Global sourcing is being rewritten. Many brands need cost-stable, compliant capacity with shorter lead times and flexible MOQs. That is why more buyers are exploring ways to invest in Nepal garment manufacturing. Recent tariff adjustments in several competing markets have widened Nepal’s relative attractiveness for select product lines. When you add Special Economic Zone incentives, an experienced workforce, and improving inland logistics, the business case becomes compelling.
Several major garment origins have seen tariff surcharges or preference changes in recent periods. Nepal, by contrast, often sits at a comparatively favorable rate on many apparel lines, with some preferential entries available by HS code where program criteria are met. The result is a price window that rewards early movers.
Nepal’s apparel industry has cycled through growth and contraction. Many managers and line leaders still possess export experience with US and EU orders. That means scale-up is not starting from zero. With targeted training, balanced lines, and preventive maintenance, output can ramp quickly.
Concentration risk is board-level. Adding Nepal as a second or third node reduces exposure to single-country tariff and policy shocks. It also creates optionality for category-level assortment moves (e.g., fleece in Nepal, denim in Vietnam, basics in Bangladesh).
Proximity to India gives rapid access to fabrics, trims, needles, spares, and machinery technicians. Land routes shorten the reaction time for urgent replacements and allow hybrid fabric sourcing strategies.
Not every category is a match on day one. Nepal is strongest where value-added sewing quality, moderate line density, and agile MOQs matter.
Good initial fits
Knit basics: tees, polos, sweatshirts, fleece, lightweight hoodies
Cotton and cotton-rich bottoms: joggers, lounge, yoga, uniforms
Sweaters and cold-weather accessories: beanies, scarves, gloves
Headwear and cut-and-sew accessories: caps, balaclavas, simple bags
Athleisure with moderate technical features: panels, taping, zips
Later-phase fits (after line stabilization)
Light outerwear: shell jackets, windbreakers, softshells
Workwear and uniforms with bar-tacking and reinforcement
Fashion knitwear with specialty yarns and trims
Pack-away or compressible garments with specialized stitching
Less suitable initially
High-complexity woven outerwear with heavy seam-sealing and bonded seams
Very high volume, ultra-low-margin basics requiring massive vertical scale
The following highlights are for planning only. Confirm your requirements with counsel and local advisors.
Nepal’s Foreign Investment and Technology Transfer Act 2019 provides the core framework for foreign investment. It generally permits up to 100% foreign ownership in manufacturing, outlines technology transfer agreements, and specifies repatriation processes for profits and royalties. Align your legal wrapper (wholly owned enterprise or joint venture) with FITTA processes early to avoid re-papering.
Special Economic Zones offer customs and tax facilities to export-focused manufacturers. Typical benefits can include relief on duties and VAT for eligible inputs, simplified customs procedures, and in-zone infrastructure with utility coordination. Each zone has specific operational rules, export ratio expectations, and lease terms. Model the net benefit zone-by-zone before committing.
Nepal’s legal wage floor is reviewed periodically. The garment sector operates under the national labor framework that covers working hours, overtime, health and safety, and social security contributions. Most export-oriented factories follow audit regimes aligned to international buyer standards. Plan your social compliance roadmap early, including remediation timelines and worker voice mechanisms.
Nepal remains a UN-designated Least Developed Country until late 2026, after which certain preference regimes may evolve. Build multi-year contracts with adaptive duty language and HS-specific scenarios so your margin model remains resilient through policy changes.
Headline wages can be misleading. The number that matters is fully loaded direct labor cost per minute, including overtime norms, social charges, absenteeism allowance, training time, line efficiency, supervisor-to-operator ratios, and rework. Nepal’s loaded minute rate is competitive for small-to-mid volumes with moderate complexity. It is not designed to undercut ultra-low-cost mass production at enormous scale, and that is fine—its edge is in agility and quality with reasonable MOQs.
Practical tip: During factory trials, request historical efficiency on similar SKU complexity and insist on real-time minute-value tracking for your style. Compare minute-value, not just wages.
Nepal’s power situation is improving, with grid reliability up in key apparel clusters. Many units use backup generators or hybrid solar for critical lines. For ESG claims, consider:
Energy metering with machine-level sub-meters
ETP (effluent treatment) where wet-processes are used off-site
Chemical management aligned to ZDHC lists for any finishing partners
Light retrofits, compressed-air leak audits, and motor efficiency upgrades
The workhorse route is factory → Inland Clearance Point (e.g., Birgunj, Biratnagar, Bhairahawa) → Indian rail/road → Kolkata/Haldia port → ocean leg. Customs time has been trending lower with better documentation and broker discipline. You can shave days by:
Booking rail slots early during peak seasons
Using pre-arrival documentation and carton-level ASN discipline
Coordinating with your forwarder on container availability at inland points
Aligning factory dispatch windows with port cutoff calendars
For US East Coast, assume inland plus ocean plus destination drayage. Build two calendars: a target calendar and a resilience calendar with buffers for monsoon periods, public holidays, and port congestion. Nepal works well for replenishment models with forecast visibility and for programmatic basics where calendar adherence beats last-minute split deliveries.
| Factor | Nepal | Bangladesh | Vietnam | India |
|---|---|---|---|---|
| Tariff exposure into US (generalized) | Often favorable on many lines; verify by HS code | Moderate to higher on several lines; verify by HS | Typically stable MFN terms; verify by HS | Higher on multiple categories; verify by HS |
| Wage band (relative) | Competitive for agile MOQs | Very cost-efficient at scale | Moderate; rising in key zones | Widely variable by state |
| MOQ flexibility | Strong for small-to-mid runs | Strong at scale; some flexibility | Good, often with higher MOQs | Wide range by cluster |
| Compliance maturity | Solid, improving; brand-led upgrades common | Deep EPZ experience | Extensive; strong buyer ecosystems | Mature in major clusters |
| Power stability | Improving; backups common | Mature in key hubs | Strong | Strong |
| Logistics to port | Inland to Kolkata/Haldia; improving ICPs | Direct to seaports | Direct deep-sea access | Multiple deep-sea ports |
| Best-fit categories | Knit basics, fleece, headwear, sweaters, uniforms | Mass basics, denim, knit/woven programs | Outerwear, fashion programs, technical sportswear | Value-add, vertical blends, specialty fabrics |
Note: Always verify HS-specific duty, port schedules, zone rules, and wage updates for your exact lines.
Week 1–2: Strategy and tariff mapping
List target SKUs and map HS codes down to 8 or 10 digits, as required in your destination market.
Run three duty scenarios per SKU: current, downside (preference loss), upside (negotiated reduction).
Define your category intent: basics, fleece, accessories, uniforms, athleisure.
Select two demand models: program replenishment and seasonal launch.
Choose target landed-cost thresholds and margin guardrails.
Week 2–4: Partner longlist and pre-qualification
6) Build a longlist of 10–12 factories across Kathmandu, Biratnagar, Itahari, and nearby clusters.
7) Request data: capacity by line, needle policy, AQL performance, rework percentage, absenteeism, lead time history, utility profile, audit certifications, social compliance remediation logs.
8) Score partners on a 100-point matrix covering capacity, quality, compliance, maintenance, and management depth.
9) Shortlist 6–8 sites for virtual walkthroughs focusing on line balancing and bottleneck areas (collar attach, cuff closing, waistband attach, tape application).
Week 3–5: Costing and pilot prep
10) Build a fully loaded costing model: fabric, trims, CM minute rate, overheads, utilities, inland freight, port, ocean, destination, and duty.
11) Run a sensitivity analysis: ±10% on fabric, ±15% on inland, ±5 days on lead time.
12) Define packaging: carton strength, polybag specs, dunnage limits, and labeling that meets DC requirements.
13) Lock QC standards: inline checkpoints, end-of-line AQL, carton audit, and metal detection if required.
Week 4–6: On-site due diligence
14) Visit top 3–5 candidates. Observe production meetings, changeover times, SMV calculations, sample room throughput, and preventive maintenance boards.
15) Verify operator skill matrices and the training cadence for new styles.
16) Confirm power backup capacity and generator maintenance logs.
17) Review payroll and timekeeping systems for worker welfare and audit integrity.
Week 6–7: Legal wrapper and banking
18) Choose a JV or wholly owned structure aligned to the national FDI framework.
19) Prepare application packs for investment approval, technology transfer agreements, and any sectoral registrations.
20) Open local bank accounts and set up repatriation workflows and foreign currency management.
Week 6–8: Zone decision and lease
21) Compare in-zone versus out-of-zone on net benefits: duty/VAT reliefs, rent, utilities, customs facilitation, export ratio expectations, and workforce access.
22) Secure a letter of intent or lease and map utility readiness dates.
23) Pre-book any equipment or line retrofits.
Week 7–9: Logistics design
24) Select a forwarder with proven inland corridor performance.
25) Reserve rail slots where applicable and define fallback routings.
26) Implement carton-level ASN and EDI with your DC.
27) Agree on KPI dashboards: ICP dwell, rail dwell, port dwell, on-time vessel departure, and on-time arrival.
Week 8–10: Pilot production
28) Launch 2–3 SKUs at 2–5k units each.
29) Require golden size sets, PP approvals, and sealed sample libraries.
30) Run a full origin documentation rehearsal: fabric invoices, cutting tickets, stitch count records, payroll logs for the production window, and serialization if used.
31) Record minute-value and quality losses; implement corrective actions.
Week 10–12: Scale plan
32) If pilots meet standards, commit 15–25% of category volume for the next season.
33) Add a second supplier for dual-sourcing resilience.
34) Negotiate duty-change clauses and mechanism for recalibrating prices post-preference shifts.
35) Draft a training calendar for advanced categories (light outerwear, uniform variants).
HS code matrix per SKU with present duty and at-risk preference notes
Factory scorecards covering capacity, efficiency, AQL, and remediation plans
FITDI/FDI filings, technology transfer drafts, and banking setup for repatriation
SEZ vs non-SEZ net benefit comparison and lease readiness
Inland corridor plan with broker mandates and ICP booking protocols
Origin integrity pack: fabric and yarn invoices, cut-and-sew logs, operator payroll records, serialized carton mapping
Risk register: tariff shifts, rail dwell, monsoon periods, power disruptions, industrial action
ESG plan: energy metering, ETP for wet partners, ZDHC alignment, worker voice channels
Experience & Expertise
Show that your team understands South Asian manufacturing rhythms. Publish your cost engineering assumptions, line-efficiency targets, and changeover playbooks. Document pilot learnings and demonstrate continuous improvement.
Authoritativeness
Reference applicable statutes in your compliance manual: the national foreign investment law for ownership and repatriation, the SEZ framework for export-oriented units, labor and health-and-safety codes for worker welfare. Maintain a library of test reports, needle-policy records, and maintenance logs.
Trustworthiness
Operate with transparent wage documentation and grievance redressal channels. Keep buyer scorecards visible on the production floor. Share on-time delivery and quality metrics with your partners.
Source notes (non-clickable, for internal use):
National FDI framework enacted in 2019 (widely recognized as the current backbone for manufacturing FDI)
Special Economic Zone legislation and practice notes for export-oriented units
Labor law and minimum-wage notifications updated periodically by competent authorities
UN timetable for LDC graduation indicating transition late-2026
Public reporting and industry commentary on recent tariff adjustments in major markets
(Confirm all details with counsel and the latest official notifications before finalizing contracts.)
Global buyers and customs authorities scrutinize origin. Maintain:
Yarn and fabric commercial documents tied to cutting tickets
Time-stamped cut, make, and trim records
Payroll logs for operators assigned to the production window
Carton serialization linked to work orders and QC sign-offs
Independent audit trails for any subcontracted process
Export quality is a capability, not a promise. Embed:
Inline QC at critical operations (collar attach, pocket attach, waistband)
End-of-line AQL, carton audit, and metal detection if product-appropriate
Preventive maintenance logs and spare parts inventory
Skill matrices per operation and refresh training after style changeovers
Build retention with fair scheduling, transparent pay slips, and safe conditions. Offer internal upskilling and line-leader pathways. Buyers reward factories that avoid churn and maintain stable, trained teams.
FOB with performance KPIs
Factories manage materials, you approve mills and trims. Use service-level KPIs for on-time delivery, AQL pass rates, and corrective-action closure times.
FOB plus nominated mills
You lock fabric quality with nominated mills; the factory sources trims. Good for consistency across regions without heavy VMI overhead.
CMT transitioning to FOB
Start with CMT to establish workmanship and calendars. Transition to FOB once trust and material control processes are mature.
Dual supplier model
Split volume across two suppliers. Use a shared scorecard to maintain friendly competition and resilience.
SMV and minute value: True sewing time plus allowances
Changeover cost: Minutes lost per style change and learning curve duration
Rework and repair: Percentage and root causes
Inline rejects vs end-of-line rejects: Early detection saves time
Inland logistics cost per carton: Split by factory-to-ICP, ICP dwell, rail dwell
On-time vessel departure: Leading indicator for on-time DC arrival
Basics and fleece first. Focus on tees, sweats, joggers, and headwear. Validate calendars, QA, and origin documentation.
Uniforms next. Add bar-tack operations, reinforcement stitches, and consistent size spec adherence.
Light outerwear. Introduce seam tolerance controls, tape application, and zipper consistency checks.
Fashion knitwear. Train on specialty yarn handling and finishing.
Program consolidation. Lock annual programs with rolling forecasts and VMI options for trims.
Golden sample library signed by both sides
PP meeting minutes with unresolved points closed before bulk
Line balance chart with observed vs target efficiency within 5%
Inline QC pass rates meeting thresholds for three consecutive days
End-of-line AQL at or above contracted level
Full origin documentation bundle reviewed without material findings
On-time vessel departure on the first pilot shipment
1) Why invest in Nepal garment production now?
Tariff realignments and shifting preferences have opened a favorable window. Nepal combines competitive landed cost potential, agile MOQs, and improving logistics. It is ideal for basics, fleece, headwear, uniforms, and moderate-complexity categories.
2) Is Nepal suitable for large, fast-fashion volumes?
Start with phased volumes. Nepal scales well for program basics and replenishment. For ultra-large, ultra-low-margin runs, blend Nepal with a high-scale hub as a hedge.
3) What is the best entry model: JV or wholly owned?
Both work. Choose based on governance comfort, speed, and local relationship depth. Align the structure with the national foreign investment framework and repatriation rules from the outset.
4) How do wages compare with other hubs?
Headline wages differ by country and region. What matters is the loaded minute rate and actual line efficiency for your SKU. Benchmark factories on minute value, changeover time, and rework—not wages alone.
5) How can we avoid origin and transshipment issues?
Maintain a strict documentation chain: yarn and fabric invoices, cut tickets, payroll logs, and carton serialization. Audit subcontractors and keep independent trails. Train staff on customs evidence requirements.