Asia-Pacific, Economy & Trade, Headlines, Labour

NEPAL: Labour Demands Say in Reforms

Marty Logan

KATHMANDU, May 28 2006 (IPS) - Workers – 1, World Bank – 0. The Bank has long urged Nepal’s governments to amend the country’s labour laws in order to cut the cost of doing business and boost investment, a move that would also weaken workers’ status, argue trade union officials.

But that formula, followed by the government of King Gyanendra, was trashed by the revived democratic leadership on May 16 and this week a Maoist-linked trade union forced businesses in the southern industrial belt to agree to reforms that should improve employees’ benefits and secure their jobs.

According to local media, the deal signed between the Birgunj Chamber of Commerce and Industries (BCCI) and the All Nepal Trade Union Federation (ANTUF) includes:

– an end to the contract system of hiring workers; – maintaining workers’ existing salary and other benefits; – providing a minimum daily wage of 100 rupees (1.4 U.S. dollars); – mandatory appointment letters for all employees; – an eight-hour work day, with additional work counted as overtime; – overtime pay at 150 percent of basic salary, and; – a pledge that future management-employee disputes will be settled in talks

The deal was signed in the midst of a heavy-handed Maoist extortion that has targeted businesses in particular but can zero in on anyone thought to have cash. Rebel leaders have long intimidated Nepalis into handing over money, food, medicines and valuables but such acts have increased since they declared ceasefire and said they are ready to talk peace with the new government.

During their 10-year uprising, the Maoists have taken control of up to 80 percent of this impoverished, mostly rural nation, promising to end the hereditary monarchy and empower women, dalits (so called ‘untouchables’) and indigenous people. Thirteen thousand Nepalis, most of them innocent villagers, have been killed in the war.

Today, Maoist leaders maintain that their cadres are collecting only “voluntary donations” but reports from across the country belie that claim.

“The Maoists are also talking about workers’ issues,” the general secretary of one of Nepal’s three union federations told IPS earlier this week.

Bishnu Rimal’s General Federation of Nepali Trade Unions (GEFONT) represents more than 300,000 of the roughly 4.5 million workers (of a workforce of 11.5 million) who are considered “wage earners” and have the right to form unions. About one-half of these are agricultural workers.

Leaders of GEFONT and the other federations reportedly rejected the new government’s plan to amend the royal government’s labour ordinance, which was finally annulled May 16. Rimal says trade unionists have already been approached by Finance Minister Ram Sharan Mahat to discuss labour laws and are developing their response.

“Our finance minister has a bad record on labour issues – he knows only the vocabulary of capitalism,” said Rimal. “But the prime minister (Nepali Congress chief Girija Koirala) is a labour person, he started his career with the labour movement.”

Central to the royal regime’s labour law was the establishment of export processing zones that would be under special rules. Businesses setting up there would pay lower taxes but workers would have fewer protections. For example, they could be fired for no reason and with only 15 days’ notice, according to Rimal.

Former State Minister for Labour and Transport, Rabindra Khanal, told IPS in March that workers in the zones would not be more vulnerable but it was unclear how the special areas would be determined, with unions arguing that the law permitted businesses to label even a single factory a special zone.

“We certainly supported the notion of starting with limited application of the law. If we found that more jobs were created, then people would become more comfortable with a flexible labour law,” the World Bank’s country representative in Nepal, Ken Ohashi, told IPS in the midst of April’s people’s movement that brought hundreds of thousands of protesters to Nepal’s streets, forcing the monarch to relinquish power.

Revising the labour laws was one of the conditions that the Bank set the government for the release of further “budget support”. The others – cutting state subsidies on fuel and taking action against bank defaulters – had already been accomplished.

Earlier budget support totalled 70 million dollars and a future payout would be “similar,” said Ohashi, adding that the Bank had not pressured the government to introduce the amendments. “As budget pressure started to increase on the government, it must have increased internal pressure to start moving on this.”

“As in other South Asian countries, labour laws in Nepal are very restrictive in terms of hiring and firing. Excessive protection of workers in the formal sector is a major concern of investors and inhibits employment growth.” As a result, employers hire on contract and spend little on training workers, added the Bank official.

Rimal said the unions told the previous democratic government “that we were not against the revision of the act – if you remain the same you stagnate. But the (new law) has to be fair; there has to be social security,” such as health insurance and compensation for the unemployed.

The International Labour Organisation (ILO) agrees, said ILO deputy project manager in Nepal, Pracha Vasuprasat. In March it sent a mission to the capital Kathmandu to discuss the proposed ordinance but it pulled out after seeing that government and union officials were not working together, he added.

“These days you cannot avoid labour reform …but it has to go hand-in-hand with a strong social security system or there will be a fall-out – people will lose their jobs,” Vasuprasat said in an interview.

“Only five percent of Nepali workers are now covered under a thin social security system, so we would need external support to establish a strong system,” he suggested adding, “I would also like to ask the World Bank and others: what are the measures that would be used to aid reform’?”

The government could decide to direct other Bank assistance to social security, according to Ohashi, but no new money would be forthcoming so “that would be at the expense of something else”.