Anita works as a packer for a company using incense sticks in Birgunj on the Indian border.

She works an eight-hour shift, six days a week, sitting on the concrete floor of an old dilapidated factory. There are about 60 other workers, all women and young girls, some not yet teenagers, performing the same task in cramped, hot and dusty conditions.

The manager of the factory explains that men in Nepal would never accept such work. Anita’s husband, like many men in Nepal, has gone abroad to find employment.

Anita works entirely on ‘piece-rate’ and earns the equivalent of US$0.45 a day. She explains that with this income she and her daughters survive on a diet of rice and salt. If they are lucky, once a month they get to eat some meat.

Although Anita had previously never been involved in politics or trade union activities before, she joined the All Nepal Federation of Trade Unions (ANFTU) in 2006 and became an active enterprise-level leader.

“Poverty has driven this placid, apolitical grandmother to become a militant agitator”, explains Robert Kyloh, the author of the study (Note 1) and ILO labour market specialist. According to the study, a massive 83 per cent of Nepalese workers do not earn enough to lift themselves and their families above the US$2 a day poverty line.

About 20 kilometres up the busy potholed road from where Anita works is the town of Simra and the pristine premises of Surya Nepal, a multinational tobacco company.

Working conditions here are definitely decent and the pay is high by local standards. Millions of Nepalese dream of getting a job in a place like this. In late 2006, however, the company was subjected to demands for wage rises and a well-publicized ‘wildcat’ strike –although most workers were already receiving more than double the minimum wage.

The company sought clarification on its legal obligations from the regional and local labour offices which are supposed to perform mediation, conciliation and labour inspection functions. But the regional office did not reply and the staff in the local office was too inexperienced and scared to reach and impose a fair decision. In the end, management conceded and granted all the factory staff a significant pay rise.

The way forward: labour market reforms

The plight of Anita and the predicament that the tobacco company recently faced are not unusual – stories like these are being repeated day in, day out in the new Nepal.

“The re-emergence of the militant Maoist trade union and the recent upsurge in strikes and demonstrations in Nepal question the sustainability of the existing industrial relations system. A reduction in workplace tension is needed to cement in place the recent peace agreement, facilitate political stability and promote economic growth”, says Robert Kyloh.

His study reviews the history of labour relations in Nepal and considers criticisms of the existing industrial relations system. Focusing on broad economic developments since 1990, it sheds light on how labour legislation and labour institutions have influenced investment, growth and jobs over the long term.

The views of those most directly affected by the labour legislation, institutions and attitudes that govern industrial relations in Nepal have been collected through surveys and interviews with managing directors and entrepreneurs, trade union leaders and hundreds of ordinary workers from a range of locations, industries and occupations.

These views have heavily influenced the conclusions presented in the study. It recommends some moderate adjustments to labour legislation to remove unnecessary rigidities and improve the clarity of the laws. More importantly, the study supports a substantial strengthening of labour market institutions, which could be used to settle worker grievances and thus reduce the number of strikes and other forms of industrial action.

According to the study, labour market reforms need to address major shortcomings in the way industrial relations operate, including a weak and inefficient labour inspection system. The study insists on the need to upgrade existing labour market institutions, including labour offices which are responsible for labour inspection, mediation and arbitration in the event of an industrial dispute, the Labour Court and the labour section of the Ministry of Labour.

The study also recommends comprehensive reforms to the current inadequate social security system in the country. These include the introduction of a new social insurance unemployment benefit scheme to help cope with any increase in unemployment resulting from changes in the dismissal laws; improvements of tax-financed benefits for the elderly; and the introduction of a universal child benefit.

“The ultimate objective must be a fundamental change of attitudes among employers and trade unions. The current ‘winner takes all’ approach to industrial relations, in which both management and unions attempt to extract the maximum from the other side when they are in a position of strength, is short-sighted and detrimental. The situation requires labour market reforms that encourage a more long-term perspective and that remove the need for both unions and employers to rely on fear and intimidation to achieve their objectives”, concludes Robert Kyloh.

Reforms subsequently proposed by the ILO to the labour legislation, labour market institutions and social security system were agreed to in principle by the tripartite Central Labour Advisory Committee in early 2008. The ILO is currently working with its constituents in Nepal to further develop and fully implement these recommendations.

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Note 1 – From conflict to cooperation. Labour market reforms that can work in Nepal, by Robert Kyloh, International Labour Office, Geneva, 2008.