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Kathmandu Friday July 06, 2001 Ashadh 22, 2058.
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Garment industry braces for another setback
By Bhaskar Sharma
KATHMANDU, July 5 - As if the present woes of the garment
industry were not enough, the United States (US) government, at the request of its
Bangladeshi counterpart, is contemplating granting free market access to Bangladeshi
exports, all at Nepal’s unease.
Garment entrepreneurs here say the removal of tariff and
quota barriers on garment exports from Bangladesh to the US markets, which is likely to be
decided in the next three months, would mean a severe setback to the industry back home,
which tops the list of foreign currency earners.
Nepali garments is already under pressure due to the passing
of the African Growth and Opportunity Act (AGOA) in November 2000, which allows duty-free
and quota-free access to garments exports from around 33 Sub-Saharan African countries to
US markets. Bangladesh had applied for the same facility after the US congress passed the
African bill last year.
Since the demand for Nepali garments in the international
markets is as a result of spillovers from the quota from the neighbouring countries like
India, Bangladesh and Sri Lanka, free market facility for a close country like Bangladesh
would kill the market for Nepali garments back home. In addition, garments produced back
home, which is almost 25-30 per cent more expensive than the neighbouring countries, would
be at a severe disadvantage in the US market.
"Once garments from Bangladesh gains free market
facility to the US, Nepali garment industry, the prime foreign currency earner, will die
out," says Kiran Saakha, Chief of the WTO cell at the Garment Association of Nepal.
There are over 215 garment manufacturers in Nepal presently that employ over 50,000
workers and have total investments shooting above Rs 6 billion.
Garment entrepreneurs had repeatedly urged the government to
pressure the US for granting the same facility as the Sub-Saharan African countries.
However, no initiatives have been taken so far. The US had granted the facility to those
African countries having per capita income of less than US $ 1500. Nepal’s per capita
income hardly touches US $ 250, but is yet to avail to the facility granted by the US.
"If the garment industry is to be saved, the government
must actively aim to obtain the same facilities as applied by Bangladesh," says
Saakha. US importers presently pay an average of 20 per cent tariff on the import of
garments from Nepal. If no duty is levied on Bangladeshi exports, the results would be
disastrous for Nepal, says Saakha.
Nepali garment exports to the US, where over 85 per cent of
the total Nepali garment exports is absorbed, has, in the meantime, declined by almost 8
per cent in the first six months of 2001 as compared to the corresponding period last
year. In absolute terms, garment exports to the US in the January-June period in 2001
stood at US$ 92.03 million, down from the last year’s corresponding figures of US$
99.77 million. The exports had grown by almost 18 per cent in 1999 and by over 30 per cent
in 2000.
"For a sector that has grown persistently at a good
rate, the latest slump in exports is depressing," says Chandi Raj Dhakal, Managing
Director of Momento Apparels, the largest individual exporter of the country. "The
government must address the problems plaguing the industry immediately."
Pressed by the present slump in demand, Garment Association
of Nepal (GAN), about two weeks ago, had even submitted a report to the government
assessing the impact of not just the AGOA, but also a similar facility likely to be
received by the Caribbean countries under the banner of the Caribbean bill. "The
government, however, is yet to respond to the association’s report," says
Saakha.
If the government is serious in resolving the quandaries of
the garment industry, it must begin by slashing down the various duties and taxes that it
presently levies on the export sector, in addition to addressing the present problem of
duty drawback and Value Added Tax refund, say entrepreneurs.
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