Garment production shifting overseas

Garment production shifting overseas
eKantipur.com, 28-May-2007
BY MILAN MANI SHARMA

Citing fragile security situation as one of the main obstacles for industrial operation, some half a dozen leading garment manufacturers have shifted their manufacturing base to foreign lands to retain their main clients.

The manufacturers that have pulled down the shutters due to labor strike have entered in a manufacturing deal with Indian, Sri Lankan and Vietnamese factories and are fulfilling their orders from there, an official of Garment Association - Nepal (GAN) said.

“Volume of such export is estimated to stand close to one-fifth of the export made through factories in Nepal,” said the source.

If GAN's estimates mean anything, then the figure of export through such overseas bases goes more than US$ 500,000. Moreover, such shifting of base has gobbled up jobs of some 3,000 Nepali workers.

Labor stir and industrial insecurity, besides eroding competitiveness have badly hit the Nepali readymade garment industry, reducing the employment in the industry down to 15,000 from 30,000 over the last couple of year.

“Incoming of those diverted production could have generated employment for thousands, but the fact is: it is the labor stalemate that has resulted in such an action,” GAN president, Kiran Saakha told the Post.

Entrepreneurs, however, preferred not to discuss about it openly lest that might attract authorities' attention -- as the act can be interpreted as investing overseas, which is prohibited by laws -- and draw trade unions' ire. Concerned government officials expressed their awareness on the matter. “But rather than addressing the problem that has caused people to lose jobs, they have prefer to maintain silence,” charged Saakha.

The saga of shifting the base started when labor stir forced some half a dozen companies, including leading ones, to pull down their shutters last year; and over a month-long terai unrest this year posed a threat to exporters of losing clients due to failure in meeting delivery schedule.

Such a situation mainly threatened entrepreneurs of losing orders permanently, said Uday Raj Pandey, general secretary of GAN, adding “In such a situation, there was no alternative but to fulfill orders by requesting manufacturers outside the country to help.”

Proprietor of Sirin Garment, Pandey accepted he himself fulfilled the delivery order by tying up the manufacturing deal with a party in India. “Since the situation in the industry still remains bad, the trend has come to stay,” he stated.

“Ours is a long-term business deal. No exporter wishes to lose his buyer, especially when rising competition has rendered buyers difficult to come by,” said an entrepreneur who has tied up the manufacturing deal with an Indian manufacturer in Hyderabad.

He said his decision to shifting the base and hammering out a deal with factories outside the country was not easy. “The hassle is too much and we also have to compromise on profit margin,” said he.

Given the situation, Pandey said that general mindset of such manufacturers was to resume manufacturing the orders from their own factory in Nepal.

However, amid latest ultimatum of trade unions to absorb all the workers and hike wages, which they fear would ignite fresh round of labor stir, manufacturers said they seriously doubt their chances of meeting delivery deadline yet again.