Trade Union Situation in Nepal

General Economic Situation

With about 22 million population and having a per capita income of US$ 210, Nepal remains one of the poorest countries of the world. It ranks 144^th position in the UN Human Development Index out of 174 countries listed in the Human Development Report. Nepal’s Human Poverty Index is 51.3 percent. More than fifty percent of its population live on less than a dollar a day. Over 80 percent of population live in rural areas, pursuing agriculture as a source of livelihood, most on small plots that produce insufficient food for survival. If the current growth rate of population (2.5 percent) continues, the population of Nepal will reach 40 million by the year 2020. The Human Development Report concludes that in Nepal the rich are getting richer and the poor are getting poorer. While the richest 20 percent of the population earn 44.8 percent of income, the poorest 20 percent earn 7.6 percent of the income only. Adult literacy is 39.2 percent and school enrolment ratio is 61 percent. The social sector still receives a low priority in budgetary allocation. At present, the human expenditure ratio in Nepal is less than 3 per cent of GNP that is very low as compared to the internationally recommended ratio of 5 per cent.

The average annual Gross National Product (GNP) growth rate of 3.4 percent roughly balances the population growth. The population growth is higher than food grain production (2.2 percent). Until 1975, Nepal used to be a major food grain exporting country. Despite heavy investment and top priority given to the agriculture sector, the country now imports food grain every year from abroad. Ironically, this sector still dominates the economy viewed from the share in GDP contribution. More than 60 percent of its development budget comes from foreign aid and aid constitutes a major instrument for Nepal to escape from poor income, low saving (about 10 percent) and low investment trap. The growing fiscal deficit gap in the economy indicates a trend towards debt spiral. Debt is so huge that even four years of revenue collection cannot pay back the debt. About 90 percent of population do not have access to adequate health services, 29 percent do not have safe drinking water and 85 percent of population do not have access to sanitation. The infant mortality rate is 74.5 per thousand live births. Nepal is the only country in the world in which life expectancy for women is lower than for men. The literacy rate for women is 28 percent and for men 62 percent.

Economic Reform Policies

Until the latter half of 1980s, Nepali state remained hyperactive in the sphere of production, distribution, regulation, circulation and control. After that, low economic growth led to a severe macro-economic instability, such as chronic fiscal deficit owing to low internal revenue mobilisation, fast growing public expenditure, swelling debt burden and declining international reserves. In this context, major donor countries and international financial institutions such as World Bank and International Monetary Fund (IMF) began to set Nepal’s development priorities. The IMF subscribed the government to adopt a Stabilisation Program in 1985 while the World Bank offered Structural Adjustment Program (SAP). In 1990, Nepal witnessed a change in the polity—from partilessness to multi-party, competitive election, provision of human rights, constitutional monarchy and sovereignty of people. In 1992, Nepal entered into another phase of Enhanced Structural Adjustment Facility of the IMF. Accordingly, despite its avowed ideology of democratic socialism, the Nepali Congress government pushed for privatisation and liberalisation of political economy. The Privatization Act 1991, New Industrial Policy 1992, Industrial Enterprises Act 1992, Foreign Investment and Technology Transfer Act 1992 were passed to liberate the economy from politics and society and make it competitive to participate in the opportunities offered by globalization.

Nepal also became a member of Multi-lateral Investment Guarantee Agency of the World Bank and an adherent of the UN Commission for International Trade Law. As a result of liberalisation there have been the establishment of 11 joint venture banks, 40 finance companies, 2 leasing companies, 5 regional development banks and a small stock exchange. The 374 joint venture units operating in the country employ about 62,000 workers. This is a positive contribution of foreign investment but these achievements appear insignificant compared to the existence of over half a million workforce in the county. Nearly 60 percent of all joint venture industries comprise manufacturing sector, followed by tourism 18 percent, service sector 17 percent and agro-based industries 2.5 percent.

On November 29,2000 Nepal concluded a crucial negotiation with the International Monetary Fund (IMF) sponsored Poverty Reduction Growth Framework (PRGF), that will guide the country’s economic decision-making, including social spending for the next three years. Nepal’s entry into PRGF will particularly expedite the pace of economic reform initiated by Nepali Congress government in 1992 but slackened due to ensuing political uncertainty in the second half of 1990s. PRGF mainly focuses on macro-economic stability (low fiscal deficit, low inflation and comfortable foreign exchange reserve), structural reform (privatization of public enterprises, civil service reform and restructuring of financial sector among others) and poverty reduction. Though the IMF mission and high-level government officials concluded the negotiations at the Finance Ministry, it will have to be endorsed by the cabinet and IMF Board of Directors before Nepal enters into PRGF, possibly by April 2001. Besides, Nepal should pass through three crucial requirements to qualify for the entry: it should award the management contract of Rastriya Banijya Bank and Nepal Bank Ltd to private sector; conclude the mid-term Budget review and finalise Poverty Reduction Strategy Paper before April.

Politics of Workers Welfare and Their Situation

In the 1990s there have been noticeable developments in the promulgation of labour acts. Labour Act 1992, Transportation Act 1992, Child Labour Act 1992, Trade Union Act 1993, Working Journalist Act 1994 and Labour Court Regulation Act 1995 have been promulgated. A tripartite National Advisory Board was established in 1994, Labour Relations Committees have been constituted and a Labour Court was established on January 15, 1996 to settle industrial disputes. According to the Department of Labour, the number of industrial disputes stood at 189 in 1991 which came down to 49 in 1999.

But, the economic situation in the country is deteriorating due to wrong policy prescriptions. The industrial sector failed to absorb the surplus labour in the agriculture sector. Consequently, the excessive burden of generating employment has been borne mostly by the agriculture sector alone, further aggravating the unemployment and underemployment situation in the country. Of the total employed population, about 79 per cent are self-employed. Most of the self-employed labour force is concentrated in agriculture (about 71 percent). The employment in the organised sector of the economy has been stagnant standing at about 3 per cent of the country’s population. Out of the total employed in organised sector more than 8 percent of work force constitute non-Nepali origin. The growth of labour force during the last decade was estimated to be almost at 3.5 per cent per annum. This figure, if translated to the population of working age group means that every year about 4 hundred thousand people enter into the job market. The future of those who are unemployed appears bleak. Job prospects on agriculture do not seem promising. There is already a burden of over unemployment on farm sectors. The Central Bureau of Statistics (CBS) in 2000 unveils that agriculture is still the predominant sector of employment for Nepalese either by economic activity (54.7 percent) or occupation (67.3 percent). Informal sector is another major sector of employment—about 73 percent of the jobs outside agriculture. The pace of industrialisation is plummeting, for example, the CBS reveals that the number of manufacturing establishments declined to 3557 in 1997 from 4271 in 1991.

After 1995 the carpet sector has begun to show the signs of decay, following the negative publicity about the use of child labour and the decline in the quality of products, attributed to low quality dyeing. The same year the manufacturing of carpets increased to 1,800 and the number of employees reached 136,144. The weakness on the Nepalese part is that Nepal is only capitalising this market for carpets and garments, not developing the sustainable base of the industries. In the garment sector, there are 900 registered factories in Nepal but only 60 are operational. These factories employ 60,000 workers. This industry started as a quota system under GATT arrangement. But, as the provisions of the Multi-Fibre Agreement go into effect by the year 2000 to the abolition of quota by 2004, Nepal is likely to loose competitive advantage in this sector.

After the opening up of national economy toward liberalisation and globalisation many import substitution industries were closed. So, this sector also could not create additional employment opportunities. On the contrary, price is rising heavily and the real wage is declining.

Origin of Trade Unions in Nepal

The history of trade union movement in Nepal is of recent origin. There were no trade unions in Nepal before 1945 as the country was under the family rule of Ranas. Nepal had followed closed-door economy having almost no relations with the outside world. In 1946 All Nepal Trade Union Congress (ANTUC) was formed. In 1947, Biratnagar Workers Union (BWU) was set up. In March 1947 the first workers’ movement took place at Biratnagar for the establishment of democracy. In 1951 ANTUC and BWU became united and formed the first trade union federation in Nepal. The World Federation of Trade Unions (WFTU) in 1953 granted membership to ANTUC. After the democratic change of 1950, the freedom of association allowed the opportunities to many voluntary organisations in the country and the workers, too, felt the need to be united under one umbrella to fight against the exploitation of the management and the government. The unions existed at that time were:

Biratnagar Workers’ Union, Cotton Mills Workers’ Union, All Nepal Trade Union Congress, Independent Workers’ Union, Biratnagar Mills Workers’ Association, All Nepal United Workers’ Union, All Nepal Trade Union Organisation and Nepal Labour Union. But these unions were merely instruments of the political parties without the capacity of free collective bargaining. This is clear from the fact that Girija Prasad Koirala, now, the president of Nepali Congress Party and late Mana Mohan Adhikari, former president of the United Marxist-Leninist Party, were active both in trade unions and their respective parties. After the success of democratic struggle against 104 years of Rana family rule in 1950 freedom of expression and organisation became part of political life.

The Nepalese political history took a new turn in 1960 when the King staged a putsch, banned the political parties and trade unions and established a partyless Panchayat system in 1962. This system limited the freedom of expression and association but envisioned creating exploitation-free society through the harmonisation and co-ordination of the interests of different classes. For this, six different class organisations including Nepal Labour organisation were created. As this organisation was controlled by the system and also that the central body was heavily politicised, the objective of ensuring the labour welfare remained unfulfilled. Still, some of the noticeable achievements were also made during this period in the field of labour administration, such as, establishment of a separate labour ministry, department and some labour offices and the admission of Nepal into the International Labour Organisation (ILO) as a member.

Multi-party democracy was restored in the Spring of 1990 in the country after the success of people's movement, in which many professional organisations, including workers had actively participated. The Constitution of the Kingdom of Nepal 1990 guaranteed multi-party parliamentary system, human rights, constitutional monarchy and the sovereignty of people. It also granted the freedom of expression and association, which inspired the formation of trade unions. At an early stage, there was mushrooming growth of trade unions. They were heavily divided in the line of political ideologies. Each party has its own unions, if not general federation. With the passage of time, most of these unions could not exist and some of the unions were merged.

Three major federations existing in the country are Nepal Trade Union Congress (NTUC), Democratic Confederation of Nepalese Trade Unions (DECONT) and General Federation of Nepalese Trade Unions (GEFONT).

• Nepal Trade Union Congress (NTUC) was established in 1947 with the objectives of promoting workers rights. The labour movement in Nepal started on March 4, 1947 in Biratnagar against the hereditary Rana rule for the establishment of democracy and advancement of workers’ rights. The ideology of NTUC was based on democracy, nationalism and socialism. After the establishment of democracy in the country in 1950, NTUC became active in the promotion of workers rights to organise, express and struggle for their collective welfare. In 1960 with the dissolution of multi-party democracy in Nepal, trade unions were banned along with political parties for almost 30 years of Panchayat system. With the overthrow of Panchayat polity in 1990 following popular movement for the restoration of democracy, freedom of expression and organization became a part of national life. Nepal Trade Union Congress also revived its organization in 1990 and now works closely to ruling Nepali Congress party in general and current prime minister Girija Prasad Koirala in particular.
• Democratic Confederation of Nepalese Trade Unions (DECONT) is established on May 1, 1997 after it broke away from NTUC. It is not affiliated to Nepali Congress party but works closely with former Prime ministers Krishna Prasad Bhattarai- Sher Bahadur Deuba group in particular. This division extends to the grassroots level on factional lines of the political party.
• General Federation of Nepalese Trade Unions (GEFONT) was established in July 20, 1989 with four founder federations: Nepal Independent Workers Union (NIWU), Independent Transport Workers’ Association of Nepal (ITWAN),Nepal Independent Workers’ Union (NIHWU) and Trekking Workers’ Association of Nepal (TWAN). It is affiliated to Communist Party of Nepal Unified Marxist-Leninist party (CPN-UML). A small faction splinted from GEFONT formed Independent Confederation of Nepalese Trade Unions (ICONT) on March 14, 1998. ICONT is affiliated to CPN Marxist-Leninist party (CPN-ML).

Trade Union Federations, Their Affiliates and Areas Covered by Them

International Affiliations: NTUC is the sole federation affiliated to ICFTU in Nepal. Out of 20 national affiliated unions of NTUC 12 of them are affiliated to different International Labor Secretariats.

NTUC is working closely with FES, JILAF and ILO.

General Federation of Nepalese Trade Unions(GEFONT)

The central committee of GEFONT consists of 37 persons. The National Congress proportionally elects delegates from the National Affiliates and sends to National Council. National Council consists of proportionally elected members from each of the affiliates, full time activists, advisors and experts but not more than 25 percent of the total elected members. National Committee is composed of chairman (Mr. Mukund Neupane), Secretary-General (Mr. Bishnu Rimal), and Treasurer (Mr. Binod Shrestha) 3 regional co-ordinators, 6 Chiefs of Central Departments, 10 Chairpersons of Zonal Committees, and 15 Elected Members of National Affiliates. Election takes place every four years.

Address: General Federation of Nepalese Trade Unions (GEFONT Po. Box: 10652 Man Mohan Labor Building, GEFONT Plaza, Putali Sadak, Kathmandu, Nepal. Tel: 248072; Fax: 248073; E-mail: info@gefont.org Website: www.gefont.org

GEFONT works closely with ILO, FES, DANIDA, Asia Monitor Resource Center (Hong Kong), Asia-Pacific Workers’ Solidarity Links, etc.

Democratic Confederation of Nepalese Trade Unions (DECONT)

Central Committee comprises 29 elected members and two nominated by the President in every four years. There are five regional vice-presidents from five Development Regions, which includes one woman as additional one. All the presidents of National Affiliates are members to Central Committee. Then there are district and unit committees at enterprise levels. DECONT president is Mr. Rajendra B. Raut, Vice-President is Ms. Rama Paudel and General-Secretary is Mr. Khila Nath Dahal.

Address: Democratic Confederation of Nepalese Trade Unions, Po. Box: 13440; Tel and Fax: 488486 Kathmandu, Nepal.
Email: udecont@wlink.com.np Website: http://www25.brinkster.com/decont

Besides these three confederations, there are other trade unions affiliated to smaller political parties but not registered with the Department of Labor. These Unions are:

Process of Union Formation

There are three tiers of Union. At enterprise level, formation of union requires 25 percent of the total members and a minimum of 10 persons. Five thousands members from similar type of enterprise can enter into contract and can form a union. Those outside enterprises, such as trade, commerce, self-employment or service sector can also form a union if they have 500 members and enter into agreement for this purpose. In informal and agriculture sectors 5000 members from 20 districts (not less than 100 person from each district) are required to form a union. Fifty-enterprise level union can form a National Level Union. While 10 national level unions out of which 6 should be from organized sector can form Trade Union Federation.

Membership

There is no precise account of membership of the unions. However, various studies show that GEFONT is the strongest union in terms of membership as it covers roughly 310,575 members whereas NTUC and DECONT 200,000 and 50,000 respectively. GEFONT has a stronghold in carpet, garment, trekking, transport and small hotel unions in Collective Bargaining Agreement (CBA) election and NTUC is powerful in financial, corporate and press unions. Both GEFONT and DECONT are active in informal sectors and blue -collar workers while NTUC is strong in White-collar workers. DECONT’s performance in CBA election has yet to be seen as it is established only two years back so is the case with ICONT which is a break away of GEFONT about two years ago, and affiliated with CPN Marxist-Leninist Party.

Union Activities

As stated earlier, the history of trade unions in Nepal is not very old which dates back only to a decade. Despite this, lots of unions do exist. The multiplicity of union has a mixed result, both positive and negative in the labour movement of Nepal. Positive in the sense that it has covered different areas viewed from unionisation process which otherwise would have remained untouched and negative in the sense that this has weakened the strength of workers resulting in poor organisation and bargaining power. Trade Unions in Nepal are economically very weak. The number of paid members is very low as compared to the unpaid members. Despite their limited resources, they have been able to conduct many programmes, some of which are supported by international organisations. These programs mainly include, education (both formal and informal), training (both training of trainees and trainers), occupational health and safety programmes (fixed and mobile), campaigning for the unionisation of informal sectors, campaigning against the use of child labour and some regular and occasional publication. Trade unions have achieved a lot, at least, to impart the knowledge about trade union rights and duties to the workers. Consequently, the unionisation process is on rise in the organised sector. They are also strongly lobbying for the social security bills, which has already been tabled in the parliament. And, recently amended Labour Act has opened up the scope of union formation even in the unorganised sector which is also the outcome of unified efforts of the unions. All the major trade union federations (GEFONT, DECONT and NTUC) are concentrating their efforts to form union in the agriculture sector.

The Unorganised Sector

Un-organised sector, popularly known as informal sector can be defined in the Nepalese context as those sectors employing less than 10 employees/ workers. The common characteristics of this sector are; 1. Free entry and exit of the workers 2. Low income 3. Low productivity 4. Low capital intensity and 5. Low scale of operation. The ILO defines this sector as " comprising small scale units largely of individuals, self employed producers in urban areas, some of whom employed family labourers and or a few hired workers, which operate with very little capital or none at all, which utilise a low level of technology and skills, which operate at a low level of productivity, which generally provide very low and irregular income and highly unstable employment to those who work in them. They are informal in the sense that they are unregistered and unrecorded in official statistics and studies, have little or no access to organised markets to credit institution, to formal education and training institution or to many public services and amenities".

This also exactly applies to the Nepalese informal sector. Based on the above definition, for simplicity, the Nepalese informal sector can be divided into two broad categories; 1.Self employed persons, and 2. Wage earners self employed persons are those who work with their family or with the help of occasional outside labour such as small owner cultivators, share croppers, tenant, fishermen, animal husbandry, artisans, street vendors, rikshaw pullers etc. whereas wage earners are those who operate on a casual basis.

Informal workers are unprotected, deprived of legal facilities and other social security measurers which most of the workers of organised sectors enjoy. They suffer from many handicaps, such as underemployment, low skill, low income, no access to resources and as this sector is covered by labour legislation, and the workers are vulnerable to various political, economic and social pressure. They have no bargaining power and ‘strike’ also no longer remains their weapon, because if they call strike for a day they have to starve the another day as they have nothing in store.

However recently, the government of Nepal has amended the Labour Act 2048 under which a national union can be formed and this union can be affiliated to the general federation. But the procedure is not an easy task, as it requires 5000 workers at least 100 from each of the 20 districts. Independent union in this sector is therefore out of the question. At present, all the three general federations (NTUC, DECONT and GEFONT) are trying to form union in this sector and most likely they will be able to register it in the Department of Labour. But even then the question of survival remains there given the temporary nature of the work and the work place. Despite this situation the newly amended Act has broadened the scope of trade union operation as it also brings the agriculture labourers into the mainstream of union. The new provision has also made it possible that a total of 500 self-employed workers can form a national union. But whether all these will be translated into reality is a matter of wait and see especially in a condition where both informal sector workers as well as employers are totally ignorant of the trade union principles and philosophy.

Nepal & Core Labour Standards

Nepal became the member of International Labour Organisation in 1966. Until now, it has ratified the following seven conventions:

Trade Unions are also lobbying with the government for the ratification of conventions 29, 87 and 105. In this connection, Nepal Trade Union Congress recently organised a meeting where parliamentarians, labour minister, party members and even prime minister (all from Nepali Congress only) were invited which aimed at sensitising them for the ratification of these labour standards. In order to evaluate the implementation of these ratified conventions, the Government of Nepal has established a separate ILO Section under Department of Labour as per Article 22 of ILO convention. However, the implementation aspect of ratified standards are so weak that there are a number of cases where these have been violated by the parties involved (tripartite) especially from the Government and the employers side. The government is insensitive and has not shown its sincerity for the effective implementation of these standards by introducing them in appropriate legislation. Most of the labour laws pay attention only to the permanent and temporary workers and not to the contract workers and workers working in other areas, such as transport, mining and construction.

Minimum Wage For Workers

In January 2000, HMG Nepal fixed minimum wage for agricultural workers. Accordingly, a worker gets Nrs. 60 per day (Nrs. 7.50 per hour). District Development Committee can also increase the amount of minimum wage based on their capacity. On April 25, His Majesty’s Government had, in accordance with the Labor Act 1992 and on the recommendation of the committee formed to fix the minimum wages, fixed the minimum wages for workers and employees working in institutions other than the tea industries where the act is yet to be enforced. According to the Labor Ministry, the minimum wage for unskilled labourer has been fixed at Rs. 1,450 per month, Rs. 1,500 for semi-skilled, Rs. 1,610 for skilled and highly skilled and Rs. 1,144 for child workers. The above-mentioned minimum wage also includes an additional dearness allowance of Rs. 666 for adults and Rs. 500 for children. Likewise, adult workers working on a daily basis is entitled to receive Rs. 74 per day while children will receive Rs. 60 per day.

Nepal Rugmark Foundation

This Foundation was established on December 5, 1995 with the support of GTZ, UNICEF, NTUC, and AFFLI with the objective of issuing licence to those producing child labour-free carpet and promoting child rights including their education and health facilities as well as the rehabilitation of the children working in carpet factories. Carpet exporters of 108 institutions and 375 factories are affiliated to this foundation. The Foundation stamps its logo on the carpet being exported abroad for which exporters have to pay 0.25 percent while importers 1 to 2 percent of the cost of carpet. The money thus raised is donated to the foundations of countries like Nepal, India, Pakistan etc.

FES and Trade Union Partners

Organisational Relationship

• Visit of FES delegation led by Mr. Erwin Schweisshelm in Kathmandu in 1997 and meeting with all the trade union partners
• Visit of DGB team led by Dr. Ernst J. Kerbusch in 1998 to NTUC, GEFONT and DECONT office.
• Visit of Mr. Klaus Zwickel, Chairman, IMF and his secretary to Nepal on July 28,2000 and meeting with all trade union partners.

Nepal Trade Union Congress (NTUC)

Nepal Trade Union Congress is the first trade union partner to have co-operation with FES. FES has been supporting it and also its affiliates (Financial Employees Union of Nepal and Nepal Press Union) for the last one decade in the following areas:

Capacity Building

• Various Training Manuals for trainees and trainers
• Publication of simplified version of Trade Union Act and Labour Act
• Translation of various trade union materials into Nepali
• Seminars on issues of labour legislation, structural adjustment program, collective bargaining, health and safety and leadership empowerment programs.
• Material support in the form of medicine and books
• Facilitated participation in various regional and international seminars
• Visit of Nepal Press Union delegation led by Mr. Tara Baral, the then President of NPU to Germany in 1998.

Democratic Confederation of Nepalese Trade Unions (DECONT)

FES was the first International Organisation to join hands with DECONT after its formation as a general federation, two years back. It has provided material help (purchase of Medicine) to DECONT run health camp for carpet workers. Besides, FES has been co-operating with DECONT in carrying out a number of Leadership Empowerment Training Programmes.

General Federation of Nepalese Trade Unions (GEFONT)

Capacity Building

* Training Manuals on:

• Information handling, documentation and Union office management
• Trainers Handbook
• Seminars on the issues of collective bargaining, health and safety, labour economics and impact of structural adjustment on workers
• International exposures through participation in international seminar
• technical training to GEFONT official on various software of computers and office management
• Material support in the form of books
• Sharing Experiences and Promoting Understanding at the International Level
• Discussion on the subject of mutual co-operation with FES headquarter officials by Mr. Mukund Neupane, chairman of GEFONT and the then Labour Minister
• FES Meeting in Geneva ( organised in conjunction with ILO)
• Participation of GEFONT delegates to various meeting held in other South Asian countries