The market of locally produced cheap RMGs has found a strong footing after the Covid-19 pandemic disruptions reduced the import of foreign garments. Now the time is right for the government to support producers of cheap garments to sustain this opportunity for a long term.
--BY TAMISH GIRI
Mohammad Raja, proprietor of Sana Readymade in Lagantole, Kathmandu, has been producing and selling windbreakers for the last two years. Before the lockdown clamped to control the spread of Covid-19, the income he used to generate by selling the jackets priced at Rs 150-400 per unit was just enough to make a living. But his sales jumped after the lockdown was lifted. This winter, he recorded a daily transaction of Rs 50,000 on average. Another readymade garment store owner Nagendra Chaudhary also logged a brisk business after the last year’s lockdown. He currently makes a daily transaction of around Rs 20,000 selling t-shirts, trousers and hoodies that carry a price range of Rs 120-150.
Chandra Lamichhane, president of Bhotebahal Garment Producers’ and Sellers’ Association, sees Covid-19 related disruptions as the main reason behind the increase in sales of cheaper Nepal-made apparels. “The import of inexpensive clothes has taken a big hit over the past year. The local markets that used to sell imported apparels are now relying on domestically produced readymade garments,” he said. With the Covid-19 pandemic creating serious disturbances in international trade, importers are unable to import low-priced apparels mainly from China, thus providing a big opportunity for local readymade garment producers to fill the market void. Currently, about 1,800 Nepal-bound containers are stranded at Nepal-China border points of Tatopani and Rasuwagadhi, many of which are carrying readymade garments, according to Naresh Katuwal, president of Nepal National Traders' Federation. Nepal imported RMGs worth Rs 20.54 billion in the first eight months of the current fiscal year. In FY2019/20, the country imported RMGs worth Rs 23.46 billion, a drop of 24.46 percent from Rs 31.06 billion in FY2018/19.
In the last few years, places like Bhotebahal in Kathmandu, have become hubs for producing and selling readymade garments. Kusum Maharjan, who is considered among the first garment entrepreneurs of Bhotebahal, informed that there are currently around 600 apparel stores operating in the area. According to her,most of the stores produce garment by themselves and supply their products to retailers across Kathmandu and different parts of the country. "We supply goods to the various street markets of Kathmandu valley including Lagankhel, Sundhara, Guchhatole, Makkhantole, Jawalakhel, Koteshwor and Chabahil. Our customers are mainly low-income people," she said. Maharjan's factory produces different types of apparels and has production capacity of up to 2,000 units per day.
People involved in garment business say that the demand for domestically produced low-priced RMGs has grown significantly over the past few years.This is indicated by the growing number of stores and factories in places like Bhotebahal and areas adjacent to it where currently over 700 apparel stores exist as against around 250 a decade ago, according to Maharjan. “Till a couple of years ago, we mostly used to supply products to sellers of Kathmandu. But now we receive orders from across the country,” she said.
Katuwal, the president of Nepal National Traders' Federation says that Bhotebahal has become the largest area in terms of producing and distributing low-cost RMGs. "The manufacturers there produce a variety of RMGs including underwear, t-shirts, trousers, jackets, among others. Their production capacity varies from 200 to 3,000 pieces per day,” he mentioned. According to Katuwal, many residential houses have turned into factories and there are around 6,000-7,000 machines in use to manufacture RMGs.
Apparel manufacturers say that domestically produced garments currently hold 65 percent share of the low-priced segment of the Nepali RMG market. According to Lamichhane of Bhotebahal Garment Producers’ and Sellers’ Association, the locality has garment companies with investment starting from Rs 2 million to up to Rs 30 million. He estimates that a total of Rs 600 million has been invested in RMG factories of Bhotebahal and adjacent areas till date.
The rise of Bhotebahal as a low-cost garment production hub can be linked to the decline of the export-oriented Nepali RMG industry. The industry which saw a massive growth in the 1990s went on a steep decline after the United States scrapped the duty-free, quota-free access in January 2005. This dealt a severe blow to Nepali garment producers, who were already facing problems from trade unions, Maoist insurgency and short supply of electricity, as the US was the most important market to them, which used to consume around 80 percent of their products. This led to closure of many RMG companies. "But some kept on producing in smaller volumes for the export markets and some changed their business modality by targeting local customers,” said Lamichhane, adding, “This helped places like Bhotebahal to become a production hub of low-cost garments.”
According to Katuwal, many Indian tailors and workers, who previously worked at Nepali export-oriented RMG companies, started their own garment factories in late 2000s. Later, some of the Nepalis engaged in the business joined the bandwagon. According to Bhotebahal Garment Producers’ and Sellers’ Association, more than 5,000 individuals are employed by garment factories and stores of Bhotebahal. Katuwal informs that more than 70 percent of the individuals involved are Indian nationals.
Maharjan runs a medium-size factory and has employed 50 workers, most of whom are Indian nationals. She said that a staff working in her factory as a ‘thread cutter’ can earn as much as Rs 15,000 per month, whereas those working as ‘folders’ can generate up to Rs 150,000 monthly as per their skills, experience, and work load they can handle. “Most of the high earners are from India. The market of low-cost garments is growing significantly, but it is Indian nationals who have profited the most from this boom," shares Katuwal.
The factories import most of the raw materials such as fabrics, threads, elastics and cardboard from China, India and Bangladesh. Producers say that the price of the raw materials has increased lately which has squeezed profit margins. According to Maharjan, prices of all RMG items have increased with the rising cost of production and transportation charges. "The price of elastics has risen from Rs 220 to 245 per roll, packaging plastic from Rs 20 to 25 per kg and the cost of fabric to produce a t-shirt by Rs 30. Lately, we are facing a shortage of raw materials and our sales have lately started to decline," she adds.
Katuwal said that that the government needs to support the garment entrepreneurs which would make their business sustainable in the long run. “We have already submitted suggestions to the government to reduce import duties on raw materials and help find ways to lower transportation costs,” he informed.