Covid-19 Nepal pushes foreign employment agencies, notorious for cheating, to a struggle for existence

Govinda Thapaliya, who used to own a foreign employment recruitment agency named Koshi International Services, has opened an agricultural farm in Kavre of late. He says his recruitment company suffered a lot because of the Covid-19 pandemic, and as a result, he opted for another business. Likewise, Kumar KC of Omega International Pvt Ltd has also opened an agricultural farm in the Godavari.

 KC and Thapaliya represent many foreign employment entrepreneurs who have been in a business crisis since the onset of the pandemic. While this pandemic has pushed many businesses towards the crisis, the foreign employment business which is often criticised for cheating Nepali workers is no exception.

Negligible demand for workers

According to Sujit Kumar Shrestha, the general secretary of the Nepal Association of Foreign Employment Agencies (NAFEA), the demand for human resources in the international labour market and the recruitment process have been directly affected due to the pandemic. 

As the major labour destination countries have been largely affected by the pandemic, there has been a significant decline in economic activities. After the first wave of the pandemic, economies were gradually moving. However, the onset of the second wave pushed the economic activities further back. Due to that, the entrepreneurs have not been able to bring the demand of the workers.

Further, he adds the complexity of the recruitment process and the economic burden on the workers due to the pandemic has made the businesses suffer even in the recruitment of workers for the places where there is demand.

Similarly, Rohan Gurung, a former president of the NAFEA, explains Malaysia, where recruitment agencies used to export up to 175,000 workers in a year, has been closed for a year and a half now and the same is with the UAE.

Also, the Nepali Embassy in Saudi Arabia has made the process of demand letter verification slow and cumbersome. According to him, there is no new demand for workers in Bahrain, Oman, and Kuwait.

“Foreign employment business has been limited to Qatar’s demand for workers as of now. As it plans to host the World Cup 2022, the country has to hire workers,” informs Gurung.

Further, Gurung adds the Nepali companies sending workers to Qatar and Saudi Arabia are mostly closed.

Data during the crisis

Migrant workers stand in a line to acquire labour permits, in Kathmandu, in July 2020.

The data of recruitment companies sending workers abroad in the last fiscal year 2020/21 also confirms the crisis in the recruitment business. Last year, only 61,428 workers were able to go abroad through these companies. In FY 019/20, this number was 172,000.

Last fiscal year, 250 recruitment companies could not send a single worker abroad. A total of 25 companies sent one worker each. The number of companies sending less than 100 workers was 667. Out of 854 licensed recruitment companies, only 603 were able to send workers.

There is a legal provision that the license of the recruitment companies will be revoked if 100 workers are not sent for two consecutive fiscal years. Considering that such a situation has arisen due to the pandemic, the Council of Ministers has decided to allow all interested recruitment companies to renew their licences. The licence of those who could not send 100 workers in the fiscal year 2020/21 was renewed by a similar special decision.

According to government standards, the number of recruitment companies sending more than 1,000 workers abroad last year is only nine. Mainly, the companies dependent on a few countries including Malaysia have been greatly affected. However, the business of those agencies sending workers to Qatar is relatively good.

This year, Advance Management Consultant became the recruitment company to send the most number of workers abroad. Earlier, the River Overseas was the one. Advance Management Consultant sent 2,494 workers abroad this year, followed by Shaan Nepal Pvt Ltd that sent 2,172, and Star Recruitment Pvt Ltd 1,462.

Further, Paradise International Pvt Ltd, which sent 1,445, and SOS Manpower Services, which sent 1,429 are ranked fourth and fifth, respectively, on the list of companies sending workers abroad this year. 

High time to utilise security deposits

File image: Nepali migrant workers at a Malaysian airport

According to Gurung, entrepreneurs are looking for alternatives after the crisis. Some of them have officially started new businesses. Some entrepreneurs have invested in farming, medical and educational institutions. Some have also started opting for hotel and restaurant businesses.

In addition, he suggests the entrepreneurs should make joint use of the security deposit remaining at the Department of Foreign Employment and make joint investments in other businesses. Stating that the business will not return to its old state unless the vaccine against coronavirus is universally available, he asserts that the association should take institutional initiatives to tackle the problem.

Further, Shrestha informs, “Around 300 recruitment companies have left the business citing the unsustainability brought by the Covid-19 pandemic. However, they have not liquidated the companies as it takes three years to return the deposit.”

As per the Foreign Employment Act amended in 2019, there is the provision that a proposed company that aims to send up to 3,000 workers annually should park a cash guarantee of Rs 5 million in government coffers and furnish Rs 15 million of bank guarantee as a security deposit.

Similarly, a recruitment company proposing to send 3,000 to 5,000 workers yearly is required to deposit Rs 10 million in state coffers and present a bank guarantee of Rs 30 million. For those companies having the goal of sending more than 5,000 workers a year, the requirement is a cash deposit of Rs 20 million and a bank guarantee of Rs 40 million to start the operation.

“The Department of Foreign Employment has a large amount of money as security deposits,” states Shrestha, “Even when the business is stalled, entrepreneurs are having to pay interest on loans taken for security deposits to the bank .”

Here, Gurung says, “The department now has about Rs 4 billion as security deposits from the foreign employment entrepreneurs. As there is no way to get back to business, the association had to make a plan to use the money together.”