NATIONAL8 (Spotlight Weekly]

Terror Fallout

The collapse of the World Trade Center twin towers seven seas away is having an adverse affect on Nepal's economy, particularly garment exports

By SANJAYA DHAKAL

Udaya Raj Pandey is an unhappy man today. Having pumped in millions of rupees into his new garment factory in Kappan just last year, Pandey is now lamenting that investment decision. His factory has no work at least until December.

The general secretary of the Garment Association of Nepal (GAN) and proprietor of Serene Garment Industries, Pandey says he and other members of his trade have been literally "pushed to the wall" by the series of national and international events over the last six months.

Ready-made garments : On the wane

The latest event to hit them is none other than the terrorist attacks in the United States. America being the single largest importer of Nepalese garments, any change in the economy there is likely to have a cascading effect here.

It is especially strange to see Pandey in such depressed mood at this time of year. This is the season when spring bookings start in the United States. "This is the time when 75 percent of the total demands used to come by. But now with the recession setting in the United States, we are left in the lurch," said Pandey.

In fact, the worries of Nepalese garment producers did not start with the September 11 terrorist attacks. They were already feeling pressure after the US Congress passed the African bill last year, making it easier for developing countries in that continent to export garments to US markets. As the Nepalese garment producers are at a disadvantage because of their high transportation costs (the added cost of delivering the products to the nearest seaport), they were taken aback by the decision.

Compounded by the attitude of indifference exhibited by government officials, garment producers were pushed closer to the brink of collapse by insecurity and labor disgruntlement related to Maoists activities. Just as they were hoping to make a comeback, the final kick, it seems, has arrived.

Already 80 percent of the garment factories have closed down and 40,000 people have lost their jobs. Last year, garments worth Rs 14 billion to 15 billion were exported. "We expect that will come down by half this year," Pandey said. He added that if the situation does not improve, all the garment industries would close by the end of the year. "There has to be an urgent move by the government to help us sail through this period of uncertainty," Pandey added, complaining that the authorities were too preoccupied in their dialogue with the Maoists to take any notice of the country's economy.

Agrees Shyam Agrawal, managing director of Worldlink Communication. "It seems our leaders have no time to address the bleak economic situation. They are always busy in politics." Agrawal says that the fallout of terrorist attacks in the United States may not be very bad for the information technology sector in Nepal, "since we are not doing much business with the US". Even then, companies providing IT-enabled services like medical transcription and call centers would suffer if the recession in the United States continues for too long.

Finance Minister Ram Sharan Mahat, too, seems worried at the negative consequences of the terror attacks. "In the aftermath of the terrorist attacks in New York and Washington DC on September 11, things have worsened further. Tourist arrivals have gone down suddenly when it was in the process of recovery. Hotels and travel agencies are receiving cancellations. Tourism revenue is down. Last month's overall revenue collection was lower than the same period last year," Dr. Mahat told SPOTLIGHT (See interview).

"Tourism has already been affected. Now our exports will be affected, as you know the United States is the largest buyer in the global marketplace. Particularly, our garment industry will be badly hit. We are having problems in competing with products from Africa and other countries in the US market. It would be more difficult as confidence among consumers is very low at this moment. When consumer spending goes down, it will affect the whole economy," said the finance minister.