Nepali RMG Export Sees Possible Revival


By TC Correspondent


The export of readymade garments (RMG) from Nepal has seen a slight increase after a decade long decline. According to Garment Association Nepal (GAN), the export of garments from Nepal in fiscal year 2010/11 was of Rs 4.08 billion which is an increase by 5.56 per cent as compared to the previous year. FY 2009/10 witnessed an export worth Rs 3.75 billion. There had been a sharp decline in the export of garments from Nepal in the past decade.


According to Uday Raj Pandey, President of GAN, the association is trying to maintain the export of the garments. “Our main strategy now is to stop this decline in export. Even if we are not able to increase the exports, we will try to maintain the current rate,” said Pandey.

FY 2002/03 saw a huge increment of 50.81 per cent in the export of RMGs, as compared to the previous year. But from the FY 2003/04 to 2007/08, the rate continually declined. According to Pandey, this constant decline in the export was because of the cancelation of the quota system by the US.


“The US cancelled the quota system for Nepal, and at the same time, the country suffered political instability. This helped in further decreasing the exports,” said he “due to the political instability; factories couldn’t deliver the consignment to the parties in time. This reduced the trust of our buyers, and they diverted towards other nations”.


At present, the factories are not taking huge orders owing to the political instability and labour issues. Moreover, the prevalent power outage has increased the cost of production of RMGs, which ultimately decreases the export. For the revenue generation, companies are shifting towards import business.


“We are almost forced to stop the production of garments. The government budget has also been revenue oriented rather than export oriented,” complained Pandey. Though Nepal Rastra Bank (NRB) has created a provision of providing loan at 4.5 per cent interest for the RMG manufacturing companies, it hasn’t been in practice yet. The companies are forced to pay up to 15 per cent interest on loans. Most of the garments companies are either in break-even or in loss, expressed Pandey.


Nepali garment companies were able to export garments worth mere Rs 3.31 billion in the FY 2007/08, which is the lowest of the decade. After the heavy decline, the association attempted to maintain an export worth Rs 4 billion at least. “We encouraged the companies to export to Europe and India that were exporting only to the US.


This increased the export to Rs 4.35 billion in the FY 2008/09,” said Pandey. In the earlier years of export, 90 per cent of the RMGs were exported solely to the US, but the recent years have seen a drastic change. Now, Nepal exports 25 per cent of the RMGs to the US, 25 per cent to India and 50 per cent to Europe.


Two years back, the government had offered 2 to 4 per cent cash incentives for the exports to the companies, but due to the value added procedure, the companies haven’t been benefited by this. “We have requested the government to simplify this procedure so that the garment industries could receive some relief,” said Pandey. At the moment, there are 40 garment industries operational in Nepal. The export of RMGs started from 1983 when there were only 6 garment industries in the country.