NEPAL: COLGATE NEGOTIATES LABOR SETTLEMENT

C O N F I D E N T I A L KATHMANDU 000056 SIPDIS E.O. 12958: DECL: 01/20/2019 TAGS: ECON ETRD ELAB NP SUBJECT: NEPAL: COLGATE NEGOTIATES LABOR SETTLEMENT REF: 08 KATHMANDU 1234 Classified By: Classified By: Deputy Cheif of Mission Randy W. Berry. Reasons 1.4 (b/d). Colgate Manages to Strike A Deal -------------- ¶1. (C) On November 21, Colgate Palmolive announced it had sold its entire interest in its Nepal operation, Colgate-Palmolive Nepal),to a private Nepali concern (reftel). Although the purchase agreement included provisions ensuring continued employment under the new ownership, the former Colgate employees staged a violent protest, demanding a settlement package and refusing to work under the new ownership. On January 13, Colgate officials in India informed post that after a prolonged and painful negotiation, a settlement with the former employees had finally been reached. On January 12, after the employee settlement was finalized, the Director General at the Department of Industries approved the share transfer. This gives approval in principle for the remittance of the sale proceeds. However, the actual remittance has now been delayed pending completion of certain formalities regarding Colgate's 2005 restructuring of the Nepal operation. At this time, Colgate officials do not foresee any serious issues with the conditions for submitting documents regarding the restructuring. Comment -------------- ¶2. (C) Colgate's painful and costly exit from Nepal will do nothing to strengthen investor confidence. The numerous problems the company faced doing business in Nepal were, at the end of the day, the same problems the company faced departing Nepal. These issues including the mismanagement and misuse of labor unions and systemic corruption, will have to be honestly addressed before Nepal will be able to attract new foreign investment. The more immediate problem will be how to retain the investors who are already here. Faced with a severe energy shortage, government interaction and labor unrest, many are already looking across the border. POWELL