The approval process for a new agreement between Nepal and Japan concerning the newly proposed Employment for Skill Development (ESD) program has been delayed due to disagreements over service fee provisions. Japan has proposed a service fee equivalent to two months’ salary, while the Nepalese government insists on reducing the financial burden on workers by limiting the fee to one month. The delay in finalizing the agreement could impact Nepali workers planning to go to Japan, prompting the Ministry to establish a study committee to prepare a resolution.
Kathmandu, 24 Shrawan — Nepal has yet to finalize a necessary agreement with Japan to initiate the new foreign worker program known as the Employment for Skill Development (ESD). The process has been prolonged due to Nepal’s disagreement over the service fee clause in Japan’s draft agreement. Japan had initially given Nepal three months to conclude the agreement, with an expectation to finalize it by July; however, Nepal has not publicly issued an official stance even by August.
The lack of a signed agreement raises concerns about possible disruptions to the current procedure for sending workers to Japan. The ESD program is set to gradually replace the Technical Intern Training Program (TITP) from 2027 onward. According to Dik Bahadur Khatri, president of the Nepal Foreign Employment Entrepreneurs Association, Japan proposes charging a service fee equal to two months of the worker’s salary. Nepal, however, finds this excessive and aims to cap the fee at one month’s salary.
Khatri explained, ‘Japan’s proposal is two months’ salary as a service fee, but according to our ministry’s assessment, that duration is too long. Therefore, negotiations on this matter have been ongoing for an extended period.’ Japan contends that the fee covers costs related to skill development, training, and appropriate worker selection. Employers and workers’ fees could be adjusted accordingly, the employers suggest.
He continued, ‘Japan argues that if the service fee is less than two months, ensuring an adequate supply of skilled workers will be difficult as it needs to cover expenses for skill development and training. They have expressed doubts about sending the right candidates under lower fees.’ Nepal, conversely, maintains that the fee must be reduced to lessen the economic burden on the workers. The Ministry of Labor has also introduced an ’employer pay principle’ policy, placing the cost burden on employers for foreign employment.
A Ministry official from the Youth, Labor, and Employment sector noted that the final draft of the agreement is under preparation. A study committee, headed by Joint Secretary Pitambar Ghimire, has been formed to examine service fee issues and is preparing to submit a report shortly. The Ministry plans to reconsider the service fee clause based on this report, which explains part of the delay in concluding the agreement.
The Japanese proposal bars service fees exceeding two months’ salary, yet Nepal has yet to determine the exact permissible fee below that threshold. Previously, under the TITP, a minimum service fee of 50,000 Nepalese rupees was set for incoming workers to Japan. With the TITP’s upcoming termination, the new fee structure requires clarification. The Ministry aims to finalize the fee and agreement draft within one to one and a half months.
Employers have urged swift resolution, warning that ongoing delays could negatively affect Nepali workers bound for Japan. According to Kunchha Dorje Dimdong, General Secretary of the Nepalese Foreign Employment Democratic Forum, the ESD program is intended as a replacement for the older TITP system. Japan plans to institute ESD legally within 2024, with full implementation from 2027.
Dimdong emphasized that the ESD’s primary goal is to develop foreign workers’ Japanese language skills and technical capabilities, transforming them into highly skilled workers over a roughly three-year period, during which they receive both on-the-job and linguistic training. ‘The program aims to simultaneously promote skill development, provide employment opportunities, and cultivate skilled labor,’ he said.
The ESD places greater emphasis on skill and language proficiency than TITP, and in some cases, workers may gain the right to change companies. The new recruitment process prioritizes transparency in fee structures, an effort aimed at addressing complaints about excessive fees under the previous system, according to Dimdong.
The absence of a finalized agreement risks disrupting the worker dispatch system. Nepal and Japan last signed a skilled worker dispatch agreement on March 26, 2019 (12 Chaitra 2075), enabling the specified skilled worker (SSW) system that permits dispatching workers in 12 sectors, including agriculture, nursing care, and hospitality, after language and skill examinations.
Before this, Nepal had been sending workers under the 2009 Technical Intern Trainee Directive. Registered manpower companies sent workers through JITCO. Japan abolished the JITCO system in 2017, replacing it with TITP, but Nepal continued using the older directive until the then Labor Minister Sharad Singh Bhandari issued updated procedures in 2023 (2080). The ministry formulated new procedures in alignment with Japan’s updated system.
Now, Japan intends to phase out TITP and fully launch ESD, making a new bilateral agreement necessary. Business leaders warn that failure to reach a timely agreement may affect the current TITP dispatch process and leave the future of Japanese employment uncertain until ESD is operational. ‘If the agreement is not reached, there could be issues for workers going under either TITP or ESD. Hence, it is crucial to make the appropriate understanding and quickly finalize the agreement,’ Khatri urged.
According to ministry officials, decisions on service fees will precede any further progress in the agreement, and it remains unclear whether Nepal will accept Japan’s proposed fee or enforce its own limits. As the Nepalese government moves forward with the employer-pay-principal policy, there is internal concern that including the two-month service fee provision could provoke criticism in the new agreement.
