Garment industry suffers slowdown

KATHMANDU, April 22: As the global financial crisis casts its shadow on consumer spending, international garment importers have shrunk the import lead prices offered to exporters by 15 percent. This has landed a hard blow to the already suffering Nepali readymade garments industry. [break]

The vice president of the Garment Association of Nepal (GAN), Uday Raj Pandey, says that this change in the market has directly hit the profit margins of the exporters, and some exporter of certain product lines have even been forced to reject orders.

Amid this gloom, the export of readymade garments to the US, the largest apparel market in the world, has recorded a whopping 59 percent decline in the first quarter of 2009.

Statistics collated by GAN shows that Nepal´s apparel exports to the US dropped to US$ 2.30 million over the first three months this year; in the same period last year, apparel export from Nepal to the US was valued at US$ 5.65 million.

A monthwise breakdown of exports shows that exports dropped the most in January 2009, by 73 percent, in comparison to the same month last year. During the month, exporwas valued at US$ 706,000; in January 2008, it stood at US$ 2.65 million.

The decline that occurred in the two subsequent months, however, has not been as bad as was January´s. Still, the drop in exports was well over 54 percent in February and 31 percent in March.

Readymade garment manufacturing, which evolved into a formidable industry in the late 1980s and became the largest export sector in the late 1990s, has been seeing a downturn since 2002. While the initial jolt came from the US´s giving a dutyandquota free facility to Caribbean and SubSaharan countries, the second major blow landed with the expiring of the quota system in international apparel trading.

The problems that have cropped up over the past half decade, however, were all homegrown: attacks on industries, frequent bandas and, most crucially, the growing clout of the labor unions have all taken their toll on the industry. GAN´s data shows that over the last half decade, the number of industries in Nepal plummeted from more than 200 units to around only three dozen.

To inject life in the collapsing industry, entrepreneurs have long been demanding that the government pledge to them a hireandfire provision, so that they can contract and layoff staff according to the orders they receive. To gain a competitive edge, GAN has also been demanding that the government establish a garmentprocessing zone with all ancillary industries near its premises around Birgunj, the country´s main export point.

Both these demands, however, have fallen on deaf ears.

To counter the impact of the global financial crisis, GAN has recently asked the government to pledge a tax holiday for the industry and to provide other procedural and financial incentives to the manufacturers. But the government has paid no heed to these demands as well.