South Asia Watch on Trade, Economics & Environment (SAWTEE)

Phasing Out of Textile Quota: Future Strategies for Nepal

25 January 2005, Kathmandu, Nepal

On 31 December 2004, the quota benefits received by Nepali readymade garment (RMG) exporters, phased out and the textiles and clothing trade became part of the normal General Agreement on Tariffs and Trade (GATT) discipline. With the elimination of quotas, exports from Nepal will be much more difficult than in the past. Against this backdrop, with the objective of identifying the future strategies for Nepalese garment industry, South Asia Watch on Trade, Economics & Environment (SAWTEE) and ActionAid Nepal (AAN) organised their Fifteenth Forum on Globalisation and WTO titled "Phasing Out of Textile Quota: Future Strategies for Nepal".

The forum was chaired by Hon'ble Dr Shankar Sharma, Vice-chairperson, National Planning Commission. Speaking from the chair, Hon'ble Dr Sharma opined that Nepal should address key external and internal measures to remain competitive in the post quota regime.

Presenting his paper Mr Navin Dahal, Research Director, SAWTEE said that given the precarious position the Nepalese economy is in now and the importance of the garment industry sector, ensuring preferential market access with favourable Rule of Origin (RoO) requirements will give a breathing space to Nepal. He also opined that measures to improve the competitiveness of the sector are very important in the short run. Establishment of a Garment Processing Zone (GPZ) near the Inland Container Depot in Birgunj, establishment of Technology Upgradation Fund to provide subsidised loan to the private sector to upgrade technology, procedural simplification to reduce cost and time are measures that need to be started immediately.

Speaking as a discussant at the forum Mr Swarnim Wagle, Programme Specialist, Asia Trade Initiative, UNDP Regional Centre in Colombo, gave an all-new regional dimension to the forum and said that Nepal can learn from various other neighbouring countries and their strategies. He added Nepal can learn from the example of Sri Lanka's brassiere industry which has grown to a US $ 360 million market. He also added that Nepal need not only be a passive recipient but should proactively develop production and marketing for niche products. Tools like excellent marketing and the ability to make use of Nepal's comparative advantages would also make it possible to overcome the challenges in the post-MFA era.

Mr Purushottam Ojha, Joint Secretary, Ministry of Industry, Commerce and Supplies said that Nepalese government is positive about the establishment of GPZ but admitted that the progress has been very modest on that front. He also stated that private sector and government should work hand-in-hand in such crucial situations rather than playing a blame game on one another.

Mr Prashant Kumar Pokharel, Second Vice President, Garment Association - Nepal (GAN) also speaking as a discussant admitted that Nepal's garment sector has always depended on 'other countries' weaknesses' and not on our own strengths. Nepalese garment sector is currently standing at the midst of uncertainties but trying its best to overcome the challenges facing the sector in the post-MFA era. He also pointed out that GAN has been lobbying with the government for the establishment of GPZ but the fruits of which has not yet been borne.

The participants took note of the fact that despite getting preferential market access to the EU, Nepalese garment sector has not been able to take benefits from the same. They also asked if Nepal will benefit from quota-free duty-free access to the US.

The participants were also of the opinion that the sector is of vital important because of the foreign earning and employment it generates. Therefore, in order to remain competitive, this sector needs more attention from the policymakers. The private sector too needs to think anew.

The forum was attended by around 70 participants from the concerned ministries and departments, exporters of garments and apparels, private sector, academia, civil society and media.

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