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Hike in Guarantee Amount for Recruiting Agencies Unlikely to Eliminate Malpractices, Experts Say

The state had hoped that by increasing the guarantee amount it would bring down the number of agencies, hence lowering incidences of workers being cheated

Chandan Kumar Mandal
The  Kathmandu Post
7 September 2019

The government’s decision to hike the guarantee amount of recruiting agencies that supply workers for foreign employment is not the ultimate solution to curbing the malpractices prevalent in the foreign employment sector for years, according to experts.

As the deadline for depositing the new guarantee amount ended last Wednesday, the number of recruiting agencies that were actively operating has come down to 848 from 1,323, after some companies failed to produce the amount whereas others went for the merger.

Last February, the government categorised the existing recruiting agencies into three groups based on the number of workers they would supply in a year. With the new groups, the government also set new guarantee amounts which reached a minimum of Rs20 million to Rs60 million maximum—a whopping increase from Rs3 million that was required to run their businesses.

The move, which was introduced by the government with the hope to bring down the number of recruiting agencies, hence ultimately controlling fraudulent conduct, will not yield the expected outcomes, say experts.

According to Swarna Kumar Jha, a labour migration researcher, a smaller number of operating agencies does not ensure massive changes in the governance of foreign employment.

“The number of recruiting agencies has come down. But they have not quit the business. They have instead become united through merger,” Jha, coordinator of the National Network for Safe Migration, told the Post. “It’s tough to say it will curtail the malpractices in this sector. For example, the government scrapped working via sub-agents, but they are still operating. Honesty and commitment from those agencies is a must for improving the sector.”

When the government proposed a hike in the guarantee amount, the logic was to limit the number of such agencies and to eliminate the high incidence of dubious agencies cheating migrant workers. Government officials had also argued that the Rs3 million—Rs 700,000 in cash deposit and Rs 2.3 million in bank guarantee—would often be inadequate at the time of rescuing workers who get into problems abroad and paying compensation.

According to Jeevan Baniya, a labour migration expert at the Centre for the Study of Labour and Mobility (CESLAM), the move to hike the amount was motivated by minimising fraudulent activities by increasing the collateral amount and having enough fund to help migrant workers in need.

“The government must have thought that fewer agencies will make it easier for them to regulate their conduct. It somehow makes recruiting agencies more accountable, as they cannot run away after paying a huge guarantee amount and shut down their business,” Baniya said. “Agencies that submitted the new amount might have seen it as a lucrative sector to invest in because there are new labour destination countries opening up for Nepali workers.”

However, Baniya also doubts that the move will be enough for dealing with fraudulent cases, especially because the agencies continue to charge workers more than the government ceiling of a service charge of Rs10,000.

“Even government studies have shown that these agencies charge as high as Rs70,000 from a worker. It’s suspicious how they deposited the vast amount and would accept the same prescribed service charge,” said Baniya. “These agencies must have thought that this money can be collected anyway from workers. It’s unlikely that they will send workers by accepting Rs10,000.”

The recruiting agencies have long been protesting against the government’s decision to hike the guarantee amount. After the decision was enforced, they had also demanded at least the interest on their cash deposit.

According to Rohan Gurung, president of the Nepal Association of Foreign Employment Agencies (NAFEA), the multifold increase in the guarantee amount was the wrong prescription for overhauling the foreign employment sector.

“Increasing the deposit is meaningless because the existing provision says if the guarantee amount is not enough, the government can claim both movable and immovable properties of the company owner,” said Gurung, adding that the government should revise the service charge if it genuinely wants to eliminate fraudulent cases.

“When the guarantee amount was only Rs3 million, the service charge was Rs10,000 per worker. Now, when it has reached a minimum of Rs20 million, it is still the same. How is this justified?” Gurung asked. “Recruiting agencies have already invested huge amounts of money for running their business. With the service charge, they will struggle even to pay the interest on their cash deposits. To recover their investment, they will eventually turn to migrant workers.”

According to labour migration experts, the government will not be able to minimise the malpractices plaguing the sector unless it increases monitoring measures to watch over the agencies’ conduct.

“More agencies meant more cases of workers being cheated. With fewer companies in operation, we now hope that such cases will come down,” said Bhola Nath Guragain, spokesperson for the Department of Foreign Employment. “This is one of the components of managing the foreign employment sector. But we surely have to wait for some time to see the improvement.”


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