Everyone agrees that the workers should receive decent compensation for their work but one should also acknowledge that what you term decent varies with the environment and situation. Nepali industries are reeling under pressure of poor infrastructure (mainly acute power shortage) and insecurity. With 12 hours of power cuts a day and an expensive alternative in diesel (priced at almost $1 per litre), many industries have shut down and most of those in operation have already cut down production by more than half. Industrialists are being openly targeted by criminals and armed groups and forced to pay ransom. Also, the global economic slowdown has affected the industries badly. And in case of the industries in the eastern region, the destruction of the highway caused by the Koshi river breach has put additional burden in terms of transportation costs.

Industries are the main contributors to economic growth. They not only contribute in terms of taxes and duties but also in terms of the employment opportunities they generate. Thus, the government should first ensure uninterrupted electricity supply, good security situation and proper operating environment. According to the Nepal Rastra Bank, the year on year consumer inflation was 14.1% in mid-October; the figure for the same period last year was 6.3%. That’s a combined figure of 21.3%. Now compare this with the increment of minimum labour wages. The government first increased the minimum daily wages from the existing Rs. 90 to Rs. 125 effective from July 17, 2006 and then again to Rs. 190 effective from Sept. 17, 2008. That’s a whopping combined increment of 111.11%. This decision to increase the daily minimum labour wages is simply irrational to say the least.

In the most recent budget unveiled by finance minister Dr. Baburam Bhattarai, he had emphasised employment generation and distribution of economic gains. He had also stressed the need for public-private partnership and foreign investment in certain sectors. But with the prevalent situation the prospects appear dim. Employment cannot be generated in a situation where the existing industries are forced to shut down, power crunch and disproportionate increment of wages. In fact, employment rate will decrease with industries either shutting down or looking for non-labour intensive alternatives. Like Professor Ghani had famously remarked during his visit to Nepal in 2007 that you have to create a pie before you can distribute it evenly. With the present situation of negative growth there hardly comes a question of distributing it. Public private partnership cannot materialise in a situation where the existing industries are forced to shut down. And, it would be foolhardy to expect foreign investment in an environment where the domestic players themselves are scared of investing or losing their investments.

Thus, the government should reconsider its decision and instead of falling prey to short term populist gimmick, it should focus on long-term economic revival. It should look for ways to make its industries more competitive in the world market and facilitate their smooth operation. In a country with unemployment rate as high as 42%, the government cannot

afford to put undue pressure on the industries and add to the unemployment problem.