Nepali Times
Business is bad, and could become worse

The February 10 deadline labour unions have given government to resolve the service charge hotel workers are demanding expires in under a month. The threat of a strike looms large and comes at a time when the spring tourist season and bookings begin. But even this is no longer an issue, businesses say, given how the investment climate in Nepal has deteriorated over the past year.

Last week (Trade in tatters, NT #24) we wrote about how bad things were-it could now be getting worse. Large multinational companies are getting increasingly edgy about doing business in Nepal, wondering if it's worth their while at all. "Last week we had a meeting and they are very worried," says Prabhakar Rana, chairman of the Soaltee Group, which also runs Surya Tobacco. "That's more worrying to us because they can afford to just pack up and go." The Nepal operations of a company like Unilever-whose Indian operations even account for only 2 percent of its global business-doesn't mean much to the conglomerate. But businesses know that a company of that scale packing-up means irreparable losses for Nepal as a whole, and a dark shadow over business prospects.

Just look at some of the problems they already face: The government is sitting on over Rs400 million of money belonging to companies like Unilever. Worse still, it shows no signs of being willing to pay it back. "At the very least, it could promise to pay back in instalments. We know the government has used the money already," a business source said. "Instead they refer us to one ministry or another and keep us going in circles."

Now businesses say there are other issues the government must decide. Chief among them is whether it wants a liberal business environment. It indicates nothing of the sort, and is far from amending a number of regressive clauses in the Company and Labour laws. "Or the government should declare that we want to go back to agriculture and we're prepared to pick up the spades and get to work," says Rana. This middle-of-the-road vacillation won't get us anywhere, he adds.

The coalition of 16 business and industry groups that came together to fend off the unions' threat to shut down hotels is particularly worried by the lack of governance, which has become clear in recent weeks. The coalition has commissioned two studies, one to look into the socio-economic impact of the 10 percent service tax demanded by the worker's unions, and another to unscramble the legal tangles governing business and investment. The report is to be submitted to the government in the coming weeks.

Rajendra Khetan, the chair of the Employer's Council at the Federation of Nepalese Chambers of Commerce and Industry does not mince words: "The labour law needs to be balanced, we want inclusion of the no work-no pay principle and the right to fire unproductive employees," he says. Other worries: Nepal is perhaps the only country in the world that has close to 150 officially sanctioned non-working days. "Add to that the two-day weekends, and we end up having barely five months of workdays in the Kathmandu Valley, but we're required to pay 13-month salaries."

(11 JAN 2013 - 17 JAN 2013)