Nepali garment sector in troubled waters

What happens when the largest exporters in an industry have a single major customer, which goes bankrupt without paying outstanding dues of imports, of another country? Well, the whole industry plunges in troubled waters, putting the survival of the industry at stake. This is happening to Nepali garment sector recently. Four big firms' production and exports are in limbo as its buyer Stephen Berry has sought protection under US Chapter 11 bankruptcy law, which suspends or delays payments of outstanding debts. More misery for the already troubled industry...a result of poor industrial policy!

Knowledgeable people in the industry said it's not only a question of delay. Since the buyer has declared bankruptcy exporters will lose at least a chunk of the payments due.

Stephen Berry, known for dealing in cheap university labels in the US, has been importing a substantial volume of garments from Nepal over the last half decade.

In the latest deal, it placed orders worth US$ 5.25 million with the four Nepali manufacturers in January. Of that, the exporters said they have received payment of only US$ 400,000. While they are yet to dispatch last consignments worth US$ 850,000, they

are also supposed to have received payment of $ 4 million for consignments already dispatched.

According to exporters, the Stephen Berry bankruptcy is bad news for the four exporters and for the Nepali garment industry as a whole. As chances of the US economy going into recession are heightening, exporters warned that more such cases can surface in the days to come.

Delay in payment, which they said is the best case scenario in the Stephen Berry deal, would still affect timely release of bank guarantees, freeze assets, subject them to fines and affect future operations, unless the banks came to the rescue.

"If the court refuses Stephen Berry's appeal, the company will have to go into liquidation, which will be a disaster for Nepali manufacturers," said an official at the Garment Association of Nepal, requesting not to be named.

More here.

Gains from Goats

This is why we need selective intervention (funding source may be either internal or external or both) in the developing countries if we are really and economically serious about reducing poverty. This intervention is about providing what is needed the most to generate sustainable livelihood, in this case goats, to the most affected people. Here, goats are given to lower caste families (aka intervention because market always keeps them in dark!) to help them build livelihood. Incentive mechanism works well and there is rise in real income as well.

The innovative project gives participants breeding stock, allowing them to build up herds to the point where they can return the same number of animals they originally received to the program operator, the District Livestock Services Office (DLSO). In turn, those animals are then given to other needy communities who repeat the process.

In the case of the Pokharathok Goat Lending Group-made up of 50 women from the village including Padma Bhitriya-each member was given three female goats, and each group was given two bucks to kickstart the breeding program.

The program has been a major success, with group members' annual incomes rising to NRs17,000 ($270) each, a far cry from their income of around NRs6,000 three years ago.

The goats were provided under the Community Livestock Development Program, a project funded by the ADB which, in 2004, superseded the successful six-year long Third Livestock Development Program (TLDP). The initial program was kickstarted with an $18 million loan from ADB, supplemented by an additional $4 million from the Government of Nepal and local financing institutions.

More here from the ADB.