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From Conflict to Cooperation   
From Conflict to Cooperation

Labour Market Reforms that can work in Nepal

Robert Kyloh
This edition is published in India by
Academic Foundation, New Delhi
under arrangement with
International Labour Office, Geneva.
Paperback Book   :   Pages : 218
2008  Edition         :   ISBN - 978-81-7188-687-6
Price : Rs. 495.00
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This book reviews the history of labour relations in Nepal and considers criticisms of the existing industrial relations system. It reports on the re-emergence of the militant Maoist trade union and the recent upsurge in strikes and demonstrations in Nepal. A reduction in workplace tension is needed to cement in place the recent peace agreement, facilitate political stability and promote economic growth.

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 this volume.

The International Labour Organization :

The International Labour Organization was founded in 1919 to promote social justice and, thereby, to contribute to universal and lasting peace. Its tripartite structure is unique among agencies affiliated to the United Nations; the ILO's Governing Body includes representatives of governments, and of employers' and workers' organizations. These three constituencies are active participants in regional and other meetings sponsored by the ILO, as well as in the International Labour Conference a world forum that meets annually to discuss social and labour questions.

Over the years the ILO has issued for adoption by member States a widely respected code of international labour Conventions and Recommendations on freedom of association, employment, social policy, conditions of work, social security, industrial relations and labour administration, and child labour, among others.

The ILO provides expert advice and technical assistance to member States through a network of offices and multidisciplinary teams in over 40 countries. This assistance takes the form of labour rights and industrial relations counselling, employment promotion, training in small business development, project management, advice on social security, workplace safety and working conditions, the compiling and dissemination of labour statistics, and workers' education.





1. Introduction

1.1 Background

The road to peace

Law and order concerns

Rise of the anftu

Improving industrial relations

National policy priorities

1.2 Methodology

Case studies: Union activists

1.3 Key objectives

2. The politics of labour .

2.1 Introduction

2.2 History of modern Nepal

Beginnings of industrial relations

One-party panchayat system

Trade unions’ role in the push for democracy

Introduction of labour legislation

Deterioration of industrial relations environment

Developments since 2000

3. The concerns of capital .

3.1 Labour legislation

Main labour law restrictions

3.2 Enterprise survey

Assessing the influence of legislation on investment and growth

The most serious concerns

Lack of skilled workers

The impact of strikes

The labour laws and how restrictions are overcome

Absenteeism and workplace discipline

Wages and labour costs

Low productivity

3.3 How to improve the Labour Act

Clarify ambiguities

Adjust the wage structure

Reform the Bonus Act 

3.4 Summary 

4. The complaints of labour .

4.1 Case studies 

Working conditions 

Employment security 

The lure of working abroad

4.2 Union leaders’ key areas of concern 

Social security

Labour legislation evasion and inadequate enforcement

Permanent employment status

4.3 Labour institutions

The Labour Office

The Labour Court

Tripartite institutions in Nepal

4.4 Summary

5. From insurgency to industrial conflict .

5.1 The upsurge in strikes and demonstrations

5.2 The ANFTU campaign

Three-tier minimum wage structure

Regularization of employment contracts

ANFTU tactics

The ANFTU moves into the mainstream

Repercussions of the ANFTU campaign 

5.3 The industrial relations environment

Promoting workers’ rights and economic development

5.4 Summary

6. International organizations and the Nepalese labour market .

6.1 The World Bank 

The 2003 Trade and competitiveness study

The World Bank’s change of position 

The World Bank’s Doing Business reports

World Bank warnings

6.2 The IMF

6.3 The ADB: A distinctive perspective

6.4 The ILO: An integrated approach to reform

6.5 The need for policy coherence

6.6 Summary

7. Recent attempts at reforming labour legislation and labour market institutions .

7.1 Nepal’s Tenth Plan

7.2 The labour ordinance of 2006

Triangular employment relationships

New regulations for SEZs and EPZs

Obstacles to strikes

Withdrawal of the Labour Ordinance

7.3 SEZs

7.4 Backdoor ban on strikes

7.5 Restarting labour market reforms

7.6 Summary

8. The relationship between economic trends and industrial relations .

8.1 Introduction

8.2 Trends in economic growth and the way they correlate with labour legislation and labour market institutions


Growth levels

Patterns in agricultural and non-agricultural sectors

Trends in imports and exports

Stabilization and structural adjustment programme

The impact of reforms

Reasons behind Nepal’s economic decline

8.3 Trends in investment and the way they correlate with labour legislation and labour market institutions

Investment pattern since 1990

8.4 Summary

9. Employment and incomes .

9.1 Labour market trends

Labour force participation rates


Employment by sector

9.2 Working poor, income inequality and poverty

ILO estimates of working poor

NLSS estimates of inequality and poverty

The rise in remittances

9.3 Wages, productivity and the labour share of output

Wage trends

Productivity and labour costs

Rigid labour laws versus wage flexibility

10. Conclusions and policy recommendations

10.1 Introduction

10.2 The case against radical labour market deregulation

10.3 The way forward

Trade unions

Labour legislation and labour market institutions

Social security reform

Need for clarity and policy coherence

Appendix I: Chronology of key political and industrial relations events in Nepal 

Appendix II: Enterprise survey questionnaire: Investment, growth and decent work, Nepal 2006

Appendix III: Technical note concerning the costs of selected basic social protection benefits in Nepal 2007–2034



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