The Nepali garment industry has started feeling the pinch of the abolition of the international multifibre arrangement from the first of this January under the new World Trade Organisation regime. The effect of this has been that Nepal’s garment industry now has to compete with such countries as China for a share of the global market. Nepal’s garment exports had been shielded with export quotas and lower tariffs in such countries as the United States and the garment industry flourished in Nepal for years, except for an internal setback in recent times produced by the Maoist insurgency. The first month of open global competition without quotas has come hard on Nepal, as its exports to the US have declined by 46 per cent over the corresponding month last year. The American market accounts for more than 80 per cent of Nepal’s total garment exports, which have for years ranked as one of the three biggest earners of foreign exchange.
The days ahead do not look promising for the industry, which suffers from several constraints. Nepal has to compete in quality, price, and reliability of supply with the world at large. To ensure quality, such things matter as technology, incentives for manufacturers, regulations punishing unscrupulous businessmen and constant monitoring. In price Nepal is at an even greater disadvantage. Its landlockedness contributes to higher transportation costs, and most of its raw materials have to be imported. Administrative hassles have caused unnecessary problems for exporters, such as the requirement for too many documents to be made. The bureaucratic red tape has made matters worse. There is no such thing as the one-door export house in Nepal. Besides, hassles in India, such as customs checks on goods in transit, do not appear to help Nepali exports, either.
In the new trade regime Nepal cannot survive on the mercy of others. It has to carve out its own place in the world market. The drop in exports to the US is all the more troubling as Nepal’s readymade garment industry has long concentrated almost wholly on the American market. Nepali exporters have failed to capitalise on the concessions and privileges accorded to Nepal by the European Union and Canada since 2002. During 2002-2004, Nepal could freely export garments to these two large markets, enjoying a duty-free preferential market access. Businessmen argue that they could not penetrate these markets as the exporting giant China had a strong presence there already and Nepal’s competitive strength was much lower. If that is the reason, in a world where the fittest survive, one can no longer pin much hope on the Nepali garment industry for huge export earnings and large domestic employment.