Tuesday, August 19, 2008

Carpets, duty free treatment, and poverty reduction-- a modern day myth!

Here is call for duty-free treatment of carpet made in Nepal for the sake of poverty reduction. Again, a call for inefficiency!

Nepal needs duty-free treatment of carpets and shirts in India, China, Europe and the US.

It should be noted that almost 98% of the garment and textile firms have gone out of business, especially after the end of MFA in 2005. And, over 80% of the jobs are already lost. Why? Because Nepali exporters never learnt how competition works and were always smug with duty free access in the West. Neither the government nor the entrepreneurs looked into enhancing our industry's capacity, competitiveness,quality, and market access. After all quota restrictions were phased out in 2005, big producers, who enjoy large agglomeration economies and offer cheaper products of the same quality, from China, India, Cambodia, and Vietnam took over the Nepali market pie in the West.

Given this reality, why would Nepal still need duty-free treatment in the West? Nepal is not going to recoup the market pie already lost the its international competitors. Also, the dream of poverty reduction through duty-free treatment is just a myth because already over 80% of the workers are out of jobs! The developing countries like Nepal were already given ample time to enhance their competitiveness in this sector; the first phase out began in 1995 and since then it is more than a decade-- ten years is a lot of time to enhance competitiveness of this sector by increasing investment in capital, quality, marketing, labor skills, etc. No such step was taken, hence this sorry fate! No regrets!

Forget about aiding this sector. It is high time Nepal prioritized other sectors like tourism and hydropower.