May 20, 2005

Despite falling exports, garment sector can take respite from movements towards US bill for LDCs and re-imposition of quota on Chinese apparel products

By SANJAYA DHAKAL

Even as the huge decline in the garment exports following the expiry of the Multi Fiber Agreement since January, 2005 has pushed the entire garment business towards the brink of collapse, Nepalese entrepreneurs may get respite from the rapidly falling business if the two recent developments are any indications.

Garment factory : Struggling to survive

The proposed Asia-Pacific trade bill that promises duty free market access in US for 14 Least Developed Countries is most likely to be approved this fall. The LDCs including Nepal and Bangladesh have already stepped up their efforts to lobby for the passage of this bill. A team of Bangladeshi entrepreneurs including a renowned activist Mohammad Younus had recently made a trip to Washington where they lobbied with influential senators including Hillary Rodham Clinton in favor of the bill.

That apart, a recent decision by the Bush administration to re-impose quotas on Chinese-made cotton trousers, cotton knit shirts and underwear could provide a relief to countries like India, Bangladesh and even Nepal. “The quota re-imposition on cotton trousers are of particular interest to us because this is what we have been exporting a lot in the past,” said Udaya Raj Pandey, general secretary of the Garment Association of Nepal (GAN). The Bush administration was compelled to take this decision as the Chinese exports surged by as much as 1505 percent on this product in recent months.

As per the Chinese protocol of accession to WTO, other countries can slap anti-dumping duties on its good till 2008 by invoking Trade Remedy Measures. In fact, the US had already in the past taken safeguard measures to curb import of Chinese knitted fabrics, dressing gowns, bras and socks.

“Although India and Bangladesh will be the immediate beneficiaries of such US move, Nepal, too, would gain to a certain extent,” added Pandey.

The decline of Nepal’s exports after the expiry of MFA has been quite dramatic. In the first four months of 2005, the exports of garment to the US market – which consumes 80 percent of the total exports from Nepal – came down by whopping 41 percent. Three leading garment manufacturers – Shangri la Apparels (Biratnagar), Prabha Apparels (Kathmandu) and Bikas Apparels (Kathmandu) - which in 2003 and 2004 had bagged the GAN Excellence award have already closed down.

Exports to the US had suffered almost throughout the year in 2004. Garment and apparel products valued at over US$ 22.98 million were exported to US from January to April 2005, whereas garment products worth over US$ 39.24 million were exported last year, reveals the figures provided by the Garment Association of Nepal. Many internal factors and other non-tariff barriers such as social compliances, procedural complications, lengthy customs process and documentations, are said to be setbacks for export of Nepali apparel products that make them costly and less competitive.

The garment industry generates 12 percent of the total industrial employment and earns 40 percent of foreign exchange of overseas export earnings. The garment entrepreneurs have requested the government to create Garment Processing Zone (GPZ) to facilitate their operation and cut down time and cost of manufacturing garments.