The change will straightaway hit the country´s garment export, which is worth some Rs 3 billion a year, to European countries,” said Uday Raj Pandey, president of Garment Association of Nepal (GAN).[break]
Though can make petition to continue the facilities, officials at the Ministry of Commerce and Supplies (MoCS) said they do not have much time for petition, thanks to lack of lack of communication by Nepali Embassy in Brussels.
The EU was providing derogation facility to Nepal, under which Nepali manufacturers enjoy duty-free market access even without using local raw materials. Similar facility was also pledged to Cambodia and Laos.
The EU had announced the change in its law and withdrawal of facility on November 19. However, government officials and stakeholders, including GAN, came to know about the changes only when the high-level EU delegation visited the country this week.
Contrary to the events that unfolded in Brussels some three weeks ago, MoCS and GAN had still lobbied for the facility and inquired the delegation about the fate of the facility.
“It is a really embarrassing situation for us. And worse part is; our officials in Brussels are still silent about it,” an official at MoCS told Republica.
The change in EU´s law on rules of origin was not unexpected. Officials knew the change was coming at least a year ago.
Officials of MoCS and GAN had been lobbying hard for the continuation of derogation facility for the next two years, especially given the country´s political transition and additional time traders needed to switch to the new system in a sustainable manner. The facility is scheduled to expire on December and MoCS and GAN officials had been communicating with officials at the EU headquarters through Nepali Embassy for the extension of facility for the last three months.
“About a few weeks ago, both MoCS and the Nepali Embassy in Brussels had informed us that EU was positive on our request. But the EU delegation brought with them a big shock,” Pandey added.
“The entire saga lays bare the competence of our officials there and the kind of economic diplomacy that they have been practicing.”
Even James Moran, EU´s director general of External Relation for Asia, who led the EU delegation, had expressed surprise over the lack of communication by the embassy in Brussels to the stakeholders back home.
“Had we knew about the decision on time, we would have requested the prime minister to lobby for the facility during his EU visit,” Pandey said.
PM Madhav Kumar Nepal had returned home after attending a program organized by EU only a few days ago.
Commerce Secretary Purushottam Ojha said he came to know about the new development only recently. “We will decided our future steps only after going through the new rule and assessing the impacts that it would make,” he added.
Exporters said the end of the derogation facility will hit them hardly. They said they now will have to ensure local raw materials content and higher value addition, something which will not be possible given the state of textile industry in the country.
“Sadly, the latest development will hit our overall exports figure. And considering the current huge trade gap and balance of payment deficit, it will trouble the government and country as well,” added Pandey.
According to records, Nepal´s exports to the EU stand at around $100 million. Of that, readymade garment alone accounts for $40 million. GAN says Europe consumes some two-thirds of around Rs 5.5 billion worth of garment that the country exports in a year.
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