NATIONAL 5 (Spotlight Weekly)]

Clothed In Uncertainty

As African nations win quota- and duty-free access to the United States, Nepal's garment industry faces an uphill task to sustain its growth

By SANJAYA DHAKAL

The garment industry in Nepal has been making phenomenal progress in the last couple of years. From total exports worth over Rs 3 billion in 1991/92, the industry has witnessed a remarkable growth to reach Rs 13 billion-plus in 1999/2000. The garment industry effectively filled the vacuum created by the frightening slump experienced by the carpet sector, which had witnessed a similar growth in the early nineties.

But this impressive record could become a thing of the past. Recently, the US Senate approved a bill allowing poor nations of Africa to export their garment products duty free and without quota barriers.

Though Nepal's export to the United States comes under quota provisions and its competition is limited against India and Bangladesh, the recent decision to allow African products duty free access could reflect badly in the coming days.

Nepalese garments : Tough days ahead

"Definitely, we are going to lose as their products will be highly competitive cost-wise," said Udaya Raj Pandey, general secretary of the Garment Association of Nepal (GAN).

According to Pandey, Nepalese garments could enjoy similar facilities if the concerned authorities took up the matter with their US counterparts. "The US government has allowed duty and quota free access to garments from those African countries with a per capita income of less than US$ 1500. By that yardstick, Nepal with a per capita income of around US$ 200 is very much eligible to get similar favored treatment. But this needs lobbying and dialogue at the government level," he said.

In fact, Nepal is worse off than many African countries because of its land-lockedness. "Because of the lack of port and high cost and time involved in delivery, we have to face additional challenges," Pandey said.

Experts say Nepal's garment industries need to take necessary steps to sustain their growth as the quota facilities it is enjoying at present is set to be revoked in 2005 once World Trade Organization (WTO) provisions come into force. "So, it is useless to cry over the African bill as that, too, could become meaningless after 2005," said one garment entrepreneur.

But Pandey disagrees. "Yes, it is true that after 2005 we will not have the quota facilities. But if we could enjoy duty-free access even for a couple of years, that could strengthen us financially and put us in a position from where we could compete in the situation following that."

That apart, Pandey expresses concern over the confusion among garment industrialists regarding the WTO provisions. "Nepal is also preparing to enter the WTO. But till now, we do not know how the provisions would work. Nobody, including government officials, has told us what would happen to labor laws, bilateral treaties and duty structure once the WTO comes in full force."

Unless the government comes up with clear policies to safely steer the thriving garment industries post 2005, the sector that currently employs more than 70,000 people could come crashing down, pulling with it the entire economy of the country.

Garment Exports From Nepal

Year USA Total (in NRs)

1991/92 2,897,935,385 3,112,002,050

1994/95 4,636,633,276 5,357,028,756

1998/99 7,723,019,631 8,727,437,214

Exports in 1999/2000 crossed NRs 13 billion

In 1999, the total garment market in the United States was worth US$ 10,174 billion. Of this, the SAARC share was 1.45 % and Nepal's share was 0.0174%..

About 82% of Nepalese garments are exported to the United States out of which 88% are exported under the quota facilities.

Source : GAN