Kathmandu, September 27:

Expiry of Multi-fibre arrangement (MFA) regime has hit Nepali garment sector harder than any other least developed countries (LDCs) like Bangladesh, Cambodia and Sri Lanka.

According to the latest government study, Nepali garment export to USA has declined by 50 per cent in the first two months of 2005, in comparison to the same period last year. In contrary, exports of Bangladesh, Cambodia and Sri Lanka to the US has registered an increament by 10 to 20 per cent. “Nepali textile sector is facing a hard time, which has compelled the manufacturers to stop their production en masse, bringing down the number of industries to less than twenty from over 100 within a year, according to the study done by Economic Policy Network (EPN) under the Ministry of Finance (MoF).

The reason for this sorry-state of textile sector, according to the report is, lack of homework and vision at the industry and policy level to respond to the emerging crisis. The lack of product and market diversification, and protect market access has affected the apparel sector shortly, states the study. The study accuses both the government and the industry for not taking concrete measures to exploit the opportunities in the EU and Canada. EU has awarded preferential status to the LDCs under the (Everything but no Arms (EbA) policy.

Nepali apparel sector faces problems like non-competitive technology, low labour productivity, high transaction and transit costs, lack of direct marketing network, rigid labour laws and cumbersome income tax clearance. Moreover, the sector is also facing complications in bank financing and export benefits.

“The apparel sector needs to build a capacity to face the adjustment problems brought about by the abolition of quotas,” stated the report. The industry’s ability to compete will depend not only upon cheap labour cost but also on how skillful they are. Continuous fall in the global apparel prices since the end of quota seems to be yet another concern to Nepal. The China syndrome looks more threatening in terms of price competition as the average price for chinese apparels, removed from quotas, declined by 48 per cent in 2001 and March 2004. And the prices for items interested to Nepali exporters have gone down by 58 per cent. Nepali average export price for selected items is 40 per cent costlier than the Chinese one, because the unit price for Nepali apparels has gone up from $3 in 1990 to approximately $3.5 after a decade.