Nepal’s Textile Sector Prepares for Post-LDC Reality with ILO-Led Push on Labour Compliance and Global Standards

A central issue addressed during the training was widespread informality, which continues to limit the sector’s growth potential.

As Nepal approaches its graduation from Least Developed Country (LDC) status in November 2026, the country’s textile and garment sector—one of its largest export industries and a major employer of women—is undergoing a critical transformation to meet stricter global labour and compliance standards.

In response, the International Labour Organization (ILO), through its International Training Centre (ITCILO), has conducted a five-day intensive training programme on Responsible Business Conduct (RBC) and social compliance, aimed at preparing the sector for a more competitive and demanding international market.

A Sector at a Turning Point

Nepal’s textile and garment industry has long benefited from preferential trade access linked to its LDC status. However, with graduation approaching, the sector faces:

• Loss of certain trade advantages

• Increased scrutiny from international buyers

• Rising demand for labour rights compliance and human rights due diligence

This shift means that social compliance is no longer optional—it is essential for market access.

Building Capacity for Global Market Alignment

The training programme brought together 35 key stakeholders, including:

• Entrepreneurs from textile, garment, and carpet sectors

• Representatives from the Garment Association of Nepal (GAN)

• Nepal Carpet Manufacturers & Exporters Association (NCMEA)

• Federation of Nepalese Chambers of Commerce and Industry (FNCCI)

• Trade unions and government institutions

The initiative focused on translating global labour and business standards into practical actions, equipping participants with tools to:

• Improve working conditions

• Align with international compliance requirements

• Enhance productivity and competitiveness

Tackling Informality: The Sector’s Biggest Challenge

A central issue addressed during the training was widespread informality, which continues to limit the sector’s growth potential.

Many enterprises:

• Operate outside formal regulatory systems

• Lack access to social protection frameworks

• Face barriers to entering global value chains

The programme emphasized gradual and inclusive formalization, which can:

• Improve worker protections

• Strengthen labour inspection systems

• Unlock access to international markets and financing

Grounded in Global Standards

The training was anchored in key international frameworks, including:

• ILO Fundamental Principles and Rights at Work (FPRW)

• ILO Multinational Enterprises (MNE) Declaration

• UN Guiding Principles on Business and Human Rights

• OECD Guidelines for Responsible Business Conduct

These frameworks were adapted into context-specific strategies for Nepal, bridging the gap between global expectations and local realities.

From Compliance to Competitiveness

Experts highlighted that adopting responsible business practices is not just about meeting standards—it is a pathway to:

• Higher productivity

• Better-quality jobs

• Stronger integration into global supply chains

ILO Country Director Numan Özcan underscored this shift:

“LDC graduation is not just an economic milestone—it is an opportunity to build a textile sector that is competitive, productive, and grounded in decent work.”

Women at the Center of the Transition

The textile and garment sector is a major source of employment for women in Nepal, making compliance reforms especially significant for:

• Gender equality

• Workplace safety

• Income stability for households

Improving labour standards could therefore have broad social and economic impacts.

Strengthening Social Dialogue and Collaboration

A key feature of the programme was its tripartite approach, bringing together:

• Government

• Employers

• Workers’ representatives

This collaboration aims to:

• Strengthen social dialogue mechanisms

• Ensure reforms are inclusive and practical

• Build consensus on sector-wide transformation

Preparing for a Post-LDC Trade Environment

As preferential trade benefits phase out, Nepal’s competitiveness will increasingly depend on:

• Transparency and traceability in supply chains

• Compliance with labour and environmental standards

• Ability to meet buyer expectations on sustainability and ethics

The training is part of a broader effort to ensure that Nepal’s textile sector:👉 Remains globally competitive despite changing trade dynamics

From Training to Implementation

Participants concluded the programme by presenting action plans to implement lessons learned, focusing on:

• Workplace improvements

• Compliance systems

• Business formalization strategies

The success of the initiative will ultimately depend on how these plans are translated into real changes across factories and supply chains.

A Strategic Opportunity for Nepal

The transition from LDC status presents both risks and opportunities:

• Risk: Loss of trade preferences and increased competition

• Opportunity: Upgrade to a higher-value, standards-compliant export sector

By investing in responsible business conduct and social compliance, Nepal is positioning its textile industry for:

• Sustainable growth

• Better job quality

• Stronger global market integration

The Bigger Picture

The initiative reflects a broader global shift where:

• Buyers demand ethical and transparent supply chains

• Compliance becomes a competitive advantage

• Labour standards are integral to trade

For Nepal, the message is clear:👉 Future export success will depend as much on compliance and sustainability as on cost and production capacity.