The suggestion goes directly against the spirit of the Insolvency Act which allows companies facing financial difficulties to shut down their production units.[break]
The recommendation was laid keeping in view Surya Nepal´s decision to close down its garment unit in August, which, the parliamentary committee said, was the result of huge losses suffered by the company rather than labor-related problems as the management had cited.
“The company terminated operations because the Indian investors in the company did not want to continue operating a unit which was making loss for a long time,” said the report prepared by the Economic and Labor Relations Sub-committee formed to investigate the closure of Surya Nepal´s garment unit. “So the labor unrest, which the company said caused heavy loss of orders from major Western markets like the US and Europe, was only used as a pretext to shut down the unit.”
Ravi KC, corporate vice-president of Surya Nepal, refused to make any comments on the report, saying that he still hasn´t gone through it. But he asserted labor unrest and not losses suffered by the company was the main reason behind the closure of Surya Nepal´s garment unit.
“We had lost orders from the US and Europe after the company remained close for 40 days during May-June. This was why we had to close down the unit,” he told Republica on Sunday.
However, the report argued if the company was really suffering from labor-related problems then it should have continued production after firing 20 workers who were suspected of inciting others to stage protests. “This shows the company was bent on closing down the loss-making unit rather than restructuring it,” the report said.
This practice of closing down firms soon after incurring losses should not be encouraged and the government should monitor such activities of foreign companies,” the report has suggested. It has also recommended that the government regularly check whether international companies are providing salaries and benefits as mentioned in the law to workers.
But since the report was prepared mainly based on interviews with workers, without incorporating views of employers or management staff, it tends to give a skewed view on why international companies are closing down their units in Nepal.
For instance, the report has talked about creating an investor-friendly environment to promote foreign direct investment in the country, but it has failed to acknowledge that labor-related problems are also one of the major obstacles to foreign investment.
This was reflected in its account on closure of Surya Nepal´s garment unit, which has failed to denounce the violent methods used by workers, such as holding management staff hostage for a day and taking the factory in their control, to coerce the management into fulfilling their demands.
The parliamentary committee report has, however, said the Labor Act, which was last amended 20 years ago, is not relevant in the present context and should be modified. But it has failed to make suggestions on what kind of provisions should be included to better protect interests of both employees and employers.
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