If Nepal’s garment industry can tap even 0.05 per cent of the potential $200 billion US market, the country’s readymade garment exports can exceed a billion dollars. However, Nepal can compete in the global market by diversifying away from the US and producing small quantities of customised and specialised products with higher profit margins to cover higher costs. In the past, the United States, with the introduction of duty-free, quota-free access to some 66 items, was the largest market for Nepal’s garment industry.
Compared to Bangladesh or Ethiopia, Nepal has a much higher minimum wage and transport lead time, and policies are much more export-friendly in those countries compared to Nepal. The meteoric rise of Nepal’s garment industry was brought about by the interplay of various factors, both domestic and foreign. The much-needed boost came at a time when garment-exporting industries in Asia were hit by the quota system imposed by importers in Europe and America. This coincided with rising labor costs in garment exporting countries undermining their low cost advantage. Producers were forced to look for alternative, cheaper locations. Hence, Nepal emerged as a relocation site, especially for Indian producers who had already hit the quota ceiling.