National 5 (Spotlight Weekly)

READYMADE GARMENTS
New Prospects

Readymade garments could benefit from the recent decision by Canada to offer duty- and quota-free access to exports from Nepal

By SANJAYA DHAKAL

Canada is the second largest market for Nepal's readymade garment sector. The decision by the Canadian government to provide duty- and quota-free access to products from 48 least developed countries, including Nepal, therefore, can benefit this sector the most.

GARMENT FACTORY : BRIGHT FUTURE

"We are glad by the decision of the Canadian government. Definitely, the decision will mean that our garments will be cheaper in the Canadian market, which would ultimately increase our exports there," said Udaya Raj Pandey, general secretary of Garment Association of Nepal (GAN).

The officials of Nepalese and Canadian government signed an agreement to this effect last week in Kathmandu. The agreement was done as per the decision by Canada to revoke duty and quota restrictions on exports from 48 different LDCs. The decision was made in January 2003. Earlier, the commodities from these countries were imposed duty ranging from 10 to 25 percent and more.

Readymade garments, carpets, pashmina and handicraft are the major commodities that Nepal exports to Canada. Even among them readymade garment is the leading item.

According to Pandey, though, at present, Canada receives only 5 to 7 percent of total garment exports from Nepal, the new agreement could change that. "If we could tap even a small fraction of the huge market offered by Canada, our status could turn around quickly," said another garment entrepreneur. The United States remains the largest market for Nepalese readymade garments. More than 80 percent of the total garment exports are made to the US.

Besides, the new agreement with Canada could also revive the garment sector, which has been hit by recession in the last couple of years. Due to domestic events and recession in the United States, the garment exports declined sharply. "In the year 2001, the exports fell by 23 percent (compared to previous year) and in the year 2002, it further fell by 22 percent. In the year 2000 our total exports peaked to 14-15 billion rupees. It came down to 10 billion rupees in 2002," said Pandey.

The garment sector, where more than six billion rupees have been invested, employed 60-70 thousand people in the past. However, due to worsening situation, more than half of them have been forced out of job.

"However, the last four months have been quite encouraging. Compared to the year 2002 when we suffered the most, the figures of the last four months show an increase of exports by as much as 40 to 50 percent," said Pandey.

But the concern is whether this increase in exports can be sustained. "The latest agreement with Canada will definitely help. Now it is up to our government to lobby with the Canadian authorities to protect the interest of Nepalese exporters. Besides, similar agreement with the US can boost our exports by many times," he said.

As per the agreement, the Nepalese garments will have to adhere to the provisions of "rules of origin" before allowed for exports to Canada. Since, the new agreement will make the readymade garments from Nepal cheaper than say those from India, there is a threat of "trans-shipment" whereupon manufacturers from other countries could send their products claiming them to be Nepalese by forging documents in order to enjoy the duty free facility. "Our authorities and entrepreneurs have to be serious and doubly cautious to avoid any such events, which could doom our export potentials," said Pandey.

Apart from readymade garments, products like carpet, pashmina and handicraft, too, could benefit from the new agreement. The new agreement comes at a time when Nepal has been reeling under severe economic recession and its exports are taking a steep downhill motion.