Cover Story (Spotlight Weekly)

MAY DAY
Damaging Labor Disputes

With labor disputes growing and the law-and-order situation deteriorating, the country's industrial sector has been passing through a very critical phase. In the absence of a proper environment for industrialization, investors are reluctant to put money into new projects. Amid political instability and crisis in industrial relations, the workers of formal organized sector celebrated May Day supporting another round of political agitation. With complications arising from the rigidity in the Labor Act and growing political instability, Nepalese workers are likely to face more difficult days ahead. As the trade unions have indicated that they would back the political agitation launched by the mainstream parties, the industrial sector, too, will have to pass through another year of uncertainty

By KESHAB POUDEL

Bal Bahadur Shrestha, an overseer out of work after Himal Cement Factory was dissolved, was hurt by police while on the way to an interview for a job in South Korea. Police resorted to lathi-charge to control the masses who come for the interview. "After the closure of the factory a year ago, I am unemployed. Since there is no possibility to getting another job back home, I thought going to South Korea may be the best option," said Shrestha.

When their fellow Nepalese laborers were celebrating International Labor Day by organizing various programs inside the Birendra International Convention Center on May 1, hundreds of unemployed youths like Shrestha were struggling to seek employment in South Korea. The politicians attending the May Day evens talked about rights, protection and employment, but nobody had words for people like Shrestha.

According to Prasiddha Rana, managing director of Moon Drops Overseas, a manpower company authorized to select the candidates, more than 30,000 people have applied for the 1,500 quota allocated by the South Korean government. First, the applicants have to go to Dasarath Stadium and then to the International Convention Center for the interview. Many candidates are workers laid off by various industries.

Attended by former prime minister Girija Prasad Koirala and CPN-UML general secretary Madhav Kumar Nepal along with senior trade union leaders, the May Day program did not notice the plight of the unemployed and laid-off workers queuing up outside the hall to go to South Korea.

When the major political parties backed by the trade unions are pushing the country into another round of political instability and chaos, industrialization is bound to become one of the first casualties.

Although the May Day declaration issued by Nepal Trade Union Congress (NTUC) and General Federation of Nepalese Trade Union (GEFONT) has shown some concern to the unemployment problems, they have not offered any solution. "We are aware of the employment situation in the country. The structural problems of the labor market borne out of existence of unemployment and underemployment are of deep concern to us. Race for foreign employment alone cannot solve our problem. We need to address the problem of Nepali workers at home and abroad through consultation and dialogue with all concern. Our future campaign will continue to address the problems faced by thousands of youths who are working in adverse conditions all over India, Gulf and other foreign lands," the declaration stated.

Since Nepalese trade union activism has done much harm to the industrial sector, some suspect their interest in the foreign employment sector is another design to destabilize a vital alternative employment source. Experience, too, has shown that wherever trade-union politics gained ground, the sector was hurt badly.

"Like the major political parties, the trade unions are also ready to sacrifice everything for short-term and personal gains. The result: labor dispute, industrial shutout and declining industrial growth," said advocate Kamal Narayan Das. "Trade unions are much concerned with their own interest rather than the interest of employers. Experience have shown that wherever politicians try to get involved, the sector faces crisis."

With a growing number of young Nepalese laborers entering the job market each year, the current industrial growth rate is abysmally low. Even the workers of organized sectors have an uncertain future. Since many public-sector enterprises have been shut down, the demand for labor in the organized sector has drastically declined. In many instances, industrialists shut down their establishments because of trade-union activism and higher production costs.

State of Employment

According to the Population Report 2002 published by the Ministry of Population and Environment, about 54 percent of Nepal's population constitute the labor force (age group 15-64 years). The report also shows that the female labor force is larger than males'. This is because of increase in the female population between ages 15 and 45.

According to the labor force survey conducted by Central Bureau of Statistics with support from the International Labor Organization and United Nation Development Program, agriculture is still the predominant form of employment for Nepalese either by economic activity, occupation or industry. Only 16 percent of workers are paid employees. The majority are self-employed with or without family members.

The large portion of jobs comes from the registered or unregistered private-sector firms, which account for some 25 percent. This is the sector where Labor Act is applied and the laborers' rights are secured in such areas as minimum wage, working hours and social security.

Although the Labor Act governs relations between employees and employers, internal disputes have often marred ties. Some disputes end with an amicable settlement, but others go beyond control and result in closure or lock-up of factories.

In the dispute with trade unions, the majority of small industries with Nepalese investment declared lock-up and closure. Although such a situation is not in the interest of the country or labor force, nobody stops from doing anything when they are in an uncompromising stage.

Along with many small industrial units, dozens of larger industries were also shut down in the last decade. Nepal Battery Company, a multinational, Nirulas Group of Restaurants, Agri Nepal Limited, Nepal Med Limited and Arhanta Textiles were shut down. Three years ago, the dispute on the matter of service charges virtually shut down the hotel industry. The issue is pending and will abruptly appear at any time.

Labor leaders disagree that they are responsible for closure and lock-up of industries, blaming them squarely on the employers' attitude. "The labor movement in Nepal is very constructive now. In the early days, it was wild, but now the trade unions are working in a responsible manner. In the last seven years, you cannot see any violence between employees and employer," said Bishnu Rimal, general secretary of GEFONT. "Since the unions represent society, the trade unions are not apolitical organizations. They are based on certain political ideology." (See box)

According to a report prepared by Narayan Manandhar, executive director of Industrial Relations Forum, the number of workers in the established factories continues to fall over the years. In 1991/1993, there were 2,575 establishments with 347,164 workers and workers per establishment were 134.82. In 2000/2001, the number of establishment went up to 4,296, with 394,541 workers. Interestingly, the number of workers per establishment went down to 91.84.

"The number of industries and workers fell since many government undertakings were shut down and laid off workers in the last few years in the process of privatization," said Rimal. "Labor issues had nothing to do with the closure of such cases. Except in a few cases, Nepalese laborers have shown peaceful and disciplined nature."

Manandhar also points out the decline in the number of workers per establishment. The figure has declined since 1991/992 but it was not badly affected as it was after 1995/1996. In 1994/1995, the workers per establishment was 103.38 and but it was 91.26 in 1996/1997. "No big industry was shut down because of unnecessary pressure from labor and labor acts. The government privatized or liquidated many factories like Himal Cement, Birgunj Sugar Mill and Nepal Transport Corporation," said Rimal.

Industrialists see matters differently. Political instability and uncertainty have affected investment. The rigid Labor Act, which favors employees in internal disputes, is also blamed. "How can you expect to see more investment when the Labor Act justifies any action, including locking up the manager," said an entrepreneur. "When you cannot control your own property and rely on employees, no genuine investors come to invest."

With the dissolution of the House of Representatives in 1994 and emergence of a hung parliament, the number of industrial establishment was drastically reduced. In 1995, 2,575 industries were registered. In 1995/1996, the number was 4,014 but the progress was slowed down. In the last six years, only 282 industries are registered in the country.

After continual pressure of environmentalists and growing unrest, garment and carpet factories based in Kathmandu valley were removed. Thanks to then prime minister Girija Prasad Koirala's decision, a number of industries have moved to points on the southern border. As the Nepalese laborers put many demands and are undisciplined, many industries moved in the terai recruit Indian workers with whom employers feel more comfortable. For Nepalese unemployed, they have to go to foreign countries.

"Nepal's labor market is uncomfortably poised between trade unions' demand for increased job security and management's call for flexible workforce," says Manandhar.

When the country needs jobs for more than 500,000 workers who enter the job market each year, the industrial sector is not in a position to absorb them. Many industrialists even deny jobs for Nepalese.

Labor Disputes

Although Nepalese labor movement is dominated by trade unions representing the communist ideology faithful to Vladimir Ilyich Lenin, they have hardly followed the ideology of their leader. Lenin held the view 'one step forward and two step back'. But Nepalese Leninist trade unions have taken many steps forward none back.

Industrial entrepreneurs argue that they are very much pressed by labor strikes. The investment in the industrial sector has declined due to the frequent strikes called by the trade unions and the country's deep political instability. The labor strike at Nepal Colgate Palmolive and the Supreme Court verdict on Nepal Battery Company have sent a wrong signal to international investors. The Labor Act which was amended when Mukunda Neupane, president of GEFONT, was minister, put many conditions on hiring and firing workers. Employers do not have any choice in the matter.

At a time when many countries of the world offer more discipline manpower and a secure industrial environment, Nepal, which neither has political stability nor an industrial favorable act, will have the least possibility of luring foreign investment.

Delays in the legal process and virtual non-guarantee of foreign investment also sent wrong signals. "When the country's labor unions are so arrogant and irresponsible and legal regime is unpredictable, no reliable investor will come to Nepal," said advocate Kamal Narayan Das. "We have already sent the wrong signal to the world."

Industrialists, too, agree that more labor friendly laws are discouraging domestic as well as international investors. "No investor wants to lose money where the rate of return is so low and there is virtually no safety for the managers and investor," said a senior industrialist. "We are pressuring the government to amend the labor law so that Nepal's market will be more attractive and friendly to investors."

The labor unions do not agree with these arguments. They hold the view that Nepal's labor unions are more discipline. "We have never made unnecessary demands and have always shown interest in settling disputes through negotiations," said Rimal. "The industrialists want to blame us for their failure. We cannot permit foreign workers in Nepal."

Although there are frameworks to settle the disputes between the trade unions and investors, they have hardly been able to prevent strikes, lockouts and other such incidents. The strike called by hotel workers in 2000 has damaged Nepal's reputation in the international tourism market. Despite the possibility of averting the crisis, the trade unions and hotel owners locked their horn on the issue of 10 percent service charge.

Since the issue is still there, uncertainty is looming large over the hotel and restaurant industries. "As long as the situation remains volatile, Nepal cannot see new foreign ventures providing large employment opportunities," said an industrialist.

Because of continual disputes, many multinational and other industries packed their bags from Nepal, giving the impression to the business community abroad that the kingdom is not secure for investment. "In a country where labor controls the industry, students guide the teachers, nobody will come to invest. The present political scenario has shown that the enemy of democracy is library, university press and campus building, as the investors are the enemy of the labors," said advocate Das.

Labor disputes remain a major problem in Nepal. Along with the declining number of laborers and industrial units, the number of labor disputes has increase in the country. According to a study conducted by Manandhar, till 1995/1996, labor dispute on the basis of individual and collective trend was very low.

Following 1996/1997, the labor disputes went up increasing the cases of individual disputes to 250 in year 1998/1999. From 1991 to 1997, the situation was quite good, as there were very few cases of individual or collective labor disputes. In 1998/99 and 1999/2000 the industrial disputes cross the 700 mark. It declined in 2000/01 with over 200 but in the year 2001/02, it reached 600.

Politics in Trade Unions

The country's trade union movement is led by politicians and divided along political ideology. Unlike other parts of the world, the trade union leaders joined politics after establishing their base in particular areas. In Nepal, political leaders jumped to the trade union with blessings of party leaders.

According to the International Labor Organization (ILO)'s 35th anniversary report, there are three major trade unions in Nepal. GEFONT is a confederation of 15 national federations dedicated to the rights, welfare and dignity of work force. The NTUC has 62 district committees and 20 affiliated unions in the sectors of carpet, garment, tourism and hotels, journalism, tea plantation, teaching, banks, insurance, public sector corporation, health professionals and other areas of the unorganized sector.

The Confederation of Democratic Confederation of Nepalese Trade Union (DECONT), a breakaway faction of the NTUC, has 18 affiliated unions and 40 district committees with Congress rebels. Under the Labor Act 1992, these organizations are registered in Nepal.

There are many other smaller trade unions affiliated to the small left parties and other political parties. Interestingly, the trade unions are supposed to represent the voice of the laborers but the policymaking body of † the organization is overwhelmingly dominated by the political leaders. The president of the NTUC, Laxman Basnet, does not have any labor background and is a close relative of Nepali Congress president Girija Prasad Koirala. Basnet is leading the organization for the last many years.

The president of GEFONT, Mukunda Neupane, is also a political activist. Being a central committee member of the Communist Party of Nepal Marxist-Leninist, Neupane was also elected to parliament. There is a long legacy of the political domination in the labor moment. Koirala is the first leader of the organized labor sector.

When labor and political issues are in such a cozy partnership, there is possibility of political motivation in many strikes and lockouts. "Political party leaders use the labor unions to harass rivals in the industrial sector," said a businessman on condition of anonymity. "Don't talk about the Nepalese trade union movement. Giving the slogan of nationalism, they are killing industries promoting the national interest. This is what one can see in the political leaders who always commit anti-national works harping the slogan of nationalism."

Debate on Labor Act

The industrialists are demanding improvements in labor legislation. They are very much concerned about various modalities of the act. Industrialists point out that there is rigidity on the part of appointment, including restrictions on the appointment of the contract workers in non-core jobs, restriction on the appointment of foreign workers. The maximum limit is seven years. There are also rigidities in downsizing the retrenchments, layoffs and payoffs. Government approval is required for lay-off decisions, lay-off compensation 50 percent of wages and 100 percent of facilities. There is rigidity in the disciplinary actions.

Entrepreneurs also point to rigidity in collective bargaining and dispute settlement. Government approval is required for lockout decisions while the workers can do so by 60 percent balloting. Lockout decisions are for emergencies, but the situation has to be proved within three days. The workers are to be paid for illegal lockouts but the law is silent over illegal strikes.

Interestingly, the law protects the labor leaders in case of promotion and transfer. No promotion or transfer of executive committee members can take place without their prior consent. Although the employers are pushing the agenda for amendment, trade unions are resisting it. "The act is doing nothing wrong with the multinational companies like Soaltee Crown Plaza, Nepal Lever Limited and others but only small industrialists are pushing for amendment," said Rimal.

The May Day declaration also pointed out positive aspects of the Labor Act 1992. "We feel that labor laws and acts naturally become pro-labor. We feel proud to note a unified response by the trade union movement to thwart proposed amendment to the labor law by the government. We oppose the hasty and conspiratorial proposed amendment to labor law but we are open to discussion and reach a solution," said Basnet.

As the country is passing though a very critical economic phase, any misunderstanding between employers and employees will damage the overall situation. If both groups read what is written on the wall, they can save themselves - and their country.

'You Cannot Expect The Labor Movement To Be Apolitical'

— BISHNU RIMAL

BISHNU RIMAL, general secretary of GEFONT, has been in the labor movement for a long time. Rimal spoke to various issues related to trade unions. Excerpts:

What is happening to the unification process of GEFONT and NTUC?

We have set up a task force which is working out the procedure for the merger of two unions. We have already identified some areas of common concern like the gender issues at the workplace. We had jointly launched the agitation on the service charge issues. If we have a united trade union, it will benefit employers as well as employees.

It is said that Nepalese trade unions are creating hurdles for foreign investment by making unnecessary demands within a rigid Labor Act. How do you look at it?

There is no truth in this. We have maintained good relations with employers in the establishment of foreign investment. In Soaltee Crown Plaza, Nepal Lever Limited and other five-star hotels, there are very good relations between employers and employees.

Where are you facing more problems?

We have problems in the small hotels and small industries where the employers do not want to implement† the laws. If the laws are implemented correctly, nobody would have to worry. There are better relations in the garment industry.

You mean trade unions are not creating any problems?

That's right. We have not created any problems. Nepal Battery shut down due to the disputes with the Nepalese executives and Nirula's was shut down because of other reasons. Nepal's labor moment is constructive. Of course, it was wild in its early stage. But now it is very manageable and disciplined.

How do you see the frequent disturbances like strikes in factories and industrial establishments?

There were a small number of individual strikes, but you cannot see major collective strikes. The number of strikes is coming out. There is a tendency now to lock out the hotels.

How do you see politicization in the trade unions?

You cannot expect the labor movement to be apolitical, since it has to deal with economic, political and other issues. So, it is natural to have politicians to lead the trade unions. If you see in general, there is ratio of 10 percent politicians and 90 percent workers at the organizational level. We have three different trade unions representing three different political ideologies.

'Politicians Are Exploiting Trade Unions For Their Petty Interests'

— KAMAL NARAYAN DAS

KAMAL NARAYAN DAS, a legal consultant to many industries, spoke on various issues related to industrial relations. Excerpts:

How do you see the present status of industrial relations?

The situation is very bleak. All the employees are talking about the short-term gains. They make threats and call strikes at their wish. The Labor law is protecting undisciplined employees and employers have to live with the wishes of organized labor groups. They will lock up the door of manager at any time and managers will be in prison for days. As their political masters, the trade union leaders seem to be following irresponsible ways. They do not care about long-term interests and national interest. For short-term gain, they will sacrifice everything.

That means there is a very bad situation in the sector?

You are right. Because of disputes, many industries have closed down. The government policy is also anti-industrialist. Nepal Battery Company, Nirulas, Arhanta Textile, Nepal Med Limited, Agro Nepal Limited and other dozens of textile units in the terai have already been shut down. There is† no proper labor environment for foreign investment. The labor unions have put a sword on the head of hoteliers and restaurant owners, as they have their demand of 10 percent service charge. They will bring the agenda whenever they feel free. One must not put all the blame on trade unions, since it is the irresponsible behavior of politicians who exploit trade unions to gain their petty political interest.

Do you mean the investment climate is bad?

Definitely. How can you invest money where nobody is there to take responsibility in case of damage. An international chain group recently canceled its proposal to build a five-star hotel in the Himalayan region because of political uncertainty and complications in labor laws. Employees will shut down your industry at any town and you will be locked in a room for a week. In such a situation, who will come to invest in the country. Political instability and wild labor unions have sent wrong signals to the international sector.

How do you see the Labor Act?

It is one sided and backs the employees. The employers do not have any rights in the process of hire and fire. Once a person secures a permanent position, the employer cannot kick him out. If the employer tries to take legal action against any undisciplined employee, he or she has to pass through many impossible roads. Till the employers receive the verdict from the Department of Labor, the industry will be closed down. There is no system to judge labor on the basis of performance.

How do employers judge performance, then?

It is up to the mood of the unions. If someone tries to take action, the union will call a strike. Unfortunately, the employer has to pay the salary even for the duration of the strike. In our country, laborers guide the industrialists, students guide the teachers and workers guide the leaders. Students see the library and college buildings as their enemy and the laborers see the industry as their enemy. They do not fulfill duties, but only talk about their rights.

What is the role of the Ministry of Labor?

It is acting like a kept of political parties. Since trade union workers have influence over the minister, he can always be influenced in favor of labor. The Department of Labor is not playing the role of negotiator. It is just acting as an agent of labor unions. Everybody wants benefits, but nobody wants to work.

'Legal And Policy Changes Are Needed For A Better Industrial Environment'

— RAJENDRA KHETAN

RAJENDRA KHETAN is first vice-president and spokesperson of the Federation of Nepalese Chambers of Industry and Commerce (FNCCI). He spoke to SPOTLIGHT on various issues related to the labor law.

What are your observations on the present labor laws and labor policies?

The present labor laws and policies are good. They only need to be fine-tuned so that both employers and employees can feel secure. Some issues like contract labor, equal rights, definition of who can join trade unions, wages and link with productivity, etc., must be addressed.

What is the position of the FNCCI on the hire-and-fire system?

Rather than hire and fire, we are talking more about equal rights. If there is misconduct by any one side, the provision of reward and punishment should be there. Nobody should exploit rights.

Do you think the labor laws in Nepal are pro-labor?

Rather than being pro-labor, they have not been able to cater to today's needs. They have to be compatible with the rapid industrial diversification and growth within the framework of the World Trade Organization. That is why are we talking about productivity.

What are your recommendations?

Contract and seasonable labor, wages linked with productivity, clear definition that decision making portfolio holders cannot join the trade unions, reward and punishment, equal rights and so on.

How much have Nepalese business and industries suffered due to labor unrest?

After the popular moment of 1990, the trade unions camp up aggressively. The businessmen were also quite traditional in handling employees. There were many differences on issues like job security, hire and fire, minimum wages, productivity and health safety and industrial security instruments. The last 12 years has been a period of experience in handling industrial relations. Both employers and employees are getting mature enough to understand each other to deliver the best output.

Any final thoughts?

We are moving ahead with WTO. We can no more confuse ourselves with domestic issues either labor, revenue or political. We need productivity and competitive inputs and outputs. Hence changes in laws and policies for a better industrial environment, including the labor law, are necessary.