Despite the slump in the past decade due to a carpet glut, falling prices and stiff competition from India and China, Nepali carpets are staging a comeback in the international market.

Carpet exporters are excited and are preparing to meet market demands with new creative ideas and better prices. Nepal's carpet exports saw a decline from Rs 10.28 billion in 1998 to just Rs 5.6 billion in 2003. The Chinese had eaten into the market with rock-bottom prices and the Indians were copying Nepali designs, pirating clients and selling rugs at half the price.

Nepali carpet makers say they will not fall for volume any more, they have a good brand and don't want to compromise. "Our clients in Europe and the US have started to notice the quality difference between Indian and Nepali carpets. Our products have great brand recognition and high value around the world," explains Kabindra Nath Thakur, president of the Nepal Carpet Exporters' Association.

Still, Nepal is the third largest carpet exporter to Germany. In 2003 - 04, sales to Germany amounted to more than Rs 750 million but Nepali exporters are pinning their hopes on the American market. US demand for Nepali carpets has grown from just Rs 64 million in 1991 to Rs 550 million in 2003. "Business prospects for Nepali carpets in the US is promising, they seem to prefer our designs, colour and quality," adds Thakur.

Strangely, Nepal is also taking coals to Newcastle by exporting rugs to Turkey. Export sales to Turkey in 2003 exceeded Rs 100 million where the clients seem to be tourists visiting Turkey rather than the Turks themsleves. However, the Turkish government's imposition of an additional 25 percent tax increment on the import of Nepali carpets has posed a problem. Nepali exporters have to go through a long official documentation
process at the Turkish embassy in New Delhi.

"The Nepali government is not doing much to help promote the carpet industry," says Surendra Dhakal, adviser to the Nepal Carpet Exporters' Association. He explains that the government was making things worse by imposing tax on every exportable item. The industry has to pay 0.5 percent tax as service charge, an additional 40 percent on income and five percent on dividend. Businessmen say, this is in contravention of the Export Policy-2049 that promotes tax benefits for small scale industries.

Despite this, rug makers are optimistic about growth and carpets still rank as one of the top foreign exchange earners in the country. "This is due to the perseverance and efforts of the private sector," Dhakal says. The exporters' association has organised frequent promos in Europe and America for Nepali carpets. "All we have to do is compete with our rivals, not in price but in quality," explains carpet entrepreneur Senon D Lama (see interview, left).

Lama believes that Nepal's carpet industries have to move with the times and not just remain content with manufacturing ordinary and low cost carpets. There has been a shakedown in the industry and the number of carpet companies has fallen from 700 six years ago to 150 today but those that have survived are the strong, creative and aggressive ones.

Nepal's carpet industry began in the 1950s after the United Nations promoted carpet weaving among Tibetan refugees as a source of income for them. By the 1980s, it had become Nepal's top export.