Nepal’s garment industry close to losing its shirt

Nepal’s garment industry close to losing its shirt
ekantipur, 10-Jul-08

Nepal's garment exports to the US dropped by nearly half during the last six months as a result of buyers' waning interest in the leading foreign currency earning industry due to eroding competitiveness and internal labor problems.
Nepal sold US$ 8.96 million worth of readymade clothes to the US in the first six months of 2008. According to the Garment Association of Nepal (GAN), the figure was a 43 percent decline from the same period last year.

GAN's monthly trading data shows that the fall in garment exports to the world's largest apparel market was the steepest in June. Exports plummeted 71 percent to US$ 929,366 from US$ 3.21 million during the same month last year.

Entrepreneurs, who have long been demanding support from political leaders to bring discipline in the labor force, said business has been in free fall for 24 months straight.

“The government still has not shown any seriousness to develop a garment processing zone (GPZ), a program which was announced two years ago to help us cut production costs by a quarter,” said a GAN official. Nepal's garment industry, which is largely dependent on the US market, has been going downhill from 2002 when the US pledged duty-free market access to its major competitors in Sub-Saharan and Caribbean countries.

The end of the quota regime in international apparel trading in 2005 came as another blow, while internal instability, labor stirs and deteriorated industrial security forced well over 90 percent of the manufacturing units to close up shop over the past three years.

The industry, which in 2001 had some 200 operators with investments amounting to Rs 6 billion and employed over 60,000 persons, is down to a mere dozen manufacturers.

Nepali exporters have been pressing the government for the past five years to mobilize its diplomatic channels to secure duty-free facility in the US market. They even tied up with other Asian garment producing LDCs to directly lobby for special preference. “Sadly, all our pleas fell on deaf ears,” said the official. Even the bill recommending special preference for Asian LDCs that a US congressmen had tabled a couple of years ago got nowhere.

Despite the gloom running deep in the industry, garment entrepreneurs said that the industry could still regain its former glory if the GPZ was developed urgently, foreign investment was brought in and the government announced minimal fiscal and procedural support.