PM Shah pledges revival of Nepal's garment sector, orders new development council

Prime Minister Pushpa Kamal Dahal, popularly known as Shah, announced a government‑led initiative to revive Nepal’s ailing garment sector, directing the formation of a Garment Development Council and promising financial and policy support.

Core developments

According to The Himalayan Times, the prime minister instructed the Ministry of Industry, Commerce and Supplies to set up a development council tasked with diagnosing bottlenecks, streamlining regulations, and coordinating assistance for manufacturers. The council will bring together representatives from the Ministry, industry bodies, exporters, and labour organisations to draft a recovery roadmap.

Nepalnews.com echoed the announcement, noting that Shah emphasized the garment industry’s importance for job creation and export earnings. He described the sector as “vital for Nepal’s economic diversification” and signaled that the government would allocate resources to improve infrastructure, facilitate access to credit, and promote skill development.

The prime minister’s statements came after a series of meetings with industry leaders in Kathmandu, where concerns were raised about rising production costs, limited market access, and the lingering effects of the COVID‑19 pandemic on order books. Shah’s directive includes a mandate to explore incentives for modernising factories, adopting eco‑friendly practices, and enhancing compliance with international labour standards.

Why it matters

Nepal’s garment sector has traditionally been a key driver of employment, especially for women in the Terai region, and a sizeable contributor to the country’s export basket. The industry’s slowdown over the past two years has led to factory closures, layoffs, and a contraction in export volumes, threatening both household incomes and foreign‑exchange earnings.

Revitalising the sector could address several macro‑economic challenges. First, it would help narrow the trade deficit by boosting export receipts. Second, a healthier garment industry would create stable, decent‑wage jobs, reducing the reliance on seasonal agricultural work and informal labour. Third, by encouraging modern production techniques and sustainability certifications, Nepal could position itself as a competitive supplier in niche markets that value ethical sourcing, potentially attracting buyers from the European Union and United States.

The formation of a dedicated council signals a shift from ad‑hoc assistance to a structured, policy‑driven approach. It also aligns with the government’s broader “Industrial Growth and Employment” agenda, which aims to diversify the economy beyond tourism and remittances.

Differing viewpoints and reactions

Industry representatives welcomed the prime minister’s commitment but cautioned that implementation will be the true test. The Nepal Garment Manufacturers Association, speaking to The Himalayan Times, urged the council to prioritize fast‑track approval of loan facilities and to address the chronic shortage of reliable electricity, which currently inflates production costs.

Labour unions, while supportive of any measures that safeguard jobs, expressed concern that incentives for manufacturers should be balanced with strict enforcement of workers’ rights. A spokesperson for the Federation of Nepalese Trade Unions, cited by Nepalnews.com, warned that “without robust monitoring, incentives could lead to a race‑to‑the‑bottom on wages and safety standards.”

Economic analysts offered a mixed assessment. Dr. Sudip Shrestha of Tribhuvan University noted that the council’s success will hinge on coordinated action across ministries and on the government’s willingness to allocate budgetary resources amid competing fiscal priorities. He also highlighted that neighbouring Bangladesh’s garment boom was driven by large‑scale investment and export‑oriented policies, suggesting that Nepal may need to adopt a similarly aggressive stance to reclaim market share.

Conversely, a senior official from the Ministry of Industry, quoted in Nepalnews.com, stressed that the council will focus on “practical, low‑cost interventions” such as simplifying customs procedures and facilitating bulk procurement of raw materials, rather than large capital outlays.

What’s next

The Garment Development Council is slated to convene its inaugural meeting within the next 30 days, where it will draft a detailed action plan and set short‑term targets for production capacity, export volumes, and employment. The prime minister has indicated that progress reports will be presented to the cabinet on a quarterly basis.

In parallel, the Ministry plans to launch a series of workshops for factory owners on compliance with international standards and on accessing export credit schemes. A pilot financing program, reportedly backed by the Nepal Rastra Bank, is expected to roll out later this quarter, offering low‑interest loans to eligible garment exporters.

Stakeholders will be watching closely for concrete policy instruments, such as tax holidays, duty waivers on imported machinery, and subsidies for renewable energy installations. The council’s ability to deliver on these promises will determine whether the garment sector can rebound quickly enough to offset the losses incurred during the pandemic and to contribute meaningfully to Nepal’s broader economic recovery.