Concerns Still Unresolved

A recent legal decision on industrial dispute has exposed some weaknesses of current labour laws

setting up a one-member tribunal in mid-January, 2000, to resolve a dispute between the management and 24 employees of Nepal Battery Ltd., His Majesty’s Government had tried to seek a new way out from one deadlock. It was the first time that a tribunal was set up under the Article 78 (3) of the Labour Act, 2048. When the tribunal, headed by Kashi Raj Dahal, then the Registrar of the Administrative Court and now the spokesman of Supreme Court, handed down its verdict some three months later in early April 2000, it has thrown the ball back on the court of the HMG itself.

At the root of the dispute was the discrimination that, as the petitioners had claimed, the management held against them in comparison to other two groups of employees - the foreigners (Indians to be precise) and the ‘workers’. Demanding similar increase in their salary and various facilities as provided to the expatriates and others, they also had in the petition objected to the fact that the expatriates employed in the company had no "work permit" that was required under the Labour Act. And in its verdict, the tribunal has directed the company for revision in the ‘remuneration and facilities’ of the petitioners so as to make the revision ‘proportionate’ with the increase in ‘salary, allowances and facilities’ of the other two groups. Regarding the issue of the work permit, the tribunal has drawn the attention of HMG to review all its previous decisions, if any, that allow companies to employ expatriates without work permit.

In asking the management to decide on the quantum of the increase in salary and facilities, the verdict has recognized it as the sphere in which the management has the ultimate decision. But it has also handed down a formula by instructing that the revision has to be proportionate with the increase in the salary and facilities of other employees. However, the more important aspect of the verdict is regarding the ‘work permit’. Putting it simply, the tribunal’s verdict is interpreted to mean that all expatriates whether Indians or from any other country, must acquire ‘work permit’ to be employed in any company in Nepal.

These are the positions in which the foreign investors would like to have their own personnel throughout the period of the business venture running in Nepal. But the Labour Act has put such a limit that a non-Nepali can be employed only for a maximum period of five years (for skilled technician’s position) or seven years (for especially skilled technician’s position). The law is silent about the case of non-technical positions, such as in financial or personnel managers.

Similarly, the law is also vague about the position in which the work permit is required. It says that the permit is necessary for all the positions classified under the provision of article (3) which in turn requires such classification to be made for the positions of ‘workers’ and ‘staff’, the latter being defined as ‘a person involved in administrative job of the establishment’. The law has also distinguished a ‘manager’ from the ‘staff’. Moreover, it also provides for two types of managers - ‘Prabandhak’ and ‘Byabasthapak’. The former is defined as someone who is the final decision making authority in the establishment as well as one who heads a branch or unit within the establishment wielding the final decision making authority within such branch or unit. ‘Prabandhak’ is defined as a person appointed to carry out the functions of the establishment. Hence the confusion whether a particular person has to hold the work permit or not. The confusion is further complicated by the English translation. The term ‘Byabasthapak’ is translated as ‘manager’ in the English version of the Labour Act, and the same term is translated as ‘proprietor’ in the Trade Union Act.

Nepal Battery Ltd. is one of the first companies in Nepal set up in early 80’s as a joint venture with India and has experienced repeated labour disputes. Ever today, it still has some other cases pending in the labour court and other bodies. Initially, Union Carbide (India) Ltd. and presently Eveready Industries India Ltd. held 77% of equity in the company, the rest being owned by some 100 Nepali nationals. Since the expatriates working in Nepal Battery are all Indians, as is the case in almost all the other companies in Nepal whether set up in joint-venture with India or not, the tribunal’s verdict is going to have far wider implications. As the situation stands today, the Indian nationals working in many of the companies have no work permits. The argument they had so far was provided by the Indo-Nepal treaty of friendship signed in 1950 which provides for allowing nationals of both countries to go and work in each other’s country. The tribunal in its decision has referred to the provision of the Constitution of Nepal, which guarantees protection to the Nepali nationals against competition with foreigners in employment within Nepal.

With the case now back in its court, HMG is facing the problem of how to make it compulsory for all Indians to receive work permit, because of its inherent diplomatic and other risks. The matter is reported to have featured in the talks between the two countries during recently concluded India visit by Nepali foreign minister and Nepal visit by Indian foreign secretary. But the outcome has not been made public.

Executive Director of Nepal Battery Ltd., Vinod Bhandari, declines to comment on the verdict, as the matter is still subjudice. However, he informs that the matter is to be put before the Board of Directors of the company in their forthcoming meeting when the future steps of the company will be finalized. "Ever since its inception, the company is committed to abide by the law of the land, and will continue to do so", he says. Bhandari suggests that the labour laws should be made more clear-cut and less prone to arbitrary interpretation so that it helps to resolve conflicts rather than creating them. Bhandari recalls that the company had last year asked the Labour Ministry for clarification on whether work permit was really necessary for expatriates in his company, but no clarification has been provided by the ministry to date. "Now the tribunal has referred the matter to the government to review it and we’re waiting for the logical outcome from the government", says Bhandari. According to him, the law previously was clear about the work permit requirement. And Bhandari himself used to hold one when he was here in his previous job as the General Manager of Nepal Battery itself. However, the work permit document interestingly identifies him as ‘Kamdar’, which translates in English as ‘worker’. That work permit was in accordance with the then applicable labour law called the Nepal Factory and Factory-Workers Act, 2016. The present confusion was brought about by replacement of the previous Act by the current Labour Act.

The company since last couple of years is facing continuous decline in its production, sales and profits. And this fiscal year it has started incurring loss. Bhandari attributes it to increased competitive pressure due to ready availability of local as well as imported batteries at cheaper prices. "We’ve been dragged into the quicksand of legal disputes when the more important issue is the survival in the market place," moans Bhandari, whose present responsibility is to turn around the ailing company that was once reporting very good profits.

With this verdict, the tribunal has recognized the authority of the management to take actions against miscreant employees and to decide the amount of salary and facilities of its employees. But it has also raised some tricky questions as the following ones, answers of which are yet to be found:

1. How to reconcile the effect of growing wave of liberalization and globalization with that of national interest?

2. If the nation needs foreign investment, how to treat the foreign personnel that come in tied up with such investment?

 

Nepal Battery Co. Ltd.

(Rs. in million)

Source: Annual Reports

Though the tribunal has said that it is upto the management to decide the amount of salary and perks of the employees, it has given a formula to Nepal Battery for deciding at such payments. So, the next question is: "Where do the authorities of the management begin, where do they end and to what extent can a court or tribunal interfere in the management?"

Looking Towards Portugal

Appointment of an Honorary Consul General makes no big news. The same thing happened when Rajendra Kumar Khetan was appointed the Honorary Consul General of Portugal in Nepal some six months back. His appointment was followed by a Nepal visit by Portuguese ambassador to Nepal (who resides in Delhi) in December, 1999, and appointment of Maria Terriesa Cruz as Royal Nepalese Honorary Consul General in Portugal. Such appointments make no news because such two countries have very insignificant trade or other relations. If such relations are significant, a full-fledged embassy gets established, not simply a consulate.

Khetan’s appointment however held significance at least in two other respects. At the age of 31, he is the youngest ever in Nepal to be appointed a Consul General. Second, with his father Mohan Gopal Khetan already serving as the Consul General of another European country (Turkey), the family represents two countries concurrently.

Both his young age and the family experience of representating another country, however, were the two of the major reasons for junior Khetan’s selection to the position. His activities in other local fields also contributed somewhat in him being selected. "Young means likely to serve the longest", he points out expressing a feeling of pride on bagging such an honor. About five other candidates were considered by the Portuguese government before zeroing in at his name, it is learnt.

Cruz, in contrast to Khetan, is a former teacher of philosophy and psychology, and at present owns an "Auction House".

The insignificant economic relationship existing between the two countries is reflected in the trade volume. In 1997/98, goods worth Rs. 3.57 million were exported from Nepal to Portugal, from where the imports same year were worth Rs. 1.95 million. While Nepal’s major imports from Portugal included aircraft and spareparts, Portugal’s imports from Nepal were garments and handicrafts. Compare this with Portugal’s neighbour, Spain, which imported goods worth Rs. 194.78 million from Nepal the same year. Both Spain and Portugal have deficit in their trade with Nepal. Spain’s exports to Nepal in 1997/98 stood at Rs. 87.88 million. Spain’s major imports from Nepal consisted of garment, handicraft, carpets and semi-processed leather, while her major exports to Nepal were yarn and textile.

The low trade volume between Nepal and Portugal is the result of ignorance about each other, says Khetan pledging to work for promoting good understanding between the two countries.

However, Khetan and Cruz's appointments are not the only effort so far to promote relations between Nepal and Portugal. "Nepal Week" was held several times in Portugal in the past. But the results from the program have been minimal, according to Khetan. Khetan and Cruz both say that they are now working to set up a Nepal Centre in Portugal so that ‘Nepal Week’ is institutionalized.

One of the considerations for the Portuguese ambassador’s Nepal visit last December was that Nepal was to take over the Chairmanship of SAARC and Portugal was to do the same in EU. However, though Portugal actually took over the EU Chairmanship since January, the SAARC Summit meeting which would place Nepal at its chairman still stands postponed indefinitely. After July 2000 Portugal’s current tenure as EU Chairman will be over.

Two Tales of Privatization

By Ojaswi Gautam

Tea to Sanghai

Though after a long delay, the Council of Ministers has now approved privatization of the Nepal Tea
Development Corporation (NTDC). Legal problems, however, still remain. The government gave the approval on May 22 after the proposal had been passed by the Privatization Committee on May 19.

Included in the privatization process in 1997, NTDC has been caught up in one after another controversy. The initial phase of bidding had seen K. Palanaswami, an Indian citizen, make the biggest bid of Rs. 266.5 million. However, claiming that Swami had not paid the amount within the deadline, the Finance Ministry had cancelled the tender altogether, calling for fresh bids. In the second phase, Triveni Group topped the bidder’s list with an offer of Rs. 267.1 million for NTDC’s non-tangible assets, including machinery.

According to the decision, besides the said amount, for a 50 year lease term of NTDC, the Group is also to provide annual royalty of Rs. 28 million to the government. However, by the time of preparation of this report, detailed information was not available on the points put forward by Triveni Group and agreed to by the government.

An officer in the Privatization Cell of the Finance Ministry states that legal formalities still remain to be completed, implying that if things went off smoothly, it would not be less than a month before NTDC is handed over to the Triveni Group.

Data furnished by the Finance Ministry show that NTDC, sprawling across a plot of 5124 acres of land, has been engulfed in loans amounting to Rs. 250 million while in the last three years alone, the government has spent over Rs. 80 million to keep it alive.

According to information published by the Corporation Coordination Division of the Finance Ministry, upto FY 1997/98, in 43 state-owned enterprises employing 50,000 people, the government has put in Rs. 14779.4 million by way of share investments and Rs. 44234 million as loan investments while obtaining Rs. 24 million (0.16% of the total investment) in dividends during the same fiscal year.

According to the Privatization Act, 2048, for any public organization to be privatized, the Privatization Cell is to forward its views and suggestions to the Privatization Committee which in turn is to forward the proposal with its recommendations before the Council of Ministers. And privatization experts say, the main reasons behind the privatization program in Nepal not taking off as anticipated are defects in privatization laws, inability to modify laws with changing times and treating Privatization Cell simply as a wing of the government. The inability of the law to clearly state about the rights, duties and responsibilities of the Privatization Cell, is also seen in a negative light.

Bus Park to Lhotse

When His Majesty’s Government’s privatization program has been attracting enough criticism,
the Kathmandu Metropolitan City Corporation (KMCC) has decided to hand over the bus park at Gongabu to the private sector, creating fresh uproar.

On May 14, KMCC signed an agreement to hand over the operation of the Gongabu bus park to Lhotse Bahu Udesya (P) Ltd. for a term of 50 years. According to the agreement, KMCC is to receive Rs. 5.1 million in royalty every year from the company, and the amount is to go up annually by certain percentage. Besides, Lohtse is to invest over Rs. 327 million for developing physical infrastructure and for repair works. Such physical infrastructure to be developed are waiting rooms, bank, medical center, hotels, sanitary facilities, security and so on.

Explaining the decision, the Mayor of KMCC Keshav Sthapit says, "This is in accordance with our commitment to make Kathmandu a beautiful and comfortable place to live in." The annual operating costs of the bus park, built with assistance from Japan, amounted to Rs. 7 million as opposed to yearly income of Rs. 4 million, says the Mayor. "If, with the experience of the private sector, the bus park can be made more facilitative and better-managed besides providing attractive royalty to KMCC, why not go for privatization", he adds.

When, about 6 months back, the process of privatizing the bus park - spread over an area of 161 ropanis - had been started, criticism had begun making rounds. It became an issue of sentiment for those who regarded the park a sign of friendship between Nepal and Japan. The Japanese Embassy sought clarification from the government about the matter, and the government as well as the House of Representative’s Public Accounts Committee sought explanations from Mayor Sthapit. But the Mayor did not budge from his stand.

In its answer, the KMCC stated that it has stayed within the framework of law. According to the Mayor the corporation is still open to private sector investments in other potential areas.

Nepali industrialists have supported KMCC’s decision to privatize the Gongabu bus park. Says renowned industrialist Padma Jyoti, "The agreement is appreciable and in keeping with today’s demand. Hearty implementation of the agreement can give better result, failing to do which, both parties will lose their credibility."

But critics view that the burden of privatization of the bus park will be borne by customers since fare hikes are imminent. This could become a reality since the agreement does not touch upon the issue of bus fares. It is feared that bus owners will have to pay higher charge to the new management than they did to KMCC. But both Sthapit and managing director of Lhotse, Gehendra Karki, contradict this view. Says Karki, "Bus fares will not go up. We will provide facilities that are at the moment unavailable at the park, and charge only for those additional facilities."