KATHMANDU: The Nepali Army (NA) has recently begun trial production with the objective of bringing the long-ailing Hetauda Textile Industry back into operation.
A task force led by Ministry of Industry, Commerce and Supplies Joint Secretary Rambandhu Subedi has also submitted recommendations to the government on possible operational models and the policy framework required to revive the industry.
However, questions remain over whether the state-owned industry, which was shut down during the period of economic liberalization and global capitalist reforms, can be successfully operated again in today’s highly globalized market environment. Many privately run industries in Nepal were also forced to close during the same period.
In this context, here is an edited excerpt from a conversation with Pashupati Dev Pandey, chairman of the Nepal Readymade Garment Industry Association.
What is the current condition of Nepal’s readymade garment industry?
The readymade garment industry is currently the second-largest exporter to third-country markets, after carpets. If palm oil and soybean oil are included in overall export figures, the garment sector ranks fourth or fifth.
At present, the industry’s export volume is around Rs 11.5 billion. Before 2005, Nepal exported garments worth about USD 400 million in a single year. At that time, there were around 1,300 direct exporting factories and about 1,600 industries in operation.
After 2005, the number of operating industries fell sharply to around 15 to 20. The sector has gradually recovered since then, and currently around 200 garment industries are in operation.
How is the management of the raw materials required for these industries?
Recently, some good-quality raw materials have also started being used in Nepal. Most of the yarn is imported and used to manufacture garments. Around 40 percent of the fabric produced in Bhaktapur and Lubhu is consumed domestically.
Apart from that, about 60 percent of the fabric is imported from countries such as China, Thailand, South Korea, India, and Bangladesh, and is then processed into garments in Nepal for export.
So, is the availability of local raw materials very low?
The environment in our country is highly favorable for producing textile raw materials. Fibers can be extracted from many plants found in forests, and fabrics can even be made from plants such as agarwood and okra. However, we have not been able to develop these possibilities.
We have abandoned activities such as cotton farming and sericulture. These sectors were removed from policy priorities and budget allocations. As a result, since we are not self-sufficient in raw materials, we have to depend on imports for garment production. The actual share of local raw materials is probably only five to ten percent.
In fact, we may have better potential than Bangladesh. The environment there is not as fertile as ours. We have resources such as nettle, hemp, bamboo, and many other natural fibers. In the Himalayan region, there used to be a step-by-step grazing policy linked to sheep farming, but that no longer exists. Previous governments failed to continue it. It seems the current government has started taking this issue more seriously.
What kind of technology are Nepali industries using?
We produce garments according to the customer’s design and size requirements, and we also manufacture for the domestic market. Technology evolves according to demand. The technology currently being used is quite good.
If, for example, we begin receiving orders for specialized mountaineering garments, we will need different technology. Technology changes according to customer needs.
Recently, we have been adopting automation and energy-efficient systems to reduce electricity consumption. We do not see any difficulty in upgrading to newer technology in the future. The current technology is adequate, and our skilled workforce is a major strength. Products made by Nepali hands have good demand in the international market.
When international buyers place orders, they usually distribute samples to manufacturers in China, India, Vietnam, Bangladesh, and Nepal. The kind of semi-handmade, colorful products often seen in Thamel, which we call “semi-hippie” products, is an area where Nepal is among the best in the world. India also produces such items, but very few other countries do.
Since you work on the basis of orders, does that mean the market is relatively secure?
The market is not the main problem. However, we have to participate in exhibitions abroad, and products should be competitively priced. Changes in laws and the lack of adequate incentives have increased our costs, especially logistics costs.
A significant amount of business is now based on relationships and networks. Members of the Nepali diaspora are also starting businesses abroad. They import products from Nepal as well as from other countries, but they tend to give priority to Nepali products. The diaspora has become one of the main reasons for the survival of this industry, and the state should encourage this trend.
How is the domestic market for your products?
The domestic market is good. The biggest problems are brand copying and intellectual property rights violations. Another major challenge is illegal imports. If these two issues are properly addressed, the domestic market can perform much better.
What is the profit situation? Are all garment industries profitable?
This is a highly profitable industry. It is labor-intensive, production cycles are relatively short, and profits are generated quickly, even if the margins are not very large.
Smaller operators may sometimes face difficulties, but it would be wrong to say that the industry as a whole is running at a loss. After the food sector, this is one of the largest sectors of the economy.
The government has now started a production test to revive the Hetauda Textile Industry, and the Nepali Army has been given responsibility for it. Is it possible to bring that industry back into operation?
The government itself is not going to run the industry. For the past four years, our association has repeatedly submitted documents to the ministry proposing that the industry should be operated through our organization. We have had some coordination with the government, and we are still very excited about the possibility.
This is a task that must be carried out. Such industries are needed in all seven provinces. The Prime Minister himself has taken the initiative and activated the Ministry of Industry to move the process forward. He has also shown interest in reviving the Butwal Yarn Factory, which is a very welcome development.
However, instead of the government directly engaging in business operations, the private sector should be involved through a public-private partnership (PPP) model to produce textiles, fabrics, and ready-made garments.
Uniforms and clothing for the army, police, prisoners, hospitals, civil servants, and students could be produced there. In my view, domestic demand could reach around 900 million to 1 billion meters of fabric annually. We also have access to neighboring markets.
At present, many multinational companies are increasingly focusing on garments made from natural, plant-based, and animal-based fibers. Nepal has enormous potential in this area.
If production is carried out using modern technology, multinational companies could place orders a year in advance. In countries such as New Zealand, sheep and wool farming are becoming less profitable because of high costs. Some of that investment could be attracted to Nepal, where farmers could earn more from selling wool than from selling meat.
With the Butwal Yarn Factory closed and the Cotton Farming Development Committee being dissolved, shouldn’t the government first rebuild the ecosystem before reviving the Hetauda Textile Industry?
Fibers can be extracted from many trees and plants found across the Himalayas, hills, and Terai from east to west. By processing these resources and producing yarn domestically, Nepal can gradually become self-reliant in raw materials. For that, a complete ecosystem is required.
For example, yarn factories are needed, and raw materials must be collected from farmers or produced through organized cultivation.
Once the legal framework is established, collection can begin at the ward level, move to municipalities, and then reach central processing facilities. The law must come first. After that, wards need to be activated, municipalities must organize collection and processing, and the materials can then be supplied to larger industrial centers.
Is it possible to implement this through the government system?
The government must work in partnership with the private sector. Initially, a system for purchasing and collecting raw materials should be created at the ward level. The collected materials can then be transported to municipalities where the necessary processing technology is available.
Spinning and yarn production are more suitable for the Terai belt because of better road access and infrastructure.
After fiber extraction, even the waste generated during processing can be used to produce other products, including fuel-type briquettes. A structured collection system should be developed, moving materials from wards to municipalities and then to processing centers.
The private sector must also participate actively in this chain. It should pay farmers for the fiber and help create a sustainable market. The government may support collection in the initial stage, but it cannot continue to do so indefinitely.
The government has not yet included the programs you mentioned in its policy, programs, or budget. Does that mean they are not immediately possible?
They have not been included yet, but they are still possible. The budget can be revised through the provisions of the Economic Act. When I met the Finance Minister recently, he was also referring to that possibility.
Before launching such programs, the necessary infrastructure must be prepared. Awareness at the municipal and village levels can be created within a few days if the government is serious. Even the forest-related laws may need to be amended to support this process.
Chinese products currently dominate the global market. In such a situation, can Nepal compete by producing garments?
We can definitely compete in raw materials. Even if we are not fully competitive in finished garments tomorrow, we can still export processed fiber. China and India are huge markets located very close to us.
Regarding garments, we have also told the Prime Minister that if Nepal can persuade the United States to restore duty-free access for four of our products under the free trade arrangement that existed before 2005, the industry could make significant progress.
In the current global market, is it realistic for the government or the Nepali Army to operate such an industry under a state ownership model?
No, the Army is not operating it at the moment. However, the Army can help initiate the process. The government can treat it as a pilot project.
I think we should view this positively. It is a major opportunity. A government with a strong parliamentary majority may first test the feasibility of the project before handing it over to the private sector if it proves viable.
The state should act as a guardian. A guardian should not directly compete with or displace its own private sector. It should first examine all aspects of feasibility, create the enabling environment, and then transfer operations to capable private actors.
In fact, it was our association that first requested that the industry be revived through private sector participation.
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