TEXTILES AND APPAREL SECTOR: UPDATED STATISTICS

UNCLAS KATHMANDU 002637

SIPDIS

SIPDIS

DEPT FOR SCA/INS
EB/TPP/ABT TLERSTEN
DEPT PASS TO USTR FOR AHEYLIGER
COMMERCE FOR ITA/OTEXA MDANDREA

E.O. 12958: N/A
TAGS: ECON ETRD KTEX NP
SUBJECT: TEXTILES AND APPAREL SECTOR: UPDATED STATISTICS
AND PROJECTION OF FUTURE COMPETITIVENESS

REF: SECSTATE 138090


1. (U) The following is post's response to information on
textiles requested in reftel.

DATA ON TEXTILES
--------------


2. (U) The following is available data through mid-July 2006
unless otherwise specified.

-- Total production in USD value: Data not available
-- Total textiles and apparel production in USD value: Data
not available
-- Textile/apparel share of host country imports (3.09
percent) and exports (14.25%)
-- Exports in textiles and apparel to the U.S.: (USD 50.72
million through the end of 2005)
-- Total manufacturing employment: Data not available
-- Total textiles and total apparel employment: Approximately
4000 persons

RESPONSES TO QUESTIONS
--------------


3. (U) The following are responses to reftel questions on
textiles.

-- Are host country producers receiving lower prices due to
heightened international competition?

The prices of textiles have not decreased.

-- Have manufacturers received more, less, or the same number
of orders as in years past?

Manufacturers are receiving fewer orders than they have in
the past; textile exports declined by 41% in 2005.

-- Have foreign investors, particularly Asian investors,
closed factories or otherwise pulled out of local production?

Yes, there is only one foreign investor left in Nepal that is
still operating. Out of approximately 150 domestic factories
operating in 2005 there are now only 5 to 6 currently
operating.

-- Have U.S. and EU restrictions on certain exports of
textiles and apparel from China, effective through 2008,
affected export prospects for host country manufacturers?

Orders in certain categories have increased but Nepalese
manufacturers are not in a position to capitalize on the U.S.
and EU restrictions.

-- Has the host government implemented, or is it considering
implementing, safeguards or other measures to reduce growth
of imports of Chinese textile and apparel products into the
host country?

No, absolutely not, given a shared border with Tibet, Chinese
apparel products are readily available in the local market.

-- Has increased global competition affected local labor
conditions by causing employers to reduce wages, seek
flexibility from government required minimum wages, or
adversely affected union organizing?

The increased global competition has caused many Nepalese
workers to head over the border to India to seek work there
as so many factories in Nepal have shut down.

-- Has the host government or private industry taken action
to increase the country's competitiveness, such as improving
infrastructure, reducing bureaucratic requirements,
developing the textiles (fabric production) industry, moving
to higher value-added goods, or identifying niche markets?
Does post think that the host government or private
industry's strategy will be successful?

The Garment Association of Nepal has suggested to the
Government of Nepal (GON) to construct an Export Processing
Zone for garment industries near the dry port in the key
Indo-Nepal border town of Birgunj, which would have the
following benefits:
-- The garment export zone would cut down the extra
transportation cost from Kathmandu to Birgunj;
-- Production would be less affected in the event of any road
blockades caused by civil disturbance or natural events like
landslides;
-- The economies of scale would cut down on production costs;
-- Handling expenses would be reduced; and
-- The lead time on processing export orders would be
significantly reduced.

However, the GON has not taken any steps to set up the
special garment export zone, nor has it seemed particularly
interested to do so.

-- If your host government is a partner in a free trade
agreement or a beneficiary of a preference program such as
AGOA, CBTPA, CAFTA or ATPDEA, will this be sufficient for the
country to remain competitive?

Nepal is not a partner to these agreements. Members of the
Garment Association of Nepal have repeatedly requested that
the USG give Nepal preferential access to its markets. They
are currently lobbying the members of Congress to adopt
legislation which would grant that access to Nepal and
several other Asian countries. Garment Association members
also have looked into the possibility of free-trade
agreements among several small countries in the region but
there is little economic benefit to do so.

-- Overall, if not already addressed, does post think that
the host country can be competitive in textiles and apparel
exports given heightened global competition?

Nepal's apparel/textile industry has fallen flat after the
expiration of the Multi-Fiber Agreement (MFA) regime.
Nepal's garment industry can probably only survive if some
kind of quota or duty free preference is accorded. In the
absence of any special preference, the garment industry in
Nepal is likely to continue to fade away.
MORIARTY