RMG sector dying a slow death
KATHMANDU: Thanks to high production costs and dismal labour laws, only twelve readymade garment industries were surviving till recently. However, of these 12 the top five industries are shutting down one by one or running at marginal capacity. Nepali readymade garment (RMG) industries’ export is also facing a steep fall. According to recent Garment Association Nepal (GAN) data, the export of Nepali RMG in June dipped by 80 per cent compared to the same period last year. The total RMG exported in June was worth only $188622.34 while it was worth $929366.08 last June.
In May, the total export was worth $571232.94, a decrease by 49 per cent compared to last May. While April saw total export worth $529569.42, it still was a fall of 58 per cent compared to last April. March went the same way, seeing a fall of 31 per cent with total export worth $682410.88. In February, there was fall of 65 per cent compared to last February with total expoprt this February worth $915275. This January RMG export was worth $706964.17, a drop by 73 per cent compared to last January.
“There is no improvement on any front in the country, and we are left with no solution to sort out the problem,” said GAN president Prashant Kumar Pokharel. There are currently only twelve garment industries surviving. Among these 12 industries, the top five are J D Apparels, Momento Apparels, Ami Apparels, Surya Nepal and Cotton Comfort.
According to Pokharel, of these top five garment industries three are situated in the Tarai region but due to insecurity, regular labour problems, strikes and bandhs, J D Apparels shut down last month while Momento Apparels is also in lay-off mode. Ami Apparels is operational but at only 20 per cent of its capacity. Cotton Comfort shut down a year ago and the only garment industry that is fully operational is Surya Nepal.
Though a bill regarding duty free access for Nepali RMG was forwarded in the US senate recently, Pokharel opined that until there is improvement in the labour law even the approval of the bill by the senate would make no difference.
Pokharel also said that 92 per cent of the Nepal Rastra Bank (NRB) fund for sick industries is idle since eight years with less than 8 per cent of it utilized. NRB has earmarked a fund of Rs 3 billion for export-oriented industries, cottage and small industries and sick industries but the utilization rate is unsatisfactory.
According to him, the interest amount for the loan taken from the commercial bank is high for the sick industries that is about 12 per cent similarly loan pay back period mentioned in the policy is also unfavorable as it has mentioned a period of only six month which at least must be of three years.
Pokharel called for labour market reform and flexible labour law. “There should be free trade unionism, unions should not affiliated to political parties,” he added.