VZCZCXYZ0000
OO RUEHWEB

DE RUEHKT #2637/01 2730944
ZNR UUUUU ZZH
O 300944Z SEP 06
FM AMEMBASSY KATHMANDU
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3329
INFO RUEHBJ/AMEMBASSY BEIJING PRIORITY 4837
RUEHLM/AMEMBASSY COLOMBO PRIORITY 5066
RUEHKA/AMEMBASSY DHAKA PRIORITY 0217
RUEHIL/AMEMBASSY ISLAMABAD PRIORITY 3064
RUEHLO/AMEMBASSY LONDON PRIORITY 4460
RUEHNE/AMEMBASSY NEW DELHI PRIORITY 0299
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY

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