Disrobing The Economy in Nepal
Media For Freedom, Nepal
Disrobing The Economy in Nepal
Once a shining sector of Nepal’s booming export regime, the garment industry has taken a severe beating in the past few years. The downfall of the garment industry that happened in the wake of quota phase out with the expiration of Multi Fiber Agreement (MFA) in January, 2005, has now taken a big toll on the industry. Over 90 percent of the factories have pulled down their shutters unable to survive in the cutthroat competition at the international level and rapidly deteriorating politico-economic situation back home.
Labor unrest, continuous strikes, lack of government efforts to revive the sector – all worked to the disadvantage of the industry. In a matter of few years, the industry has come down to its knees. It might be too late to revive the sector amid indifferent attitude demonstrated by the government. Its downfall, however, has led to the situation where tens of thousands of people had to lose their bread and butter
By SANJAYA DHAKAL
The story of Udaya Raj Pandey speaks volumes about the crest and trough through which the garment industry of Nepal had to pass through in the last few years.
A garment entrepreneur since last many years, Pandey’s fortune had taken a dramatic rise during the time when garment was a booming business. From a modest factory in Battisputali, this young entrepreneur built a sprawling garment complex called Serene Garments at Kappan on the north-eastern part of the capital valley.
However, in a matter of three years, Pandey lost the battle against internationally and domestically deteriorating environment
And now this vivacious general secretary of Garment Association of Nepal (GAN) has closed down his factory. “I had to sell off the Kappan factory to pay back the loans of banks. The building has now been taken over by a college,†said Pandey.
He, himself, is still clinging to the garment business so as not to lose the client (importer) base. “I even went to India to fulfill my orders from there,†he said.
“Things came to such a pass that at times we had to airlift the garments to supply them on time for the importers. Some of the importers – after seeing our situation – themselves decided not to place order with us as we were making huge losses in airlifting them,†he added.
Another story that further exposes the pathetic situation of the industry is the building complex of GAN itself. Built two years ago by members by investing millions of rupees, the GAN complex at Naya Baneshwor is a swanky structure by Nepali standard. But, of late, as the industry lost its base and member entrepreneurs started abandoning the sector, the GAN is compelled to lease out its ground floor to raise resources to cover its day-to-day administrative operation costs.
Quote Phase Out And Aftermath
After the Nepali garment industry lost the preferential treatment in its largest market – the United States – in 2005, the government officials and policy-makers failed to provide it with necessary assurances.
“In fact, since then the policy-makers started becoming negative about garment industry. They had concluded that this industry was a goner,†Pandey said.
Although the industry did not immediately die after the MFA expiration, the subsequent years witnessed rapid political destabilization and unrest in the country, which threw the industry’s import schedule and timetable off the track.
Even after the initiation of peace process in April, 2014, this industry was plagued by industrial unrest as the Maoists found the workers’ base in the industry as a fertile ground to recruit their cadres. They advanced revolutionary slogans and attractive slogans to incite the workers, which led to the ultimate collapse of the industry itself.
Rapid Fall
Till a few years ago there were 225 garment factories in the country with over Rs 6 billion of investment.
But now, Pandey says, only around seven to eight of them are functioning. “Many businessmen have shut down their factories. Some became bankrupt while others turned to other businesses,†he said.
The garment industry used to provide direct and indirect employment to over 100,000 people in 2000. But now merely 10 to 15 thousand are employed by this sector.
More importantly, the garment sector used to provide jobs to illiterate and otherwise backward people – mostly women – since it needed little extra skills. As such, the downfall in this industry has affected this vulnerable section the most.
Seven years ago, the garment industry used to export readymade garment worth $170 to $180 million annually. This has now come down to less than $40 million.
Govt Response
A member of National Planning Commission (NPC) Dr. Pushpa Raj Rajkarnicar, who looks after the industry sector, said that the government does not currently have a specific policy to deal with garment.
“We don’t have such specific policy to cater to the garment sector alone. But we are, indeed, planning to revive the overall industrial sector of the country,†Dr. Rajkarnicar said.
Even as the garment entrepreneurs have been continuously urging the government to take initiatives to ensure preferential market access from the United States government, nothing has materialized in this direction as yet.
Since over 80 percent of Nepal’s garment exports are headed to the US market, enjoying preferential access there would mean a lot for the entrepreneurs. They have been demanding such access in the wake of preferential trade bill signed by the US government with Caribbean countries and some African nations.
Although at one time Nepal had lobbied along with Bangladesh seeking a trade bill providing preferential access to garments from Least Developed Countries, the efforts have not met with any success.
After the phase out of quota, countries like India, China, Vietnam and even Bangladesh have been doing well in the garment sector. However, Nepal has lagged behind. Things have come to such a pass now that the entire industry is on the verge of collapse.
Some policy makers indicate that since garment is not a sector with comparative advantage for Nepal, there should not be much attention towards developing it. They contend that since Nepal does not have forward and backward linkages required to sustain this industry, the country should go for sectors such as hydropower, tourism and agro products where it enjoys comparative advantages.
However, at a time when the country has been unable to provide job opportunities to its people, revival of the garment industry would create immense opportunities, particularly for the unskilled youths and women. When hundreds of Nepali youths are leaving for overseas employment everyday, this sector could have at least provided job opportunities to some of them within the country itself, say economists.
Source:http://www.nepalnews.com/contents/2014/englishweekly/spotlight/dec/dec14/coverstory.php
