A hotel strike planned for mid-December threatens to wreck years of concerted effort to develop Nepal into a major tourist destination, and unleash a chain reaction of damage on the economy. Hotel workers agitating for a ten percent service charge are in no mood to compromise, and hotel owners seem adamant to lock out. The government is trying to mediate, so far ineffectively, while the 12 December deadline for the strike looms ahead.

Having agreed to postpone their agitation on 19 November, the Hotel Workers' Joint Agitation Committee (HWJAC) says thousands of members of the two unions under its umbrella will start wearing black armbands to work starting Thursday next week. If there is no agreement they will then launch an indefinite strike from 12 December. Eyeball-to-eyeball, the Hotel Association of Nepal (HAN) says it is still "optimistic" about finding a "amicably acceptable solution". But privately hotel owners are defiant: they say they will shut down the hotels, come what may.

The HWJAC says the strike threat is the culmination of its 20-year struggle to get a 10 percent service charge added on all hotel bills. Five-star hotels in Nepal have at various times over the last decade agreed to the service charge demand provided the government gave the nod. But the official sanction never came, and the agreement with the unions could not go into effect. According to documents made available to us, Hotel Soaltee had as far back as 1991 agreed with its workers' union to introduce the 10 percent service charge from October the same year on condition that the government did not object. According to the unions, other hotels like Yak and Yeti, de l' Annapurna, Shangri La, Malla, and Dwarika's, had also stated they had no problems with the service charge. But the government approval never came.

So why did the government drag its feet? The only explanation seems to be that successive governments have been far too pre-occupied with staying in power to devote attention to much else-even to a sector of the economy as vital as tourism. In 1997, the Ministry of Labour did form a taskforce to study what the economic impact of levying a 10 percent service charge would be. However, the taskforce avoided making any recommendations claiming that it was not mandated to do so, but neither did it rule out a service charge. Analysts now say that the two parties could have used that document as a basis for negotiation.

The government's reluctance to announce a service charge in hotels even after several of the big players have agreed to it in principle, and the present intransigence on the part of some hotel owners has intrigued some independent observers. "The present inflexibility displayed by HAN represents the vested interest of a certain class of investors in the hotel industry," says one independent industrial relations expert, who requested anonymity. "Levying service charge helps make hotel transactions transparent, and some hotels might not find that desirable."

HAN says it represents the entire hotel industry, and is not lobbying on behalf of any particular section. A HAN representative says he is "hopeful" that the mediation panel constituted on 14 November (a day after the unionists agreed to postpone the 19 November agitation) would be successful in convincing the unions to wait for another three months. By then the high-powered committee would have submitted its report on introducing the service charge. However, HWJAC has refused to recognise the committee saying it was "tricked" into postponing the strike. HWJAC refused to attend mediation meetings called by the government twice this week.

"We do not recognise the committee and we will not sit for talks unless the government and the management promises to levy the service charge. We are ready to wait for another six months or a year to decide on the modality and percentage of the service charge," HWJAC member secretary Bishnu Lamsal told us. This shows some flexibility on the part of the unions, and could be the starting point for compromise. But, as the deadline approaches, it is difficult to see how a shutdown can be avoided if hotel owners and the unions are not even speaking to each other.

Despite official optimism on the part of HAN, it is easy to see that both sides are rolling up their sleeves for a showdown. Says HAN President Narendra Bajracharya: "We are not going to compromise on anything before the report of the high-powered committee comes about. And, even if the government decides to levy the service charge we will not comply under the present structure of taxation and the present investor-unfriendly Labour Act."

Bajracharya says that by rejecting the government committee, unions have directly challenged the government. He is adamant that there have to be changes in the taxation and labour laws because without that Nepal's tourism products would not be competitive in the regional market. Other countries that have the service charge provisions, he said have lower taxes on other items and limit the collective bargaining rights of unions.

HAN has already registered its demand that the Labour Act 1991 be amended, describing it as an obstacle towards a liberal economic policy. In another attempt to avoid the proposed strike, HAN has already appealed to the government to put the hotel industry under the Essential Services Act that would outlaw all kinds of lockout and strikes in the sector. Given the trade union background of the prime minister himself the government is not quite likely to agree to that, but that has not stopped HAN from trying.

For the first time in 20 years, the HWJAC has brought together the Nepali Congress-supported Nepal Tourism and Hotel Workers' Union and the UML-backed Nepal Independent Hotel Workers' Union. A HAN insider says that if the proposed strike is postponed, the government could influence the NC-supported union to withdraw the strike threat. But that may not solve the problem because the rival union backed by the UML is likely to continue the strike, and add a politically polarised element to the current dispute.


What is stopping you from sitting for talks to resolve the issue?

From the very beginning we have shown flexibility to resolve this issue through talks. At the request of the government we agreed to postpone our agitation, overcoming opposition from our members. But the employers and the government took our decency to be our weakness. Instead of finding ways to end the deadlock, the government constituted a committee to study our demands that we refuse to recognise. The employers are not sincere about ending this dispute. They have, till date, cheated the workers of their rightful benefits. They have broken promises to introduce the 10 percent service charge time and again, and this time they are trying their best to impose the Essential Services Law and to deny the workers from exercising their right to peaceful agitation. But nothing will stop us this time, not unless an agreement is reached between the employers and unions.


Are you not concerned about what a lockout can do to the economy?

We have not conducted a comprehensive study to assess what ill effect our strike will have on the national economy, but we are aware that such strikes cost everyone dearly, the government, the employers and the workers themselves. We are aware that one million family members of hotel workers will suffer if we are made to go for a lockout. But what we also realise is that the peak tourist season is the most effective time to make our points clear to the government and the employers. We are putting our own and our family's welfare at stake to make our point, to tell
the government and the employers that we can and will use our collective strength to get what we should rightfully get.

Why is the 10 percent service charge so important?

It is customary to fix a percentage of service charge in hotel sectors all over the world. We are not demanding an extra benefit, but asking what rightfully is ours. By not agreeing to a charge that would bring equal benefit to workers in all areas of the hospitality business, the employers are encouraging mistrust among workers themselves. That will certainly affect their productivity. Fixing a service charge is helpful also to ensure other rights of the hotel workers such as bonuses on a hotel's profit. But it is not only for the workers' benefit that we are staging this agitation, it is also good for the national economy. It makes the hotel accounts transparent, and helps the government collect tax from this sector.