Global Fashion Giants Hold Back on Nepal Plans Amid Uncertainty
In a surprising turn of events, the fashion industry's global giants are pausing their expansion plans in Nepal, citing the political turmoil following the violent protests by Gen Z activists in September. This development has left many in the industry perplexed, as it could potentially disrupt the country's burgeoning textile and garment sector.
The Garment Association of Nepal's president, Pashupati Dev Pandey, expressed concern over the sudden halt in investment. "Potential investors are hesitant and unsure about the future after the recent unrest," he said. The protests, which led to the burning of several luxury hotels in Kathmandu, have raised security concerns and cast a shadow of doubt over the country's stability.
The situation is further complicated by ongoing trade negotiations between India and the US. If the talks result in a favorable outcome for India, international clothing brands might opt to explore other markets instead of Nepal. The proposed deal could significantly reduce US tariffs on Indian exports, making it an attractive option for manufacturers.
Before the protests, some Nepali businesses had hoped that global brands like GAP, Puma, Nike, and Zara would shift part of their production to Nepal due to the heavy tariffs imposed by the US on Indian goods. The US tariffs, which stood at 50% on various products, including textiles and apparel, made Nepal an appealing alternative for manufacturers.
However, the recent political instability has caused a shift in strategy. Nepali manufacturers now believe that if the US and India fail to reach a tariff agreement, American buyers might turn to Nepal as a more competitive option. The demand for ready-made garments in the US is expected to rise due to the tariff hike, and domestic producers are investing in expanding their capacity.
But the challenges don't end there. The industry is also grappling with the issue of transhipment, where goods are rerouted through third countries to bypass tariffs. The US has warned of strict penalties for such practices, and Nepal currently lacks a clear legal policy on this matter. Indian gold jewelry producers, however, are showing interest in exploring the Nepali market post-tariff hike.
Arjun Rasaili, president of the Federation of Nepal Gold and Silver Dealers Association, revealed that some Indian jewelry makers have inquired about the market, but no concrete decisions have been made yet. The exports of silver jewelry from Nepal increased by 29.35% in the first three months of the current fiscal year, while gold jewelry exports rose by 16.70%.
As the fashion industry navigates this uncertain terrain, the future of Nepal's textile and garment sector hangs in the balance. Will global brands find a way to overcome the current hurdles, or will this be a setback for the country's economic growth?
