Nepali exporters are facing tough time retaining their market in overseas countries due to flooding of cheaper low-quality carpets there.[break]
“We are gradually losing our markets for normal carpets. To stay in the business and beat our competitors, we are gradually switching to production and export of high-quality carpet,” Anup Bahadur Malla, president of Nepal Carpet Exporters´ Association, told Republica.
Lengthy economic slowdown in European countries and high competition in US has dragged down the demand for Nepali carpets as customers there prefer cheaper carpets supplied by other countries.
“That is why we are putting focus on high-end carpets on which we have comparative advantage,” said Malla. He further added that share of high-end carpets on total carpet exports has increased to around 50 percent from less than 20 percent recorded a couple of years ago.
Nepali entrepreneurs are producing and exporting 100-knot carpets which are made from a mixture of natural fiber and wool.
Meanwhile, Nepal´s carpet export dropped by around 17 percent during the first eight months of the current fiscal year compared to the figures of the same period in the last fiscal year. According to Trade and Export Promotion Center (TEPC), Nepal exported 346,065 sq ft of hand-knotted woolen carpet worth Rs 3.43 billion during the review period.
Rising production cost due to load-shedding, increasing labor charge and expensive raw materials has forced Nepali exporters to raise price of their products. Average selling price of carpet hovers around Rs 9,900 (US$ 116) per square meters, up from Rs 8,500 ($ 100) per square meters recorded last year. However, high-quality carpets fetch as much as $150 per square meters.
“We have raised selling price in line with the rise in our cost of production,” added Malla.
Cost of production of 60-knot carpet hovers around $80 per square meter. Production cost of the same variety hovers around $45 per square meter in India, according to the exporters.
Nepal imports wool - the key raw material -- from the Netherlands and Tibet of China.
´Flat rates on cash incentive impractical´
Entrepreneurs have objected to the government decision of introducing flat rates on cash incentives.
The newly released cash incentive guidelines by the government have enforced flat rates of one percent and two percent for value addition up to 30 percent and over 30 percent, respectively.
Malla, who is also the chairman of Export Promotion Committee of the Federation of Nepalese Chambers of Commerce and Industry, said the government decision of reducing incentive rates in the name of introducing flat rates was impractical. “It will make negative impact on export promotion,” he said.
Saying that the government lowered interest rates in the pretext of ending procedural complexity while claiming incentives, Malla said the new rates will simply discourage exporters.
In a bid to promote exports, the government had introduced cash incentive of 2 percent to 4 percent of the total exports on convertible foreign currencies, except Indian currency, depending on the degree of value addition in exportable items in fiscal year 2009/10.
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