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Last Updated: Tuesday, 28 December, 2004, 02:49 GMT
Nepal's clothing makers at risk
Charles Haviland
BBC News Nepal correspondent

Cotton Comfort (Private) Ltd's factory floor
300,000 Nepalis depend on the textile industry

Nepal is among those countries which could lose out badly from the ending of the Multi-Fibre Agreement when it lapses on 1 January, 2005.

Nepal's clothing industry, based on stitching fabric to make ready-made garments, has steadily grown over the years and now accounts for more than one third of export earnings.

But with the abolition of the MFA, its giant neighbour India is expected to win a bigger slice of the world's textile trade, and Nepali clothing makers could find themselves squeezed out.

That is because MFA quotas set limits on how much an individual country can export, a system that created an opening for small developing nations.

Working for US brands

Cotton Comfort Ltd in Kathmandu sells to US high-street names like Wal-Mart and Gap. Managing director Subrat Dhital has built his firm into Nepal's biggest textile exporter.

Cotton Comfort managing director Subrat Dhital
Nepali manufacturers rely on overseas sales

In one room, workers are cleaning the fabric. In another, 300 people, mostly men, are sewing in well-lit conditions.

They are highly skilled, says Mr Dhital.

"These people have been tailors for generations, their fathers and grandfathers were training...they are very skilled, yes, I can tell you that."

Machine operator Satrughan Chowdhary, who comes from Nepal's flat farmlands, is working on girls' trousers for the Gap subsidiary Old Navy. He knows that the work may not be secure.

"I've worked in other factories like this, but they kept closing so I've moved around," he says.

"This one seems more stable. If I did lose my job I'd set up my own tailoring business at home with four or five machines."

Comfort at risk?

Cotton Comfort employs 2,500 people. But with the Multi-Fibre Agreement about to go, Mr Dhital acknowledges that the future does not look rosy for the firm, or its workforce.

"It is endangered. I don't see that their skill is compatible to any other industry," he says. "They probably need retraining for new skills, and there is no job available".

Satrughan Chowhary, a worker at Cotton Comfort's factory
Satrughan Chowhary (left) fears his job may be at risk

"If my orders go down, if I cannot match the prices that my customers are looking for, if my volumes shrink, that will have a direct impact on the people I employ".

Exporters like him are represented by the Garment Association of Nepal, or GAN.

The textile industry provides work for 90,000 people, says GAN president Kiran Saakha.

If their families are included, up to 300,000 people rely on the textile industry.

The risk to their livelihoods comes from India. Freed from quota constraints, clothes from India are expected to get cheaper, making those from Nepal more expensive.

Geography plays a part, as land-locked Nepal must ship goods down to the Indian port of Calcutta, making it hard to cut costs, says Mr Saakha.

"To ship one container from Kathmandu to Calcutta we need to spend more than $1200. And when we import the raw material from a third country, the transit expenses from Calcutta to Kathmandu comes to an average of 7% of our invoice cost, which is a lot of money," he explains.

Survival strategies

GAN is not sitting back.

It has appealed to the government to bring in a host of remedial measures: a tariff-free garment processing zone; factory modernisation; cutbacks in red-tape; and - something recently completed - a dry port by the Indian border.

Ultimately, Nepal needs to control more of the production chain to make its textile industry more sophisticated, says Bijendra Man Shakya, head of GAN's World Trade Organisation division.

Cotton Comfort's factory floor in Nepal
Nepal must compete with India's scope for economies of scale

"Until now the trend is that the buyers give us some instruction to make of their requirements. That might shift, there might be big changes," he says.

"We should be able to make yarn, make fabric, then cut, then trim, then make apparel....even we should be able to have our own fashion designings, creation - if we can do all those things, we can be competitive."

At Cotton Comfort's factory, boss Mr Dhital has already started on a new course, trying to build on Nepal's artistic strength.

"At a private level we will try to focus on a product that we are best prepared to handle as compared to our competitors - a product which needs more handwork like beadwork, handblasting and all those processes," he says.

But pending longer-term reforms, the country is having to lobby hard for temporary measures to cushion the blow, such as duty-free access to the United States and other Western markets.

The coming months will be very difficult for Nepal's textile industry.

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