-  Tuesday 29 September 2020

    New year brings hope for garment industry

    KATHMANDU, Jan 10 - The year 2005 has gone down in the history as the most devastating year for the Nepali readymade garment industry - the largest foreign currency earning export-industry of the country.
    The industry saw a 41 percent decline in exports to its major market, the US. About 50 percent of manufacturing units were shut down, leaving just about 25 units in operation, according to Garment Association of Nepal (GAN).

    In fact the total garment export to the US, Nepal's largest garment market, in 2005 remained just one-third of its peak export recorded in 2000.

    Major sufferers were not only the smaller units. Larger units like Bikas Fashion, Shangrila International and Prabha Apparels, which were among the top ten exporters in the previous year, pulled down shutters.

    The number of persons employed in the sector plummeted to about 25,000. "Neither did the previously closed units manage to pull themselves back nor did new investment come to the sector," lamented GAN President Kiran Saakha.

    Worse still, duty-free market access, which the local entrepreneurs sought from the US through WTO and regional lobby, faced a serious setback with the largest garment market refusing to pledge the facility.

    New year, high hope

    But, if the latest trends that GAN office bearers sense is anything to go by, things have started to look rosy once again for the industry with the start of 2006.

    A leading US garment retailer, which consumes over 25 percent of Nepal's total export, has already backed Nepal to fill orders throughout the year.

    Other larger buyers that diverted their orders to China and India also have expressed keenness to place fresh orders with Nepal, said GAN office bearers.

    "If the fresh initiatives materialize, exports will bounce back to the last year's level," said Saakha. GAP, Wal-Mart and Target, among others, are among the largest buyers of Nepali readymade garments.

    The reason for such a dramatic turnaround, according to GAN members, is solely due to changes seen in the global textile and garment trade in a year of quota phase out.

    During this period, cost of production in India went up significantly, as labor, land, rental and other input costs recorded a dramatic rise there. Safeguard (imposed by the US), hassles in accepting shipments, labor issues and refusal of manufacturers to bow down to importers' terms has worked against China.

    "As a cumulative effect of those two and other factors, leading importers have tended to retract their business and place orders with their previous suppliers," said Saakha.

    New problem!

    But the latest prospect has brought with it a new challenge to the industry. "If we get bulk orders, which we are expecting soon, the industry will immediately reel under labor shortage," said Saakha.

    Due to the lack of job security, rising lay-offs, uncertainty of business operations and sudden shut downs, a large number of lower-level workers have already left the country for foreign employment.

    Skilled workers in the sector such as checkers, supervisors and quality controllers moved to India, where they are pocketing more than twice the amount they received in Nepal.

    "A short tremor of the lack of tailors, masters and low-end workers has already hit the industry," said Saakha. He estimated that the industry would need about 10,000 workers to manage the crisis.

    Entrepreneurs further stated that the latest change in business has mainly come as a trickledown effect of international market trends and may not last long. They urged the government to expedite programs such as establishment of Garment Processing Zone and help manufacturers attain economy of scale in production to sustain this opportunity.

    GAN has been arguing that GPZ with minimal tax-incentives in the vicinity of railway-based Birgunj dry port would reduce cost of production by about 25 percent.



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