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Unemployment in Nepal worsens as government fumbles for a response

Kamal Dev Bhattarai

Kamal Dev Bhattarai

Unemployment in Nepal worsens as government fumbles for a response

According to a National Planning Commission (NPC) report, around 700,000 Nepali migrant workers could return due to the Covid-19 crisis. Another 300,000 are expected to come back from India. They will add to the burden of joblessness

Any future projection of the Nepali economy has become increasingly difficult due to the highly uncertain course of the Covid-19 pandemic. Factoring in severe impacts on hotels, restaurants, domestic and international transport, and other areas, the Central Bureau of Statistics has projected national economic growth to shrink to 2.27 percent against the government’s aim of seven percent. But, again, this can only be a tentative estimate at best. 

Accompanying this economic decline will be widespread joblessness across all sectors. Covid-19 is leading to dramatic job losses across the world and young people in particular are suffering a great deal. In our case, thousands of youths have already lost their jobs, while thousands more employed in Gulf countries are returning to Nepal after being relieved of their professional duties. 

Dr. Anup Subedee, an infectious disease physician, says although it is hard to project the future trajectory of the virus, it could still be active in Nepal until April-May next year. “Perhaps if our labor destination countries can control the virus before we control it here in Nepal, our youths can go back to their jobs abroad after PCR testing.”

According to a National Planning Commission (NPC) report, around 700,000 Nepali migrant workers could return due to the Covid-19 crisis. Another 300,000 are expected to come back from India. They will add to the burden of joblessness. The Economic Survey of Nepal 2020/2021 says around half a million youths enter the country’s labor force each year. 

The survey says, without giving any numbers, that there is a huge gap between job demand and job creation. There are also no official figures on the number of jobs created in Nepal every year. What can be said with more certainty is that till the fiscal 2019-2020, around five million Nepalis had gone abroad, excluding India, seeking employment opportunities. 

Prolonged political instability contributed to an unstable economic climate for most of the past three decades. In the absence of jobs at home, youths sought the shores of the Gulf and other countries. On an institutional basis, Nepal issues labor permits to 110 countries, while permits on an individual basis are issued for 172 countries. 

Nepali abroad

Pre-Covid days 

The NPC’s third Nepal Labor Survey (2017-18) says working age population (15+) had a share of 71.5 percent (20.7 million) of the total population, of which 55.6 percent were females. Of approximately 20.7 million working-age people, 7.1 million were employed, while 908,000 were unemployed, translating into an unemployment rate of 11.4 percent. Moreover, females reported unemployment rate of 13.1 percent, 2.8 percentage points higher than males.

There were also geographical disparities. Bagmati province reported the lowest unemployment rate (seven percent) while Province 2 reported the highest (20.1 percent). Says the NPC survey: “One in every five people who had jobs in Nepal were employed in agriculture, the biggest employing industry. Trade-industry had the second largest share of employment (17.5 percent), followed by construction (13.8 percent). The informal sector had the biggest share of 62.2 percent.”  

The hope was that the new government, with its two-thirds majority, would herald an era of stability and create many new jobs. But the expectation had proved misplaced, even before the onset of the Covid-19 pandemic.

During the pandemic

Public health experts say that even if the current wave of Covid-19 contagion is contained, there is always a chance of another wave as a vaccine is still uncertain. Since the start of the lockdown on March 24, economic activities are yet to fully resume, and things could get worse. 

Data from the Nepal Rastra Bank (NRB) suggests that during the lockdown, which lasted a little over three months, four percent of industries were in full operation, 35 percent were partially operational, and 61 percent were closed. In this period, “there was a 22.4 percent layoff in industries and businesses. Two-thirds of manpower hired as temporary staff or on contract basis lost their jobs.” Hotels, restaurants, transport and education suffered the most, the NRB data show.

According to the Hotel Association of Nepal (HAN), around 700,000 people are employed in hotels. HAN President Shreejana Rana says hotels have no policy of expelling workers. “There has been an agreement that hotels will continue to pay some amount to their workers until the end of December,” she says, with the exact amount depending on the hotel’s profitability. Rana says there has been no forced layoffs, even though workers have the choice of voluntary retirement. 

Another hard-hit area, according to the NRB survey, is transport. Saroj Sitaula, general secretary of the Federation of Nepali National Transport Entrepreneurs, says the sector employs a million people.  During the lockdown, public transport was completely halted and workers were left in a lurch. Most workers in the sector don’t have formal appointment letters and as such, no social security as well. According to Sitaula, there is no record of how many people in transport have lost their jobs since the start of the lockdown. 

“Some have returned to work with the resumption of transport, but entrepreneurs are still struggling to provide them with a timely salary,” he says. 

Education has also been hit hard. Schools, colleges, and consultancy services are closed. Some colleges and universities are holding their classes online but, as guardians are reluctant to pay for this form of education, many teachers have not been paid. 

Axe falls on the small

According to the UNDP-Nepal’s “Rapid Assessment of the Social and Economic Impacts of COVID-19”, both formal and informal micro, small and medium enterprises (MSMEs) with low cash-to-asset ratio have been affected. “We find that every three in five employees have lost their jobs in the micro and small businesses that were surveyed; [these businesses] have seen a fall of 95 percent in average monthly revenue,” the report says.  

Says another survey undertaken by the International Labor Organization (ILO), “between 1.6 and 2.0 million jobs are likely to be disrupted in Nepal in the current crisis, either with complete job loss or reduced working hours and wages.” 

The impact on labor differs by the nature of contract. Permanent workers get pay cuts or unpaid hiatus, backed by strong labor laws that discourage layoffs. Seasonal and informal workers, who represent 60 percent of the labor force, on the other hand, can be fired, according to the UNDP report. Temporary workers, internal migrants and day laborers are the most vulnerable. Nor can these workers find alternative work easily. 

Approximately 5.7 million or 80.8 percent of workers in Nepal are a part of the informal economy. The majority of workers in all sectors are informally employed, including the sectors facing the highest degree of disruption: construction (97 percent informal employment), trade (74 percent) and manufacturing (84 percent), says the ILO survey. 

Yet the chances of job-creation in the near future are dismal.  Says economist Biswo Poudel, “The demand for bank loans is very low, including from the industries, which suggests our industries don’t want to spend and therefore, new jobs are not being created”.

According to him, the government has failed to come up with a policy of job-creating through the identification of growth areas. “The monetary and other policies are targeted at survival not job-creation. There is, for instance, great prospect of creating new jobs in the online business and yet, there is no incentive for those interested,” Poudel adds. 

Areas of interest

An NPC panel formed to gauge the impact of Covid-19 on foreign employment and agriculture says 1.5 million jobs need to be created this fiscal. In the 2020-21 budget, the government had pledged 700,000 new jobs, less than half the number needed. But economists say some areas still hold promise. 

Since the lockdown, ruling politicians as well as economists have agreed that agriculture is most suited to employ a large number. Partially as a result of young people seeking foreign employment over the past two decades, villages were empty and fertile lands were barren. Thus, returning migrant workers, particularly the youth, could be employed in farming.

Minister for Agriculture, Ghanashyam Bhushal, is hopeful of creating 150,000 new jobs in agriculture this fiscal. Speaking at an interaction a few days ago, Bhushal said jobs could be created by promoting farming in barren lands, riverbeds, and in designated plots. 

The government has also launched the Prime Minister Employment Program. But critics say the youths are just not attracted to the program, which is to provide a minimum of 100 days of employment to unemployed youths. 

Likewise, with the members of the marginalized community as its target, the government has come up with a program called Work for Food in the 2020-2021 budget. The goal here is to employ in various social works those who have returned from abroad or have lost their jobs. Similarly, the government has allocated budget for vocational training of unemployed youths, which, it claims, will create five million jobs in this fiscal. Subsidiary loans have also been pledged for starting new businesses. But economists reckon all these programs are inadequate to meet the enormous Covid-19-induced unemployment challenge. 

Agriculture, again the answer

As senior economist Dr. Chandra Mani Adhikari puts it, with greater collaboration and cooperation between federal, provincial and local governments, plenty of jobs can be created in agriculture. “First, we should establish a multipurpose agriculture center in each province. This center will provide seeds, fertilizers, agriculture tools, training, anti-pesticides, cold storage, and other facilities that farmers need to sell their products,” suggests Adhikari.

According to Adhikari, farmers should then prioritize new types of fruits that are expensive and not easily available. “We are importing a lot of vegetables and masala from India and other countries, which we could otherwise have produced inside Nepal.” Another possible area of job creation could be services like plumbing, electrical work, and vehicle maintenance. Adhikari suggests organizing trainings for unemployed youths in these sectors. 

Social and political costs

The government’s failure to create enough jobs could have grave political and social ramifications. Tika Ram Gautam, head of the Central Department of Sociology at Tribhuwan University, says the impact of Covid-19 won’t be limited to livelihood issues, as it can also create problems within families and societies. “There could be sudden changes in existing social norms and values. Greater unemployment could lead to more violence, social unrest, and other law and order problems,” Gautam says.   

Rise of extremism is another possibility. In 1996, the Maoists had started their armed insurgency by recruiting a large number of unemployed youths from rural areas. Widespread unemployment today could similarly increase youth enthusiasm for extremism. For instance, the splinter Maoist group led by Netra Bikram Chand could more easily find recruits for its armed insurgency. One can only hope that the government works doubly hard from hereon to contain the Covid-19 crisis and create enough jobs for its growing workforce. The status quo is unsustainable.