The United States will allow duty-free access to Nepalese readymade garments until 2025. In addition, the US will provide economic as well as technical assistance to Nepal’s garment sector, which would in turn improve the competitiveness of its garments in the global market. Until now, the US had been imposing a 16 to 17 per cent duty on Nepalese garments.
The preferential market access provides Nepal an opportunity to increase its garment exports. The new duty-free access to the US apparel and textile market is expected to revive the dying garment companies of Nepal. The Nepalese garment industry was a flourishing industry but it saw a drastic decline since the quota system ended in 2005. Garment exports dropped from an all time high of Rs 13 billion in 2000-1 to Rs 5.28 billion in 2014-15. Most readymade garment factories closed down leaving only about 50 in business today. There were 400 in 2001.
The major drawback of Nepal’s garment industry is its cost of transportation that increases the price of the product and makes it difficult to compete with other countries such as Bangladesh that produce garments at cheaper prices. Taxes on imported raw materials are very high. There is a problem of erratic power supply.