Garment industrialists will not toast 2005. Reason: from 1 January 2005, Nepal's quota for export of ready-made garments to countries like the US will be scrapped because of the WTO. That will mean almost all the remaining 30 garment industries in the country will have to close shop. The death of the annual Rs 6 billion industry will also mean a big loss for the national coffers that had been getting 35 percent of its earnings from garment exports.
There was sufficient warning. The industry and the overnment have both known this was coming. "That is the reason we had been alerting the government to do something since years ago," says Kiran Sakha, President of Garment Association of Nepal (GAN). "But unfortunately, nothing was done and here we are helpless when our industry is dying."
The end of the quota system means the Nepali garment industry has lost its lifeline because it cannot compete with giant regional exporters like India and China on pricing. Situated far from the sea as it is, Nepali garments already have a hefty transportation markup. That was the reason GAN had suggested that the government rush to build a dry port near the border and an Export Processing Zone (EPZ).
With the financial assistance from the World Bank, the government did build a dry port near Birganj but there is no sign of an EPZ. "Without an EPZ we don't have the infrastructure to build capacity as an exporter in the quota free era," says Sakha.
Garment industrialists had also pressured the government to request the US government to provide duty free access to Nepali garments in the American market. But the bill for such a provision has been gathering dust because lobbyists of an American company (Panda Energy) wants a dispute, over the Bhote Koshi hydropower project it has invested in, to be resolved first.
GAN executive members said Republican senators close to Panda Energy are blocking the bill and holding the Nepali garment industry hostage. More than 90 percent of Nepal's ready-made garment production is exported to the US market earning $100 million this year. Although this is down from $140 million in 2001 it is a big source of employment and cash for the beleagured government. Since 2001, 70 percent of the 125 garment factories have closed down.