MFA phase-out likely to impact garment industry

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KATHMANDU, Sep 25 - Participants at a seminar today urged upon the need for intra-regional co-operation among SAARC countries to enhance the competitiveness of the garment industry in the region.

Garment entrepreneurs, employees and workers, including representatives from five South Asian countries had gathered in the capital Tuesday to discuss on the issues relating to the garment industry.

The thrust of all representatives from Nepal, India, Pakistan, Bangladesh and Sri Lanka was to strive for higher productivity and greater quality to strengthen the garment industry in the context of globalisation, especially the effects of the withdrawal of the Multi-Fibre Agreement (MFA) that is set to expire from 2005.

The existing quota regime will be abolished once the MFA is phased out. The representatives opined that the removal of quota allocations under the MFA is likely to have an adverse impact on the region.

Experts warned that the removal of quota to Sub-Saharan African countries have already resulted in the dying out of several small production units resulting in job losses and downsizing in the SAARC countries.

Speaking at the inaugural session of the two-day workshop today, Palten Gurung, Minister for Labour and Transport Management, warned that Nepal is likely to suffer the most from the impending abolition of the quota system.

"Nepal will have to face the situation mores severely if it has to compete with countries having comparative advantages in terms of technology, labour cost and raw materials. This is high time to identify alternative strategy as preparedness to face the situation in Nepal," he added.

"We have not focused on quality and productivity unlike Sri Lanka, India, Bangladesh and Pakistan and our industries are the most vulnerable in South Asia in the wake of quota removal," said Suraj Vaidhya, fourth vice president of FNCCI.

"The impact would be severe for women employed in garment industries," said H Wijeratne, official at the Department of Labour, Sri Lanka, which has around 32 percent of its labour force engaged in garment industries.

Nihal Rodrigo, SAARC Secretary-General said that the concerned representatives to focus on the specific sectors to identify and address how the phase out of MFA obligations would affect the lives of those in the garment sector.

Leyla Tegmo-Reddy, Director at the International Labour Organisation (ILO) office, Kathmandu warned of serious social and economic implications for millions of workers particularly women who are employed in the garment industries in South Asia following the termination of MFA regime.

She urged the respective governments of the region to institute a strategy to deal with the quota free competitive environment of global trade, which is just three years away.

"ILO is gravely concerned about the potential job losses of millions of men and women across the region as competitive pressures builds in the wake of MFA termination," she said.

The participants expressed hope that they would come out with a strategy to address the challenges of MFA phase-out faced by SAARC region.

Garment exports to the USA, which stands as the single largest importer of Nepalese garments absorbing around 85 per cent of the total garment exports, in the last fiscal year stood at around Rs 13 billion.

Twenty-nine participants from the South Asian region are taking part in the workshop organised by ILO that concludes Wednesday.

NRB to adopt flexible policy for Dev Banks

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KATHMANDU, Sept 25 - Nepal Rastra Bank (NRB) is making necessary preparations to allow development banks (DBs) to open savings accounts by making its prevalent policy more flexible.

The deposit collection of development banks so far was limited only to fixed account constraining their long term lending. The latest preparations come at the request from the development banks.

According to a source at the NRB, the process of allowing development banks to open savings account is about to be finalized and the decision to this effect will be taken soon.

The central bank is mulling to decide in favour of a more flexible policy since commercial banks are providing low interest rates on savings. The decision once taken would promote open competition, the source informed.

Promoters of development banks claim that the new provision would benefit depositors as well since they would offer better interest rates on savings account than the commercial banks.

Savings deposits is necessary for long term lending. Restricting savings deposit in development banks so far had made their liquidity position precarious. Especially because large withdrawals by any one fixed depositor would have led the development bank into a crisis.

The latest NRB indication also comes as a relief to development banks whose costs of capital were higher as a result of the restriction to collect time deposits only.

There are altogether 12 development banks in Nepal, including the state-owned banks and five Rural Development Banks. About 50 applications are presently registered with the central bank for opening up new development banks.

Besides, the central bank has licensed 15 commercial banks, 49 financial institutions, 34 cooperatives and 15 non-governmental organizations to carry out limited financial transactions.

IMF concerned over sluggish reform

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KATHMANDU Sept 25- The International Monetary Fund (IMF) has stated that Nepal requires a comprehensive structural reform and substantial foreign aid, together with political stability and internal security, to achieve a strong and sustainable growth to reduce poverty incidence.

The IMF Nepal Office today expressed its satisfaction over the developments achieved by Nepal in the macroeconomic front in the past two years despite difficult political circumstances.

According to a summary report on the Nepalese economic performance provided by the IMF Office here, directors welcomed the adoption of a reform agenda that focuses on maintaining macroeconomic stability and removing structural impediments to growth. The impediments to growth include inadequate provision of public services, ineffective and segmented financial sector, and weak governance, states the report.

The overall real GDP growth, according to a report, surged from 4.5 per cent in 1998/99 to 6.5 per cent in 1999/00, primarily propelled by improved agricultural performance and strong exports. Growth is estimated to have eased to 5.5 per cent in 2000/01, owing to the dampening effects of higher oil prices and deterioration in the tourism sector.

The report puts the external balance to be favourable in 1999/00 with the current account close to balance and a steady increase in reserves. The overall balance remained strong despite decline in capital transfers and foreign direct investment (FDI).

Aided by strong exports and increased remittances, gross official reserves reached US $ 946 million in 1999/00 and US $ 1.014 billion in 2000/01, equivalent to five months of imports in both years, the report says.

The nominal interest rates declined during the past two years, with the yield on Treasury bill falling to 5 per cent. The spread rate between the lending and deposit rates remained at 5 per cent, reflecting weaknesses in the banking system.

Despite all achievements, the progress in the structural reform was limited. Financial performance of public sector enterprises continued to be disappointing with the privatisation of public sector entities virtually stagnant.

Executive Board of the IMF stressed upon strengthening the revenue mobilisation and also to improve the targeting of budget allocations so as to allow for higher social spending.

It has urged the Nepalese authorities to continue the process of streamlining the civil service and prioritising public expenditures.

The IMF Board has also highlighted upon the need to address the balance sheet problems of the two largest banks and has stated that they are looking forward to the installation of new management teams in these banks. There is a need of recapitalisation in these largest banks by proper restructuring under the new management, the report says.

Utsav 2001 from Sept 28

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KATHMANDU, Sept 25 - With an aim to bring consumers and traders together and to built strong understanding between them, Everest Exhibitions is going to organise Kathmandu Utsav 2001 from September 28 to October 7.

The Utsav, which has been organised every year just before the Bijaya Dashami - the greatest Hindu festival since 1995, aims to present an ideal platform to exhibit, display and sell domestic as well as foreign products.

According to a press release issued during a press meet here today, the Utsav, the largest consumer fair in Nepal, will provide a unique festival shopping opportunity for the Nepalese consumers with collection of varied consumer goods.

Altogether, more than ten thousand varieties of consumer goods from 75 domestic and foreign companies will exhibit their products in 170 stalls.

Among other, the consumer fair would also be accompanied by other various entertaining programs like music concert, painting competition for kids and kite flying competition, states the release.

Answering queries at the press meet, Bhaskar Rajkarnikar, Managing Director of the Everest Exhibitions, said that an effective security arrangement has been made during the fair. "This time we have arranged for excellent telephone facilities to each stall," he said.