Chandi Raj Dhakal, Third Vice-president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) also runs Momento Garments, one of Nepal's largest exporters of readymade garments. Momento supplies to famous international brands such as Gap and large US retail outlets such as Walmart and JC Penney. Dhakal discussed his business with the Nepali Times.
Nepali Times: We're told you are running a sinking business, just how bad are things?
The industry is going through the worst times, not only because of internal problems. 11 September was a major setback, but we had problems even before-our competitive edge was gone when the US allowed duty-free, and quota free garment imports from sub-Saharan and Caribbean countries. Besides, our inefficiencies, production and transport costs always made our goods more expensive by 25-30 percent. This is a sensitive industry, but we've never received recognition from the government and political parties.
What kind of recognition?
Look how Bangladesh treats its garment industry. We began in garments at almost the same time, the late 1970s. Bangladesh took the industry very seriously from day one, attracting Korean and Japanese investors and setting up assembly lines. In Nepal the Indians came with their old paddle machines. India still does manual sewing except in some large cities, but manages to get business because they have skilled, cheap, readily-available labour, and fewer work and supply disruptions compared to us, and their workers are more disciplined. So they can go for labour-intensive items such as embroidery etc, and also high-quantity bidding. They also have very good cotton and fabrics.
In Nepal our governments have failed to realise that this is an industry that could have employed thousands of people-with the right incentives. Even good policies are rarely implemented. Investors have lost confidence in government promises. Our competitors get new facilities almost every two months. Bangladesh does not allow strikes, here even political parties and educated people encourage striking.
How many do you employ? How much have you invested?
The garment industry is Nepal's largest, in terms of foreign currency earnings and employment. I have been the highest exporter for the past four years running. My initial investment was $5 million; with upgrades to provide customers new stitching and finishing, the total investment is about $6 million. There are 2,000-3,000 people working there, 99 percent Nepalis, 90 percent women. We use the assembly-line approach and have strict quality controls to meet international standards. My turnover in 2001 was $13.9 million.
How can we do business afer the quotas are gone?
Nepalis are losing interest in garments because of the recession and the upcoming WTO regime. Other countries are taking measures to adapt-Bangladesh has reduced interest rates, India and China have raised incentives. In Nepal we don't expect cash incentives, but we want appropriate policies and their implementation. In our case, export industries are supposed to be tax-free. But we pay 0.75 percent tax, and 0.5 percent service charge, above the disadvantages we already face being landlocked and having high industrial factor costs. Meanwhile China, for example, is dumping anything anywhere, which it can do, because its production is efficient and there's a climate where people can work undisrupted day and night. In this industry if you don't meet deadlines you're gone. Our strikes prevent us from meeting the vessels sailing from Calcutta, but politicians don't realise that.
How bad were post 11-September cancellations?
Personally I didn't have cancellations of ready orders, but business we were expecting has been put on hold, which means it's gone-seasons, fashion trends don't wait for us to sort things out. The business I was expecting in November or December may have gone to other countries. And the almost daily news on the insurgency may have begun to divert potential orders elsewhere. Our customers have gone through delays caused by bandhs, hold-ups caused by changing rules. We have major image problems, which affect customers' perception of our ability to deliver. Our competitors get the business we lose.
What are the chances of a revival?
The good old days are gone forever. The only way we can shore up business now would be major, government-backed support like soft-loans, deferred LoCs (Letters of Credit), more banking facilities, less red-tape. We have to make this industry competitive and sustainable. We need to tell the US government immediately: if you want to help us, we need trade, not aid. This industry can generate the employment needed to re-activate economic transactions.
Has there been a follow-up to US Secretary of State Colin Powell's promise to look into textile quotas?
I think we need to continuously lobby to follow up on that assurance. Our embassy in Washington should be doing that on a daily basis. We have continued to campaign, but things aren't moving.
How many industries have shut down?
More than 85 percent. Central bank data shows exports are declining by over 30 percent compared with last year. This would have been the right time to increase production, but this year production is already down by 50 percent compared to last year.
How bad will the situation be after the WTO rules take effect?
We will have more competition, our survival will depend on our ability to enhance productivity, quality and the overall business environment. We lie between two giants, India and China, which have everything businesses need, from production to shipping lines. Without commensurate facilities here we can do little at the industry end. We work with quotas, which will not be there after WTO. There are possibilities within the WTO so least developed countries can get customs exemptions. The government should be working on that now, before the trading rules take effect. With those things in place, some industries may stay around, and they'll be able to help Nepal by generating employment and earning foreign currency.