Malaysia, one of the most sought-after destinations for Nepali migrant workers, is again on the verge of closing its labour market to Nepal amid a dispute over the recruitment agencies authorised to send workers there.

The dispute has intensified after Malaysia authorised 25 Nepali recruitment agencies as “principal recruitment agencies” and allowed each to work with up to 10 affiliated agencies. The move has drawn objections from the Nepal government and recruitment agencies, who argue that it restricts competition and excludes most of Nepal’s licensed agencies from the recruitment process.

Stakeholders have urged the government to resolve the dispute through high-level diplomatic talks before it disrupts a major overseas employment destination, Malaysia, for Nepali workers.

On August 21, Malaysia’s Human Resources Ministry authorised a limited number of recruitment agencies from 10 labour-source countries, including Nepal. For Nepal, 25 agencies were selected and registered with Malaysia’s Foreign Worker Centralised Management System (FWCMS).

“Under the FWCMS, all authorised recruitment activities, administrative procedures and technical access must be conducted only through the approved principal recruitment agencies,” Malaysia’s Foreign Ministry said in a letter to the Nepali government on August 28, informing it of the decision.

The letter said Nepal could choose the agencies that would work as affiliates of the 25 principal agencies. Malaysia would have no objection to up to 10 associate agencies being affiliated with each principal agency, it said.

However, the decision on whether to authorise, select and assign responsibilities to up to 10 affiliated agencies would remain within the sole discretion and jurisdiction of the Nepali government, in accordance with its policies, laws and regulatory arrangements, the letter said.

Malaysia’s Human Resources Ministry said in a statement on August 22 that the new model was introduced to make the recruitment of foreign workers more effective and transparent while protecting the interests of employers, workers and the country.

Under the new system, applications for foreign worker quotas must be submitted through a new application process, the ministry said.

Nepal objects and orders probe

Nepal has not accepted Malaysia’s decision and has objected to the selection process itself.

On August 22, the Ministry of Youth, Labour and Social Security, through the Foreign Ministry, wrote to the Malaysian side asking it to continue the existing recruitment system.

Before that, Labour and Employment Minister Ramji Yadav had met Malaysia’s acting ambassador to Nepal, Mohammad Firdaus Azam, and discussed the issue.

Nepal raised three main concerns during the meeting: removing the 25 selected recruitment agencies from the list; ensuring that labour migration issues between the two countries are addressed only through bilateral discussions, consultations and agreement; and holding an immediate meeting of the joint technical committee.

The government subsequently conveyed the same concerns to Malaysia in writing.

“Nepal’s position is clear that all recruitment agencies licensed in Nepal should be allowed to export workers,” said labour ministry spokesperson Mira Acharya. “We have a labour agreement between the two countries, and both sides should work accordingly. Issues related to worker recruitment should be decided on the basis of mutual agreement.”

The Nepal Association of Foreign Employment Agencies, the umbrella body of recruitment businesses, has also objected to Kuala Lumpur’s agency selection process.

The association has described the arrangement as a move towards monopoly and called for participation, transparency and equal opportunities for all recruitment agencies.

“Equal opportunity, fair competition and the right to conduct business must be guaranteed for around 1,100 businesses and institutions,” said association president Dik Bahadur Chhetri. “We don’t support restricting competition and creating a monopoly.”

He said limiting access to the FWCMS to only 25 agencies could lead to unhealthy competition in Nepal’s foreign employment sector.

The labour ministry has also ordered an investigation into the 25 selected agencies. The Department of Foreign Employment is now conducting the investigation.

New recruitment effectively stalled

Following the ministry’s directive, the Nepali embassy in Kuala Lumpur has been instructed not to certify demand letters submitted by the 25 agencies selected by Malaysia or their affiliated agencies.

The Department of Foreign Employment has also stopped granting prior approval for demand letters submitted through those agencies for Malaysia since August 22, according to officials.

As a result, recruitment is currently proceeding only for quotas issued by Malaysia before August 22. No recruitment of Nepali workers has begun under Malaysia’s new system.

Uday Raj Pandey, a former ambassador to Malaysia and Saudi Arabia, said the situation had become complicated because Nepal failed to respond adequately when Malaysia first moved to introduce the new recruitment system.

Malaysia had sent criteria for selecting recruitment agencies last October, he said, adding that the two countries should have convened their formal consultation mechanism at that stage.

“We should have held a meeting of the formal mechanism and consulted each other when the criteria were first sent,” Pandey said. “We remained silent after receiving the letter. Now that the situation has become complicated, the mechanism should meet immediately to discuss each side’s concerns.”

The two countries have a formal mechanism to address labour-related issues under their labour agreement signed on October 29, 2018. The Joint Technical Committee includes representatives from the labour, foreign, home and law ministries of both countries.

The committee has held only two formal meetings since the labour agreement was signed.

“The situation is becoming extremely difficult. This is precisely when the mechanism needs to be activated and made effective,” Pandey said.

Labour expert Ganesh Gurung, a former member of the National Planning Commission, said Nepal should make every effort to retain access to the Malaysian labour market.

“Employment opportunities in the [Persian] Gulf are shrinking because of tensions in West Asia, while the domestic labour market is not generating enough quality jobs,” Gurung said. “Closing Malaysia as a destination is not a solution. Diplomatic dialogue is the appropriate way forward.”

He said Nepal should consider all options for high-level talks to resolve the dispute rather than allowing the recruitment process to shut down.

Nepal also needs to be aware that competing labour-source countries could take advantage if its access to Malaysia is disrupted, he said.

The recruitment agencies’ association has likewise called on the two governments to resolve the dispute through diplomacy.

A major destination

Around 400,000 Nepali workers are currently employed in Malaysia.

Bangladesh has the largest number of workers in Malaysia, with around 900,000, followed by Indonesia with about 550,000. Nepal ranks third among the major labour-source countries.

Large numbers of workers from Myanmar, India and Pakistan also work in Malaysia.

According to the latest figures from Malaysia’s Home Affairs and Human Resources ministries, the country currently has around 2.1 million to 2.4 million documented migrant workers. Including undocumented workers, the total is estimated to exceed 3 million.