Multinationals Closed in Nepal

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The fight between employers and employees has hit the Nepalese market again. Those employed want higher wages and better working conditions while those employing cite poor profitability and low sales for meagre wages. The higher wages demanded by the unions in the southern part of Nepal has led to the closure of multinationals like Coke and Carlsberg.


The Statesman writes:

Multinationals such as Coke and Carlsberg Beer, as well as more than 30 local factories in southern and central Nepal have closed their factories after “impractical demands” by labour unions…..Multinationals such as Coke and Carlsberg Beer, as well as more than 30 local factories in southern and central Nepal have closed their factories after “impractical demands” by labour unions.

This seems to have severe repurcussions in the economy. A day lost without work is lost forever. Hence all the production that can be done in that day is also thrown down the drain. Moreover, the poor people in Nepal will suffer the most. They are the people who need to work the most and with the closure of these industries, many are feared to be left without work. Statesman writes that more than 40,000 workers are going to suffer from the shut-down of the industries.

It is indeed a sad thing to witness in a country like Nepal. It is reported that the unions wanted to raise the minimum wage to 10,000 rupees while the government estimation of minimum wage is around 3500 rupees a month. This sounds a little insane to me. How can people in Nepal expect a minimum wage of 10,000 rupees? 

Come on, the unions are going insane. They need to assess the situation properly. However, the real story seems to be the competition among the unions themselves. If one union fights for the workers, other unions feel compelled to fight for their members in fear of losing members to  other unions. So, this seems to have contributed to these insane actions.

We need to grow up and be realistic. We should let the market decide the wages. After all we have high level of unemployment and the best way to solve this problem is to allow people to operate freely, remove minimum wages, support private property and liberty and build infrastrustures. If we continue to see the multinationals closed, we are for a deep crisis. We need to curb the power of unions to force employers. That way we will see more employment and growth.

 (source:The Statesman, June 24,06,www.thestatesman.net)

3 Responses to “Multinationals Closed in Nepal”

  1. sanobhai Says:

    The owners have their own ‘union’ too even though it is not official. The unions come in different names such as chamber of commerce, industrial form, etc. You can also use the word ‘gang’ if you wish. They collude and keep the wages low and cite wages at each others’ when any demands for pay raise is made. The evidence that the owners have their union is simultaneous shutdown of all the factories. These fights are fights between different unions – not between different labor unions but between labor unions and owner unions.

    I don’t believe that the unions are asking for 10,000 per month. Might be yet another propaganda from the factory owners. I don’t think there is a need to believe every single word written on papers.

    Pure market economy is nothing more than an idealistic stand. I don’t think pure market economy has worked in any poor country. I have yet to come across an evidence that it has worked in a poor country. I have heard many speculations though.

  2. bibas Says:

    Sanobhai,
    I think we have to look at the consequences of such closures. Who lost? Is it just the multinationals ? No, right? The workers lost their wages. Who is responsible for this? Are unions in a position to reimburse the workers for their lost wages?
    I understand pure market economy is idealistic but we can perform near to it. Unions do reduce employment or create distortions through several interventions. And, it is also true that different labor unions (affiliated to different parties) are competing among themselves. So, this is creating another problem of high intervention in the market.

    So, we have to be practical. There is high unemployment in the country and if these workers shirk work, they can be replaced with another bunch of people. We have to be aware of these issues. The bargaining power is divided.
    If we have labor unions and employer unions, then market cannot function. So, we might be better off eliminating anything that tries to hinder competition. At the same time, we should also limit union powers. Then only can we expect growth in the economy.

  3. sanobhai Says:

    If the mechanisms in place ensure that the workers are treated fairly and with respect, all the unions should be eliminated. Otherwise, unions should be strengthened. In the name of market economy (sometimes globalization), it is usually the norm to exploit low wage workers.

    I do not think there are mechanisms in place right now to prevent exploitation (no minimum wage, if you are an employer not only are you free to bad mounth a worker, you can probably beat him up if you feel like it too). No one will do anything. Then people will argue in the name of free market and give another slap on the face of the workers. If there is no rule of law and basic notion of fairness and justice in the society, I doubt free market works for the low wage workers.

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