Going by the Nepal Labor Force Survey 2008, the agricultural sector, almost entirely informal, employs 74 percent of the currently employed labor force (aged 15 and above). As much as 70 percent of those with main jobs outside agriculture work in the informal sector. This means that less than a million people had formal sector jobs in 2008. With agriculture characterized by low productivity and the non-agricultural sector not growing fast enough to absorb an expanding labor force (which gets at least 500,000 new entrants every year), the combined un/under-employment rate is 30 percent as per the survey—an underestimation, given the use of very broad definitions of being economically active and being employed.
The Ministry of Labor and Transport Management recently expressed serious concern over the increasing tendency of organizations to recruit foreigners without obtaining work permits from the Department of Labor (DoL). Indeed, Nepali citizens are being bypassed in favor of foreigners—from telecommunications companies to manufacturing firms to hydropower projects, including those with foreign investment. The Ministry´s belated vigilance about the recruitment practice in the private sector drew predictable consternation from quarters that saw it as an attack on the free market. The Foreign Investment and Technology Transfer Act 1992 (FITTA) was violated in the case of establishments with foreign investment, went the bogus claim. FITTA says nothing about recruitment of foreigners.
The relevant Acts are the Industrial Enterprises Act 1992 and the Labor Act 1992, which, despite some contradictory provisions, allow recruitment of foreign workers only under strict conditions. Section 22 of the Industrial Enterprises Act requires “manpower” to be recruited from among Nepali citizens. It allows appointment of foreign manpower only if the industry cannot be operated without it, that too only with the prior approval of the DoL for a maximum period of five years. In the case the foreigner in question happens to be a technician of a special category but not available within Nepal, s/he may be appointed for up to an additional period of five years with the approval of the DoL.
The use of the word “manpower” in the Industrial Enterprises Act may raise questions about the provision’s coverage of labor categories. By contrast, the Labor Act covers both “employees” and “workers” in all enterprises employing 10 or more people, tea estates, and enterprises operating within industrial districts regardless of the number of people employed. Section 4A of the Labor Act explicitly prohibits employment of non-Nepali citizens in any post (that of “worker” or “employee”), while specifying conditions under which foreigners can be appointed to “skilled technical post”. The latter implies that the Labor Act renders illegal employment of foreigners in any post other than skilled technical post under any circumstances.
As for recruiting a foreigner for any skilled technical post, the manager has to seek the approval of the DoL, furnishing evidence of the non-availability of any Nepali citizen for the post even after the publication of vacancy announcements in national-level newspapers and journals. If the DoL, upon investigation, finds that no Nepali citizen is indeed available for the post, it may grant approval for the recruitment of foreigner for a maximum period of five years, not exceeding two years at a time, and, in the “specialized kind of skilled technical post”, for a period upto seven years. The Labor Act also requires that arrangements be made for “making the Nepalese citizens skilled and for replacing the non-Nepalese citizens gradually by them”.
Nepali citizens are being bypassed in favor of foreigners—from telecommunications companies to manufacturing firms to hydropower projects, including those with foreign investment.
If it is really serious about enforcing the Labor Act, so that domestic formal sector jobs go to Nepali citizens as far as possible, the government should strengthen the monitoring capacity of the DoL and extend it full support when it decides to take actions against errant enterprises found employing foreigners in violation of the Act. Additionally, while revising the Industrial Enterprises Act in line with the new Industrial Policy, it should be made fully compatible with the Labor Act.
Nepal’s World Trade Organization (WTO) membership does not render Section 4A of the Labor Act null and void, as popular myth would suggest. As part of its accession to the WTO’s General Agreement on Trade in Services (GATS), Nepal had to commit to allowing temporary entry and stay of “natural persons” from other WTO members in 70 sub-sectors of 11 services sectors. Where they conflict, GATS commitments prevail over Section 4A of the Labor Act. Nonetheless, the DoL must be enabled to ensure—in coordination with the Department of Industry, Ministry of Commerce and Supplies (which handles international trade-related matters) and the regulatory bodies concerned—that the employment of foreigners is not in excess of what Nepal has officially committed to.
Three points are notable with regard to the GATS commitments. First, the commitments pertain only to the specified services sectors/sub-sectors, meaning that they are applicable neither to services sectors/sub-sectors not listed in Nepal’s GATS schedule of commitments, nor to non-services sectors (eg, manufacturing). For example, if foreigners are found working in a juice-making factory set up with foreign investment, Nepal’s GATS commitments cannot be invoked to justify that. Second, the commitment to allow foreign nationals to provide commercial services in Nepal is chiefly linked to foreign direct investment (“commercial presence” in GATS jargon), meaning that foreigners cannot just sell their services individually. Third, the commitment is subject to restrictions in terms of job categories and duration of stay.
Only three categories have been opened up: Services sales persons representing a service supplier (provided that sales are not made directly to the general public, and the sales person is not engaged in supplying the service and does not receive remuneration from a source located in Nepal); persons responsible for setting up a commercial presence in Nepal of an enterprise of which they are employees; and intra-corporate transferees (managers, executives and specialists who are employees of firms that provide services in Nepal through a branch, subsidiary or affiliate established in Nepal and who have been in the prior employment of their firm outside Nepal for a period of not less than one year immediately preceding the date of their application for admission). For the first category, entry is limited to 90 days, which may be renewed; for the second category, to one year, which may be renewed; and for the third category, to an initial three-year period, which may be extended for an additional seven years at the most.
Some argue that shortage of skilled Nepali labor caused by massive outflow of Nepali workers makes the hiring of foreigners unavoidable. This argument is hard to accept in the light of the fact that nearly 90 percent of Nepali workers abroad are unskilled or semi-skilled. It also assumes that firms employing foreigners have genuinely sought Nepali candidates. If availability is really an issue, the logical thing to do would be to enable the Council for Technical Education and Vocational Training to live up the goal with which it was established. The contention that employees tend to prefer foreigners over Nepalis due to the latter’s trade union activities is another lame excuse.
For an average Nepali, it is the heavy presence of foreign workers in the informal sector—carpentry, tailoring, plumbing, wiring, construction, you name it—that is robbing them of potential livelihood alternatives far more attractive than toiling in the Middle East or Malaysia. Making work permits mandatory for foreign workers in all types of employment can help alleviate domestic un/under-employment to some extent. But, since most foreigners working in Nepal are from across the southern border, what about the national treatment provision of the 1950 Treaty between the two countries? Well, the Treaty has never been implemented in toto by either party. Besides, there have long been calls over here for abrogating/revising it. Moreover, in the letter exchanged with the Treaty, kept secret until 1959, the need to “afford the Nepalese nationals in Nepal protection from unrestricted competition” was recognized.
kharelparas@yahoo.com
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