Nepal | July 04, 2020

Study on readymade garments urged

Himalayan News Service
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Kathmandu, March 10

Garment producers have urged the government to carry out a study on how cost of production can be brought down and export of readymade garments increased.

Citing that the Trade Preference Act of the United States has also provisioned providing technical support to Nepal to boost exports for sustainable economic growth, the Garment Association Nepal (GAN) has urged the Ministry of Industry, Commerce and Supplies to mobilise the support to carry out a study on how the readymade garment sector can be competitive in the global market.

Chandi Prasad Aryal, president of GAN, said the government needs to provide incentives to the sector, which could have a significant impact on the growth of small and medium enterprises, ancillary industries and also generate jobs. Nepali garments are 15 per cent more expensive in the global market, but entrepreneurs believe that this difference can be minimised if the government provides facilities to readymade garment producers in the country.

The government is developing a Garment Processing Zone (GPZ) in Simara of Bara district to promote the export of readymade garments. However, the project has not yet been completed. As per garment entrepreneurs, the high cost involved in importing raw materials and exporting finished products is the major reason for Nepali garments being less competitive in the international market.

“If the construction of GPZ is expedited and completed as early as possible and the government ensures low-cost financing to invest in latest machines in the industries, garment sector can also be revitalised,” said Aryal.

“It takes $200 for an Indian garment manufacturer to ferry their goods to the port for exports, however, it costs $1,500 for Nepalis.”

Nepal should take advantage of economies of scale in garment sector by bringing advanced machines, making labour and electricity cheaper, and minimising cost of importing raw materials and exports, he added.

On top of that, the government should be flexible towards providing tax incentives to the garment factories in the initial years. And to make garments more competitive, the government has to ensure export incentives to exporters. “Once the industry booms, the government can generate more revenue, more jobs will be created and overall economy will get a boost,” said Aryal.

Nepal’s readymade garment industry has been on the verge of collapse since the expiry of Multi Fibre Agreement in January 2005, which provided duty-free access for Nepali garments to the US. Prior to phasing out of the quota system, Nepal was exporting garments worth Rs 12 billion and was generating around 500,000 jobs in the sector. Back then, the sector had drawn investment to the tune of Rs six billion. Since then, over 85 per cent of garment factories have pulled their shutters.

As per Nepal Rastra Bank, the country has exported readymade garments worth Rs 2.15 billion in the first half of current fiscal 2017-18, an increase of 11 per cent compared to the corresponding period of the previous fiscal. The major export destinations for Nepali garment products are the European Union, India and the US, among others.

A version of this article appears in print on March 11, 2018 of The Himalayan Times.

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