Vol. 3 :: No. 3 February, 2001 (Magh-Falgun)

Sectoral

Carpets Knotty Troubles

By Ram Kumar Kamat

At a time when buyers and manufacturers of carpet are increasing worldwide, Nepal’s export business of carpet is declining year by year.

In Domotex Hanover, held from January 13 to 16 this year, the number of international trade visitors increased by 46.5 percent. That is itself an evidence that the number of consumers is growing. So, the trend in international carpet market should be a good indication and hope for all the carpet traders. But the reality with Nepali manufacturers is different. Indeed, Nepali carpet manufacturers are worried over the gradual decline in their export and they have reasons to fear of the worst times.

Figures show that Nepal’s carpet export had reached 33,25,123 M2 in the fiscal year 1993/94 whereas in the year 1999/00 the figure swooped down to 25,09,452 M2. Ever since 1993/94, carpet export had been going down steadily except in 1998, the Visit Nepal Year, when it was 26,04,476 M2. One of the big foreign currency earner business of Nepal is still not based on a solid foundation. The occasional boom are merely bubbles.

The main reason for the decline is described as a lack of competitiveness. There are a couple of factors that take toll on the competitiveness. Being a landlocked country, the production cost in Nepal is automatically a bit higher than in its immediate and two giant neighbours, namely India and China, says A.G. Sherpa, President of Central Carpet Industries Association (CCIA).

Nepali carpet entrepreneurs import Daisue (color used in the carpets) from Switzerland that costs around Nepali Rupees eight to nine thousand a kilo whereas India is able to produce the same kind of coloring agent domestically and the cost is "damn cheap" - seven to eight hundred Indian Rupees a kilo! Though the carpets coloured by such Indian Daisue are of lower quality, Indian firms use their marketing skills very efficiently.

It is our weakness that we have not been able to expose this fact, laments Sherpa. Moreover, unlike in Nepal, Indian carpet manufacturers enjoy export incentives. This makes Indian carpets 15 to 20 percent cheaper compared to Nepali carpets in the international market, Sherpa adds.

So, even those Nepali carpet manufacturers who are principally against any spoon-feeding system have now started to clamour for incentives and packages of such concessions. "Principally I am against any government sponsored incentive in business because it is like bottle feeding. But when your child has to compete with those being bottle fed, you cannot afford not to follow suit," says Zafar Ahmad, immediate past president of CCIA.

Economist and former member of National Planning Commission Dr. Kishor Kumar Gurugharana has different views to share. According to him, lack of diversification of our carpet market, irregularity in supply and quality, lack of the understanding of the attitude of the final buyers are at the root of the problem.

He also points out at the lack of supporting infrastructure. Though Nepal has been doing carpet business for more than two decades, it is still dependent on New Zealand for wool despite the availability of all kinds of topography and weather in Nepal for sheep farming, he argues.

Since the very beginning, Nepali carpet industry lacked the business motive as it started on a charity motive-as an off-shoot of the rehabilitation program for Tibetan refugees started by some European countries and agencies.

That may be the reason why despite decades of endeavours, Nepal is not able to diversify its market and Germany has remained the single market. Very lately Nepali carpet has begun to be exported to the US, but its share has been only around 15% of the total exports. When there is single market for any product, the boom or slump of the export depends upon the booms and slumps of the economy of that buyer country.

Dr. Gurugharana also blames Nepali carpet entrepreneurs for not being conscious that the buyers in industrialized nations give priority to quality, not price. "Europe is the market of all the industrialized countries, newly industrialized countries and the countries of South Asia as well. They are kind of pampered by all the sellers. So, the competition is intense and only they can succeed who come up with good quality", says Dr. Gurugharana. Despite doing business for so long, Nepal carpet has not been able to establish a unique image as Iranian carpet has done. "We never thought seriously as to why only the Germans prefer our carpets, not other Europeans. This soul searching job could at least help us to chalk out better strategies," opines the former NPC member.

Lack of reliability in supply and content of Nepali carpet is also one of the factors responsible for the sorry state of our carpet business. Experts point out that in order to promote carpet business there should be hundred percent reliability both in contents and delivery. But the irony is that there are some manufacturers who are short sighted and have been using low quality contents only to damage the image of our carpet that is popular for hand spinning of the yarns, knotting on the iron rods and flexibility to absorb any design. Some manufacturers do not seem to be worried over the fact that if a single piece is damaged, it damages the whole image and credibility of our carpet, says Dr. Gurugharana.

On the other hand, when the carpet manufacturers dismiss child labour issue to be dogging them any more, the experts are not being fully convinced. They are of the view that, though the manufacturers have done satisfactory job on child labour issue they should be really committed to it forever. We should not act only to appease our buyers.

A healthy industrial relation is also a vital tool to promote business, opines Gurugharana. The private sector is blaming the government for not chalking out appropriate policies and strategies to enable the manufacturers to cope with fierce competition in the international market but the government says, it is up to the private sector to follow the trend of the market and to come up accordingly with the standard quality in the market. "We can activate our diplomatic missions abroad and help the manufacturers to take part in the trade fairs which we have been doing", says Chandi Prasad Shrestha, spokesperson at the Ministry of Industry and Commerce.

The government has also been assisting to conduct a study for the viability of sheep raising in Humla and Jumla districts where the weather is akin to New Zealand. We have been studying the viability so far and have sent a British volunteer to those districts. He is to give us the report soon, he added.

Source :Central Carpet Industries Association

We never thought seriously as to why only the Germans prefer our carpets, not other Europeans. This soul searching job could at least help us to chalk out better strategies.

Tea Shortage Brewing

By Himal Neupane

An agreement has been struck very recently to supply Indian businessmen 1,50,000 kg of CTC tea from Nepal, according to Dr. Dev Bhakta Shakya, Executive Director of Agro-Enterprise Center. The statement came barely three months after the Center, engaged in promoting investment in the agricultural sector, received a report stating that it would take at least 2 years for domestic demand of CTC tea to be fulfilled by local productions.

In the last season, the price of CTC tea in the international market had been hit by over production of tea in Kenya, Sri Lanka and India itself. Nepal had naturally been affected. While the retail price of CTC tea five years ago stood at about Rs. 135 per kg, it has dropped down to about Rs. 122 now. And the Tea Produce’s Association also accepts that the price slipped down also in Nepal in the last two or three months. According to General Secretary of the Association Pradeep Regmi, the price fall in the international market has dipped the wholesale price here by between 30 and 40 percent. Regmi adds that in order to ensure that prices do not slip down steeply in the domestic market, tea producers have reduced supply, keeping reasonable stocks with themselves.

However, none of the tea dealers were willing to shed information on the stocks they hold.

On the other side, while the Nepali consumers are unaware of the fall in wholesale price of CTC tea, the traders are quickly changing their focus and concentrating on the Indian market. And if the trend continues, Nepali consumers will find themselves unable to purchase CTC tea produced within the country, views Dr. Shakya.

This opinion is echoed by Regmi who feels that with the shift in focus (towards the Indian market) of the Nepali tea dealers, there will be a rise in price in the Nepali market coupled with mild shortage before the new harvest comes in.

Barely 3 months after fall in price of CTC tea, the market price here has jumped up to Rs. 170 and even Rs. 200 per kg. The rise in price is also expected due to anticipated lower production of CTC tea in the upcoming season. Tea producers, predict low productions by pointing out to the shortage of rains water. The hike in price of CTC tea in India is said to be due to anticipated drought in South India.

On its part, Nepal Tea and Coffee Development Board, the government body responsible for market expansion and development of tea in the country, seems disinterested in the present market situation. According to the Board’s Managing Director, Muktiraj Adhikari, a market survey is planned only for the next year.

From Rs. 20,00,000 allocated to the Board for the running fiscal year, it has set aside a budget of Rs. 17,63,000 for extension services. Madhav Dip Thapalia, Program Chief of the Board, emphasises that the Board is focused on extension services. He feels that when there is a yearly demand in the domestic market for 80,00,000 kg of tea and only about half of the demand is fulfilled by local production, naturally the domestic production has to be increased.

It is learned that together with area expansion for tea cultivation, the Board, in collaboration with the Nepal Agricultural Research Council (NARC), is seeking to set up a research centre for quality improvement.

Thapalia also informs that after the government issued the national tea policy (some four months back) a very positive environment for investment has been created and three to four potential investors visit the Board on a daily basis seeking suggestions and guidance.

The tea policy targets to see, within 5 years, tea cultivation area cover 40875 hectares and tea production, within 10 years, reach 4,66,11,000 kg. per year. The policy also aims to give employment to some 79,310 people in the initial five years and increase production of orthodox tea to 65 percent of the total production.

It is estimated that at present tea is cultivated in 795 bighas of land.

Translated by Navin

Editorial | Corporate | Cover Features | Opinion Poll | Economy & Policy | Inner-view | Entertainment | Management | Stock Market | Sectoral | Marketing | Event | Business News | Column | Tourism | Recent Launches | World Brief | Last Word | Main |

Send your feedback to the editor: bizage@ecomail.com.np
1999 © Mercantile Communications Pvt. Ltd. P.O. Box 876, Durbar Marg, Kathmandu, NEPAL. Tel : 977 1 220 773, 243 566 . Fax: 977 1 225 407. Reproduction in any form is prohibited without prior permission. No part of the articles which appear in the internet version on BUSINESSAGE may be reproduced without the permission of Mercantile Communications Pvt. Ltd. For reprinting rights, please write to us.  Send us your feedback:contact us . CLICK HERE FOR PAST ISSUE. This site is best viewed at : 800 X 600 resolution

Back to the top