Supporting value addition and export growth in Nepal’s pashmina sector

The challenge

Even when they produce raw materials for products that command high prices in global markets, agricultural communities in developing countries frequently capture only a small share of the gains.

Pashmina, a particularly fine type of cashmere wool that is prized in global fashion for its softness and warmth, comes from four related breeds of goats in the Himalayas. Nepal is renowned in the luxury market for its high-quality pashmina wool. The fine fibres that come from its chyangra mountain goat are particularly well regarded.

However, the sector has been volatile. After peaking at $82 million in 2001, Nepal’s pashmina exports fell to $30 million in 2010, in part due to competition from lower-quality imitation products. As competitive pressures on the sector mounted, the country’s longstanding reputation as a trusted source for high-quality pashmina products suffered.

The Government of Nepal and the Nepal Pashmina Industries Association (NPIA) recognized that concerted action was needed to regain market share and restore export revenues and the sector’s reputation. This required Nepal to re-position itself in the market, targeting high-value luxury segments. Thriving in these niche markets has the potential to be lucrative for Nepalese pashmina producers but requires them to be able to provide high-quality, unique products together with exceptional service to buyers.

The response

ITC has since 2013 been working with the Nepal Ministry of Commerce, Industry and Supplies, the NPIA, selected pashmina producers and other stakeholders in the sector to design and deliver interventions across the value chain to stimulate both export revenues and product and market diversification.

To remedy one important competitiveness gap for Nepal’s pashmina industry, ITC supported the development of branding and a trademark for Chyangra Pashmina to distinguish the product on international markets from lower-quality competitors. The Chyangra Pashmina brand was backed by marketing materials, a website, a promotional film and a social media promotion campaign in Japan and the United States.

ITC supported the NPIA to develop its business and service portfolio to better respond to the needs of its clients. It brought experts in fashion design, marketing and trademark protection to train Nepalese companies to develop high-quality product collections that meet demand trends and technical regulations in the international luxury market. ITC support also enabled 42 Nepalese pashmina producers to participate in trade fairs in France, Hong Kong SAR, Japan and the United States.

To bolster product development capabilities in Nepal, ITC connected the Namuna College of Fashion Technology to the NPIA and the broader pashmina industry to develop a specialized course on pashmina design.

During the project planning process, ITC identified a gap in backward linkages between the pashmina industry and primary producers. As a result, ITC brought farmers into the process with the NPIA and relevant ministries, enabling direct market connections and a better response to their needs. ITC also helped set up the Mustang Chyangra and Pashmina Farmers’ Association to serve as a vehicle for farmers to articulate their priorities.

The results

The Pashmina Enhancement and Trade Support project has demonstrated that Nepal can regain market share provided sector stakeholders have a clear, shared vision for how to do so. The project has contributed to the growth and diversification of Nepal’s cashmere sector. Use of the rebranded and standardized Chyangra Pashmina trademark has more than quadrupled; the sector has evolved from a cash-and-carry model of ad hoc sales of pashmina products to any willing buyer towards a more structured customer-focused approach with a collective commitment to promote the sector under a ‘Made in Nepal’ banner.

The country’s exports of knitted – as opposed to woven – cashmere products, such as pullovers, cardigans and jerseys increased from under $2 million in 2012 to over $5 million in 2016/17 despite the fall-off in trade that occurred around the devastating earthquake that struck the country in 2015. Twenty-six of the companies ITC supported to participate in international trade fairs reported additional exports of $918,000.

Overall, the 42 companies involved with the project increased exports by 16% in 2017, creating 214 additional jobs. Through the links established between NPIA members and Chyangra Pashmina producers, farmers have received prices as much as 80% higher.

The Namuna fashion college has trained 35 students in Chyangra Pashmina product development, the majority of whom have secured employment or internships in the industry.

The future

ITC is planning to build on the success of the project by expanding the reach and extent of capacity-building activities. For Chyangra Pashmina farmers this would involve more backward linkages, marketing and support to add value to fibres by washing, de-hairing and baling. Not only would this allow farmers to charge more for their products, it would allow Nepal’s pashmina industry to respond to global consumer demands for traceability from fibre to product. For the broader business environment, it would mean improving testing facilities for international quality certification and developing an export strategy for the sector.