Peace brings ITC garment unit in Nepal
Times of India, India
KATHMANDU: The winds of change that began blowing through Nepal, after Maoist guerrillas returned to parliament, ending a decade-old civil war, has put fresh heart in the kingdom’s ailing industrial sector, with ITC becoming the first to launch a new venture.
The tobacco giant that holds the majority shares in Nepal’s single largest taxpaying company, Surya Nepal Pvt Ltd, has put in an initial investment of NRS 250 million ($3.7 million) to construct a state-of-the-art garments factory in Biratnagar, a key town in eastern Nepal where Prime Minister Girija Prasad Koirala began his career in politics more than six decades ago as a trade union activist.
Surya Nepal, Nepal’s biggest cigarette maker with over 60% share diversified into garments about four years ago. Beginning with utilising local manufacturers to export to India, the company set up a makeshift factory on leased land in 2004. Like other businesses in Nepal, Surya Nepal had suffered during the political turmoil and violence during the Maoist insurgency. It suffered at the hands of the Maoists because of the perceived notion that King Gyanendra and people close to him had stakes in it.
But Dar says, while ITC holds 69% stake and BAT 2%in Surya Nepal, reast is held by Nepali shareholders.
“Our factory at Simra had problems in the past,” Surya Nepal’s MD Harsh Madhav Dar said, while announcing the launch of the new venture. “However, we have been watching the socio-political developments closely and we are confident they will have a truly positive impact.” Currently, the garments unit employs about 500 workers and holds about 5% of the local market share. In five to seven years, the new factory is estimated to employ about 2,000 people and step up production four to five-fold, churning out 7,000 shirts and 1,200 pairs of trousers.
Though the new move comes when the Maoists have pledged to allow businesses to work unhindered and the fear of the past blockades and strikes has receded, Nepal’s garments industry still has other perils to grapple with. Though the apparel sector flourished in the 80s, thanks to the multi fibre agreement, end of quota system from January 2005, has hit the sector.
Dar says Surya Nepal will be ready to take on garments giant China and other competitors like Pakistan and Bangladesh. Besides sophisticated technology, the other USPs are the special training provided to staff and superior sourcing, which is done from Hong Kong, China, Nepal and India.
The other problem Nepal’s business sector has been facing is flexing of muscles by rebels trade union. Locked in a fierce competition with trade unions of the established parties, the maverick All Nepal Trade Union Federation (Revolutionary) has been barging into multinational factories, making what management says are impossible demands, to win the workers over.
The recent labour trouble has affected big names like Coke, Pepsi and Manipal. It forced Dabur Nepal to close its greenhouse of rare herbs for over a week. But Dar says Surya Nepal has received strong support from the local communities, who often step in and mediate or oppose the Maoists when development issues are at stake.
