Chandan Sapkota’s Blog

My latest op-ed is about the downfall of the garment industry in Nepal (thanks to Theo Birch for assisting to fine-tune the article!). The shortcoming of the industry to foresee changes brought about by globalization and an out-of-date industrial policy are the primary reasons. My previous pieces on the garment industry in Nepal here, here, and here. Few people noticed that 2010 started with unfavorable information for the Nepalese overall economy.

The garment industry, the highest forex earner for Nepal once, has disappeared almost. In fact, only one firm still exports readymade garments to the united states, once the biggest market because of this industry. The growing Indian market has been the focus of attention of the few remaining companies that are struggling to survive.

The demise of the garment industry shows the failing of our trade promotion policy and commercial policy. To avoid recurrence of a similar event, it is essential that we evaluate the causes of the downfall of the garment industry and learn lessons from our mistakes. Alas, this glory is currently lost. Exports to the united states, insignificant this year which previously accounted for more than 80 percent of total garment exports have been. Significantly less than ten firms stay in operation.

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Hundreds of a large number of employees have been laid off. The national country has lost a trusted source of revenue. Worse, the failure of this industry has resulted in the collapse of the whole exports sector. Where and exactly how does it go wrong horribly? The answer is based on an incapability to foresee the noticeable changes as a result of globalization.

Policymakers and garment investors didn’t notice quite apparent signals of change in the international market. They didn’t design corrective policies to restructure the out-of-date home garment industry. Rather than dealing with the constraints which were making the garment industry uncompetitive, they basked on the already-secured preferential agreements and squandered precious time and resources in securing more of these. In 1990, the WTO’s member countries signed the Agreement on Textiles and Clothing (also known as the Multi-Fiber Agreement), which eliminated quotas on the trade of textiles and clothing. This was to be implemented in four phases; commencing with 16-percent decrease in quota of 1990’s imports.

Thus it was known two decades ago that all quotas in this sector would be abolished. There is ample time to invest and restructure the Nepalese garment industry. However, both policymakers and investors converted blind eye to the need for the reorganization of this industry. Traditionally, the Nepalese garment industry grew not because its products were competitive, and superior, but because it got preferential access to the markets in America and the EU. Where and how did it go horribly incorrect? The answer is based on an incapability to foresee the changes brought about by globalization. The downfall of the Nepalese garment industry illustrates some important lessons which could be utilized to avoid an identical fate befalling other export-based industries.