10. Political and Security Environment
In 2017, Nepal successfully held local, provincial, and national elections to fully implement its 2015 constitution. The Madhesi population in Nepal’s southern Terai belt, together with other traditionally marginalized ethnic and caste groups, believes the constitution is insufficiently inclusive and that its grievances are not being addressed. This dissatisfaction led to widespread strikes across the Terai and blockages along the India-Nepal border that halted cross-border trade and transit. The disruptions across the Terai lasted from August 2015 until February 2016. Some protests resulted in violent clashes with security personnel and 55 protesters and police were killed. Post-election, however, this feeling of disenfranchisement may be somewhat assuaged due to the fact that Madhesi parties achieved a majority in the Province 2 provincial assembly elections. In 2018, the Communist Party of Nepal (Unified Marxist Leninist) and the Communist Party of Nepal (Maoist Center) merged to form the Nepal Communist Party, currently in power.
Criminal violence, sometimes conducted under the guise of political activism, remains a problem. Bandhs (general strikes) called by political parties and other agitating groups sometimes halt transport and shut down businesses, sometimes nationwide. However, in the last several years, few bandhs have been successfully carried out in Kathmandu. Americans and other Westerners are generally not targets of violence.
U.S. citizens who travel to or reside in Nepal are urged to register with the Consular Section of the Embassy by accessing the Department of State’s travel registration site at https://step.state.gov/step, or by personal appearance at the Consular Section, located at the U.S. Embassy Kathmandu. The Consular Section can provide updated information on travel and security, and can be reached through the Embassy switchboard at (977) (1) 423-4500, by fax at (977) (1) 400-7281, by email at email@example.com, or online at http://np.usembassy.gov.
U.S. citizens also should consult the Department of State’s Consular Information Sheet for Nepal and Worldwide Caution Public Announcement via the Internet on the Department of State’s home page at http://travel.state.gov or by calling 1-888-407-4747 toll free in the United States and Canada, or, for callers outside the United States and Canada, a regular toll line at 1-202-501-4444. These numbers are available from 8:00 a.m. to 8:00 p.m. Eastern Time, Monday through Friday (except U.S. federal holidays).
Over the last ten years, there have been frequent calls for strikes, particularly in the Terai. Occasionally, protesters have vandalized or damaged factories and other businesses. On February 22, 2019, a small improvised explosive device (IED) was placed overnight outside the entrance of NCell, Nepal’s second largest mobile carrier. One person died and two others were injured. The Indian-run Arun 3 hydro-power plant has been targeted by IEDs on three occasions and in early-2018 the U.S. Embassy put out a security notice about credible threats of violence targeting the private Chandragiri Hills Cable Car attraction. Such incidents remain infrequent, but unpredictable. Demonstrations have on occasion turned violent, although these activities generally are not directed at U.S. citizens or businesses. Over the past two years, Biplav, a splinter Maoist group, has threatened or attempted to extort NGOs, businesses, and educational institutions across Nepal. Violence does not always follow a rejection, but the threat remains.
11. Labor Policies and Practices
Nepal’s labor force is characterized by an acute lack of skilled workers and an abundance of political party-affiliated unions. Only a small proportion (14 percent) of Nepal’s working age population has a secondary or above secondary education. In Nepal, there is little demand for skilled workers, and prior to the COVID pandemic, thousands of skilled and unskilled Nepalis departed each year to work in foreign countries, primarily Qatar, the United Arab Emirates, Saudi Arabia, Kuwait, South Korea, Japan, and Malaysia. Thousands more also sought employment in India, which pre-COVID, shared an open border with Nepal. Nepal’s unemployment rate of 11 percent and high rates of underemployment have provided push factors, but the gap between overseas migrant workers’ and domestic wage rates has made it difficult for Nepal’s agricultural and construction sectors to find enough workers, and many companies import laborers willing to work for lower wages from India.
According to the Central Bureau of Statistics, the country’s literacy rate is 65.9 percent, with the literacy rate for men at 75.1 percent and 57.4 percent for women. Vocational and technical training are poorly developed, and the national system of higher education is overwhelmed by high enrollment and inadequate resources. Many secondary school and college graduates are unable to find jobs commensurate with their education levels. Hiring non-Nepali workers is not, with the exception of India, a viable option as the employment of foreigners is restricted and requires the approval of the Department of Labor. The Act and Labor Regulations of 2018 limit the number of foreign employees a firm can employ and the length of time foreign employees can remain in Nepal to three years for those with non-specialized skills and five years for those with technical expertise. These terms are renewable, but only after the employee has departed Nepal for at least one-year, further undermining firm’s ability to retain needed staff based on business needs.
Under Nepali law, it has historically been difficult to dismiss employees. Labor laws differentiate between layoffs and firing. In some cases, Nepal’s labor laws have forced companies to retain employees, even after a business has closed. Workers at state-owned enterprises often receive generous severance packages if they are laid off. Unemployment insurance does not exist. Many private enterprises hire workers on a contract basis for jobs that are not temporary in nature as a way to avoid cumbersome labor laws. In some commercial banks and other businesses, security guards, drivers, and administrative staff jobs are filled by contract workers. The Industrial Enterprise Act of 2016 and the Labor Act of 2017 both include a “no work, no pay” provision, and the later clarifies processes for hiring and firing employees. In practice, it remains difficult to fire workers in Nepal and the Labor Act encourages the hiring of Nepali citizens wherever possible. Some labor union representatives said the new Labor Act is generally worker friendly. It is unclear how effectively this law is being enforced. The new act details requirements for time off, payment, and termination of employees. It also has some provisions to end discrimination in the workplace. According to the act, the employer is prohibited from discriminating against any employee based on religion, color, sex, caste and ethnicity, origin, language or belief or any other related basis. The Labor Act also confirms that employees shall have the right to form a trade union.
By law, labor unions in Nepal are independent of the government and employer. In practice, however, all labor unions are affiliated with political parties, and have significant influence within the government. The constitution provides for the freedom to establish and join unions and associations. It permits restrictions on unions only in cases of subversion, sedition, or similar circumstances. Labor laws permit strikes, except by employees in essential services such as water supply, electricity, and telecommunications. Sixty percent of a union’s membership must vote in favor of a strike for it to be legal, though this law is often ignored. Laws also empower the government to halt a strike or suspend a union’s activities if the union disturbs the peace or adversely affects the nation’s economic interests; in practice, this is rarely done. Labor unions have staged frequent strikes, often unrelated to working conditions, although they have become less frequent and less effective in recent years. Political parties will frequently call for national strikes that are observed only in particular regions or that only last for a few hours. In the past year, Post is not aware of any strike that lasted long enough to pose an investment risk. The SEZ Act approved in August 2016 prohibits workers from striking in any SEZ. There are two SEZs under development but the GoN hopes to eventually have as many as 15.
Total union participation is estimated at about one million, or about 10 percent of the total workforce. The three largest trade unions are affiliated with political parties. The Maoist-affiliated All Nepal Trade Union Federation (ANTUF) is the most active and its organizing tactics have led to violent clashes with other trade unions in the past. The ANTUF and its splinter group, the ANTUF-R, are aggressive in their defense of members and frequently engage in disputes with management. A U.S. company in Nepal was shut down twice in 2013 and 2014 by workers associated with the Maoist-affiliated ANTUF-R. Labor union agitation is often conducted in violation of valid contracts and existing laws, and unions are rarely held accountable for their actions.
Collective bargaining is only applied in establishing workers’ salaries. Trade unions, employers, and government representatives actively engage in this practice. Nepal’s Labor Act, updated in 2017, and includes two types of labor dispute resolution mechanisms, one for individual disputes and one for collective disputes for businesses with 10 or more employees. If a dispute cannot be resolved by the employee and management, the case is forwarded for mediation. If mediation is unsuccessful, it is settled through arbitration. For individual disputes, the employee is required to submit an application to the business regarding their claim. The company’s management should then discuss the claim with the employee in order to settle it within 15 days. If a claim made by the employee cannot be settled between the employee and the company, the issue may be forwarded to the Department of Labor where discussions shall be held in the presence of Department of Labor officials. If the employee is not satisfied with the decision made by the Department of Labor, they can appeal to the Labor Court.
The Labor Act is applicable only to companies, private firms, partnerships, cooperatives, associations or other organizations in operation, or established, incorporated, registered or formed under prevailing laws of Nepal regardless of their objective to earn profit or not. The Labor Act does not apply to the following entities: Civil Service, Nepal Army, Nepal Police, Armed Police Force, entities incorporated under other prevailing laws or situated in Special Economic Zones to the extent separate provisions are provided, and working journalists, unless specifically provided in the contract.
Nepal’s enforcement of regulations to monitor labor abuses and health and safety standards is weak. Operations in small towns and rural areas are rarely monitored. International labor rights are recognized within domestic law. No new labor-related laws have been enacted in the past year.
The GoN does not fully meet the minimum standards for the elimination of trafficking, though it is making significant efforts to do so. The definition of human trafficking under Nepal’s Human Trafficking and Transportation (Control) Act (HTTCA) does not match the definition of human trafficking under international law. In March 2020, the GoN acceded to the 2000 UN TIP Protocol, however, it has not been fully ratified. Children in Nepal are engaged in child labor, including in the production of bricks, carpets, and embellished textiles. The Labor Inspectorate’s budget, the number of labor inspectors, and relevant resources and training are all insufficient for effective enforcement of Nepal’s labor laws, including those related to child labor. The most recent Human Rights Report can be found at: https://www.state.gov/reports/2019-country-reports-on-human-rights-practices/nepal/. The Department of Labor’s 2018 Findings on the Worst Forms of Child Labor is available at:
Nepal has a modest level of trade with the United States, with USD 214 million in bilateral trade in 2019. In late 2016, the Nepal Trade Preferences Program – which grants duty free access to certain products made in Nepal – went into effect. Nepal exported approximately USD 3.1 million worth of goods in 2019 under this program. To remain eligible for this program, Nepal must meet certain labor standards.