as well as other markets.

How are you coping with the increasing global competition?

Well, adoption of new technology has helped us stand out better than other countries. We are using latest technology in the business. Situation of skilled manpower crunch does not exist now because as we have sufficient Nepali manpower specialized in different lines of production.

What sort of problem is the industry facing from labor?

The problem of labor exploded after Maoist launched labor union expansion drive in a bid to strengthen the party's position in open politics. To attain that, it placed various high-sounding but unreasonable demands. The workplace harmony vanished as already existing trade unions opposed the Maoist's drive. Ultimately, that caused dozens of factories to close down productions. Despite the situation, I believe labor problem can be solved soon. Of late, trade unions have begun to understand the problems of the industry. If employers are allowed to adopt hire and fire policy with a condition of employees' social security, labor problem will be solved. So, a policy of flexicurity- a combination of flexibility and social security - should be embraced to end labor unrest.