A shortage of raw materials has prevented Nepali clothing makers from ramping up production just when the field is wide open because of the absence of imported products, traders said.

After inflation slowed imports and China also slashed shipments, Nepali apparel manufacturers had hoped to cash in on the lack of competition, but they were held back by a shortage of raw materials.

Insiders say the government is also partly to blame for the missed opportunity as it has not been helping start-ups to grow.

Imported winter clothes have become costlier due to a strong dollar, higher transportation costs and slowed deliveries from China. Consumers say they haven't seen steep price tags like these before.

Sandhya Pokharel, a student from Butwal, was at New Road last Saturday to buy a jacket. She said she was shocked after looking at the price tags.

“I was not aware that jacket prices had doubled,” said Pokharel. “A decent down jacket now costs more than Rs4,000.”

Pokharel then checked out the showrooms of Nepali brands like KTM CTY and Sonam. But she found the prices still too high for her budget. She wandered around Asan bazaar and finally settled on a hoodie for Rs1,300.

Nepali start-ups like LOGO, FiBRO and Aroan, besides established brands like Sonam Gears, Kalapatthar and KTM CTY, have been pulling in winter shoppers as Chinese products are in short supply, but they lack adequate inventory to fulfil demand.

The Post talked to several Nepali manufacturers who have been creating waves lately.

The drop in Chinese imports was a big sales opportunity for them, they said, but the shortage of raw materials, which too are sourced from China, prevented them from ramping up production.

“Business is going through a rough patch,” said Suraj Raj Pandey, chief executive officer of FiBRO, which launched in 2019.

The import of raw materials from China was halted after the Covid pandemic. Then the Nepal government announced a 100 percent margin amount requirement to open a letter of credit, which made things more difficult for importers.

A scarcity of skilled manpower, caused by mass departures to greener pastures abroad, is another problem troubling apparel manufacturers in Nepal.

“We have factory workers coming from India, but it's very difficult to retain them,” said Pandey. “First, the raw materials are not coming, and there is no manpower. So, we haven’t been manufacturing jackets for months.”

FiBRO once employed 15 workers, but now its labour force is down to six.

"Demand for Nepali brand jackets is rising," he said. FiBRO sold a record 1,000 jackets last winter. This year, sales have plunged to an all-time low.

The company makes unisex fleece jackets that cost Rs3,300, fur jackets priced at Rs2,420 and winter padded jackets priced at Rs5,100.

“Chinese jackets are hard to come by. Nepali jacket manufacturers are operating at below capacity because they can't get raw materials from China,” said Pandey. “We are seeing increased demand from customers, but we don't have enough raw materials to fulfil the orders.”

Pandey said that only a few large players had been successful in importing raw materials from China.

"The government did not care about manufacturers, access to the international market was blocked, banks suffered a liquidity crisis and did not issue credit to manufacturers, and the government imposed 100 percent margin amount requirement to open a letter of credit," said Pandey.

LOGO Fashion Industries, which once manufactured apparels for European brands, has been looking towards Nepali customers. The company says the raw material shortage did not affect it much, but it has been hurt by inflation.

“Prices of yarn and fabric are going up every day in the international market. Materials are 20 to 30 percent dearer than last year. On top of that, we are paying 18 to 30 percent tax to the government,” said Sonam Moktan, director of the company. "All these added costs have made goods expensive in the domestic market."

The government's taxation policy too has been hurting the growth of apparel manufacturers, industry insiders said.

LOGO makes fleece and quilted jackets and long coats besides other lifestyle products. Its jacket prices range from Rs3,000 to Rs6,000.

“Our products are affordable, but people have a very narrow perception regarding Nepali brands,” said Moktan. “If the price is low, they become sceptical; and if it is high, they don’t buy.”

LOGO was established in 1997 and once employed more than 500 workers. The Maoist insurgency forced it to close its factory in 2002 and move production to Dubai, Malta and Vietnam.

The company returned to Nepal in 2015 and opened its first outlet at Jhamsikhel in 2016. The company now employs around 80 workers at its factory.

LOGO gets its raw materials from Taiwan, Korea, China and India. “Because of our diversified sources of raw materials, we did not suffer a shortage,” according to Moktan.

Nepali clothing brand Aroan was also slowed by a raw material shortage. Founded by Rijesh Shrestha and Kripa Joshi in 2018, the company initially produced trekking gear.

Aroan began manufacturing jackets in 2020. It makes down, synthetic and fleece jackets which cost between Rs3,000 and Rs10,500.

Last winter, its sales surged to Rs4 million. But this year, a shortage of raw materials has forced it to cut output. The company gets around 70 percent of its raw materials from China and the rest from Japan.

“Before Dashain, we faced an acute shortage of raw materials. The shortage persists,” said Shrestha. “When we started manufacturing two years ago, our products were relatively affordable. Now they are very expensive,” he said.

In the last two years, the price of fabrics has increased by around 25 percent and zippers have become 40 percent dearer, according to Shrestha. “Things are not in our hands. Due to the cost of raw materials, prices have gone up.”

Nepali brands are being confronted by another problem in the form of counterfeit products.

"Customers complain why Nepali goods cost so much when North Face and Adidas jackets are available for Rs2,000 to Rs6,000," said Kripa Joshi, co-founder of Aroan.

“People hardly know that they are counterfeit products.”

The company is worried about the liquidity crisis and scarcity of labourers, but it is optimistic about the future of Nepali jacket brands.

“If you view Instagram, you see a new Nepali brand popping up almost every day, which is a very good sign for our ecosystem. Customers are becoming conscious about brand and product quality, and this makes us very excited about the future,” added Joshi.

The prices of winter clothes have become exorbitant this season, say traders.

Jeevan Achhami, proprietor of Pahiran, a clothing store at New Road Gate, says that it is normal for prices to go up every year, but this year business has gone haywire.

“This year, the price hike is steep. Jacket prices have gone up by Rs600 to Rs1,000 depending upon the design and quality of the material," said Achhami. “Sales have declined.”

Chetan Poudel, who owns a clothing store at Bhrikutimandap where customers come to look for all kinds of low-priced goods, echoed Achhami.

“Jackets have become costlier by 20 to 30 percent,” Poudel said. “The price of jackets that we sold for Rs4,000 last year has increased to Rs5,000 now.”