Krishana Prasain, The Kathmandu Post, September 16, 2019
Nepal’s readymade garment export hit a 13-year high in terms of value in the last fiscal year, thanks to the appreciation of the US dollar against the Nepali rupee and improvement in product quality.
The Trade and Export Promotion Centre statistics show that the country exported readymade garment worth Rs6.34 billion in the last fiscal year that ended mid-July, against Rs5.97 billion in the previous fiscal year, up 6.53 percent.
The statistics show that in the last fiscal year, Nepal exported 12.2 million pieces of readymade garments against 15 million pieces in the previous fiscal year, down 19 percent year-on-year.
Despite a sharp drop in quantity, the improvement in product quality allowed the export item to fetch good value, traders said.
“The increase in the US dollar against the Nepali rupee also contributed to increasing the export value of Nepali readymade garments,” said Chandi Prasad Aryal, president at the Garment Association of Nepal. “It’s not growth in quantity but growth in product quality,” he said.
Yagya Prasad Pokhrel, director of United Fashion and Knitting Industry, said that improvement in the quality of readymade garments contributed to increasing the value of Nepali products abroad.
Export of Nepal’s readymade garment — once the most sought after product in foreign markets — used to earn the largest chunk of foreign currency but earnings plunged after manufacturers cut back on quality due to unhealthy competition.
“Nowadays, manufacturers are focusing on improving the quality of readymade garments and incorporating designs as per the needs of the overseas markets,” said Pokhrel. “But despite fetching good value for their products, the industry is still struggling due to the increase in labour cost and raw material.”
Aryal said that loyal buyers have increased orders due to the rise in quality. “We are expecting orders to increase gradually.”
During 2000, Nepali garment manufacturers used to export products worth Rs12 billion annually but exports started to collapse after the Multi Fibre Agreement expired in January 2005 that used to provide duty-free access for Nepali garments to the US.
According to a report, fierce competition in the global textiles and clothing market unleashed by the expiry of the World Trade Organisation’s Agreement on Textiles and Clothing on December 31, 2004 had adversely affected Nepal’s ready-made garment industry, which ranked among the two top export products of the country at that time.
While Nepal’s garment exports started declining after 2001 due to the impact of domestic conflict, the adverse international climate following the 9/11 attacks and the global abolition of textiles and clothing quotas almost bought the industry to the brink of collapse. Export earnings declined by an annual rate of 14.2 percent between 2000 and 2007, and by 21.2 percent from 2005 to 2007, the report said. In the US market, earnings declined by 18.5 percent and 28.4 percent, respectively, during the two periods.
According to the association, before the agreement expired, the country used to provide jobs to 500,000 people. More than 85 percent of the garment factories including major manufacturers have shut down since then.
The country was shipping 87 percent of its readymade garments to the US till 2002, said the association. Following the fall in exports to the US market, Europe has emerged as a major buyer of Nepali readymade garments, said Aryal.
In recent years, the major markets for Nepali readymade garments are Canada, Europe, Australia and India, with 90 percent of export to these countries. The remaining exports go to the US, said Aryal. Nepali readymade garment has been receiving duty-free facility in European countries and the demand is also good, he said.
Price competitiveness in the international market has become a major challenge for the country’s readymade garment industry. “Our cost of production is 15 to 18 percent higher as compared to other international brands. As a result, Nepali readymade garment is struggling to compete overseas,” said Aryal.
Pokhrel said the government needs to provide export incentives for the industry to regain its lost global market share.
Nepal and Bangladesh started exporting garments in the 1980s, but Nepal has fallen way behind, said Aryal. Bangladesh currently exports readymade garments worth $32 billion annually, which is more than Nepal’s annual gross domestic product.