Tuesday, August 19, 2008

Times up for garment industry

That's the title of my latest Op-Ed published in The Kathmandu Post. This piece's main point: don't foster ailing industries by seeking preferential treatment in the international market. In Nepal's case, it is the garment and textile industry, which once was the largest foreign currency earning exportable commodity. Now, it has lost almost 80% of jobs and 98% of firms. Why? Because of its inability to withstand competition in the international market, especially after the end of Multi-Fiber Agreement (MFA) in 2005. Interestingly, for Nepal, the year 2005 can also be labeled as 'the Great Garment Depression of 2005'.I favor market competition, which probably is the best way to induce incentives among individuals and firms.

In light of these widely known reasons but scarcely mentioned by the bureaucrats, a new high level delegation, composed of Commerce Secretary and FNCCI and GAN members, is heading to the United States to lobby for preferential treatment of or duty free access to Nepali garments in the US market, which is the largest importer of readymade garments made in Nepal. What surprises me the most is the fact that our leaders and garment sector entrepreneurs have not yet realized the value of competition and the stark truth that the Nepali garment sector cannot simply compete with the big producers, who continue to take an advantage of agglomeration economies, from Cambodia, China, India, Vietnam, and Mexico, at least not in the current situation.

Instead of rectifying defective economic policies considering the changed circumstances in the market brought about by globalization, the bureaucrats are too bogged down and intent on getting the preferential treatment in the US market. It shows how misguided our economic priorities are and how ignorant and unyielding our policymakers are to change the course of economic policy for good.

The prevailing illusionary notion among the policy-makers and garment sector entrepreneurs -- who are already battered hard by the depression in the garment sector -- is that the industry can recoup lost jobs and revenues if they are able to secure special treatment in the US market.

However, what is hard to swallow is the fact that no such recouping would occur and greater revenue generation would just be a dream, unless a miracle happens in favor of Nepali products in the international market. After the end of the MFA, Nepal already has lost market pie to big producers from China, India, Cambodia, and Vietnam, among others.

Read the full Op-Ed here. Here is a previous post about carpet industry, preferential treatment, and poverty reduction (in reality, it is a modern day myth!). Related to this post is this news piece about "carpet exports roll down by 14%" this fiscal year.

Also, this time there is a pic of mine with my Op-Ed. Below is an embedded link of how the Op-Ed page looks like on the actual print version (what could be a better way to advertise myself than this! How much of rationality and selfishness is in question here?)


  1. Good one. Keep it rolling!

  2. Wow Chandan,*************you have a serious side too. Just kidding!

    Nice blog!