Brokers going for broke

Travel restrictions and the economic fallout of the global pandemic in countries that employ migrant workers have hit labour recruiters in Nepal hard.

Although the plight of migrant workers gets a lot of media attention and recruitment agencies get blamed much of the time, the truth remains: Nepal’s labour migration industry rests on the shoulders of these very recruiters.

Labour recruiters have been responsible for 88-92% of Nepali workers mobilised annually since 2015. With their business plummeting because of the COVID-19 (see chart), they have been putting pressure on the government to scrap rules that regulate the industry.

Last week, the Cabinet waived the legal requirement for recruiters to have mobilised at least 100 workers annually in the last two years to be eligible for license renewal. While this number does not seem high, the placement patterns suggest otherwise.

In 2018/19, over half the recruiters deployed less than 100 workers, and the numbers are even lower this year with the pandemic. According to Kumar Dahal, Director of Department of Foreign Employment, the licenses of 536 of the 854 registered recruiters would have been scrapped had the waiver not been given.

Recruitment agencies have other demands, including use of escrow deposits of a minimum of Rs5 million in cash and Rs15 million in bank guarantees for companies mobilising up to 3,000 workers. The government dips into this deposit in case workers need compensation, either because of the fraudulent activities that recruiters themselves or the foreign employers engage in.

“They should at least let us use the cash deposit temporarily,” says Saroj Pokhrel, a labour recruiter. “The government would still have our bank guarantee to rely on in case of fraudulent activities.”

Recruiters also want the free-visa-free-ticket policy scrapped, arguing that it affects their competitiveness in the international market. Instead, they want to be allowed to be charged a month’s salary as fee.

Pokhrel says that being allowed to charge a month’s salary like the Philippines will give firms an incentive to look for higher paying jobs, and the government can increase its tax revenue. However, both the free-visa-free-ticket policy or a cap on a month’s wage are moot because the actual cost paid by workers is significantly higher, the consequences of which is being borne by thousands of workers now.

There is a need to go beyond principle-based discussions on zero-cost recruitment. The experience of Ethics Practitioners Association of Nepal (EPAN), an umbrella organisation of recruiters determined to carry out ethical recruitment that includes zero costs to workers, is telling.  In the last few years, the organisation has mobilised zero workers.

Rajendra Khadka of EPAN explains: “We have not been able to attract a single ethical employer. We are gaining recognition internationally, but it is still difficult to earn the trust of employers engaged in ethical recruitment which are generally multinational companies and brands. Even workers themselves do not trust us, as they associate recruitment costs to the quality of jobs.”

Recruiters are embroiled in fierce, unhealthy competition among themselves as they vie for the limited jobs in common destinations, with majority focusing on just a few countries. Even though they are legally allowed to supply workers to 110 countries, Nepali recruiters sent workers to just 28 countries last year, with the majority to just one or two countries (See Chart).

For example, over 747 recruiters deployed workers to Qatar in 2018/19 and very few outside the Gulf and Malaysia. (See chart) This over-concentration in a few countries intensifies competition as recruiters tend to outbid one another while fetching job offers, and many even pay employers or foreign recruiters for job offers. Desperate Nepalis are willing to pay exorbitant fees, and this distorted arrangement works well for recruiters.

The unhealthy competition among recruiters also transcends boundaries. There are, for example, over 1,200 recruiters in Bangladesh, 1,857 in Pakistan and 1,454 in India competing for similar jobs. Regionally, there are 4,346 recruiters audited and registered with Malaysia’s Foreign Workers Centralised Management System to undertake biomedical health examination of prospective migrants to Malaysia. The sheer numbers of recruiters competing for limited jobs indicates how competitive it is.

With the pandemic, the contraction in jobs available globally may also be an impetus for fiercer competition which will lead to more workers having to bear recruitment costs. For Nepal to unilaterally declare a free-visa-free-ticket policy therefore may be a populist move, but it will mean under-the-table transactions between workers and recruiters will continue in an unmanaged way.

Nepal may be pushing a rights-based approach to migration, and while this may be necessary, sticking to just principles may end up being counterproductive.

When recruitment costs for workers from Bangladesh and Pakistan are three to four times that of Nepal, our attempts to unilaterally control costs will fall short. International frameworks like the Colombo Process to find a common voice among migrant sending countries do exist, but they have very little to show for.

They have not done much to address the common plight of their workers during the pandemic, precisely when such international cooperation was needed the most. Either we need to admit that these loose platforms are not meant to create any tangible difference on the ground, or the Colombo Process needs to be revamped so it is more than just a forum to share experiences.

Within Nepal as well, there is no carrot for good-performers and the ‘stick’ is always just for show because the same leaders governing recruiters are also colluding with them behind doors to allow the status quo to remain. As with everything else, as long as corrupt leaders meddle with this industry, there is very little incentive for any real change.

Even a conservative estimate of recruitment costs of  $1,000 per worker means that in 2018/19, over Rs28 billion was floating around, a fraction of which can be earmarked to  influence policy decisions and even, who gets to stay a minister.

It is just a matter of time before workers will be once more lining up for labour approvals. Nepal’s migrant recruitment industry shares commonalities with the lemon market for used cars, where the whole industry is viewed with suspicion and distrust, given difficulties distinguishing the good ones (peaches) from the frauds (lemons).

Clamping down on recruiters is necessary given prevalent malpractices, but it is also important to acknowledge the contribution in matching workers at scale from every corner of Nepal for jobs abroad. The government would not have been able to manage this on its own. Other labour exporting countries like India are also facing a similar dilemma – how to minimise recruiters’ malpractices while using their contribution during the pandemic.

The role of recruitment agencies in driving diversification to new destination countries, and higher skilled sectors will be crucial in the post-pandemic phase if the demand for Nepali workers in the Gulf and Malaysia drops.

Pokhrel says recruitment can be cleaned up and made more professional with mergers to reduce the number of recruiters, or setting standards and criteria for those competent enough to be in the recruitment business. But for all this, Nepal needs a more coordinated approach between the government and private sector.

Upasana Khadka writes this column Labour Mobility every month in Nepali Times analysing trends affecting Nepal’s workers abroad.