Oral care giant Colgate Palmolive India has announced the sale of its fully owned unit in Nepalt, which it had been operating for twenty years, by transferring its shares to a local company, Everest Hygiene Products, thereby incurring the wrath of the employees and the ruling political party who turned violent after learning of the sale.
Before exiting, the company signed a contract manufacturing agreement with Everest Hygiene Products for sourcing and supplying toothpowder from its Hetauda factory in Nepal in order to maintain operations and exports from the plant.
The company said "All employees of Colgate-Palmolive (Nepal) would continue their employment on the existing terms and conditions under the new ownership."
Colgate Palmolive had already decided in 2005 to exit Nepal when it discontinued production of tooth paste at its Hetauda factory.
Employees of the factory turned violent on hearing about the news of the sale and the newly founded strong arm of the Communist Party of Nepal-Unified Marxist Leninist (UML), Youth Force, captured and detained two senior officials of the company as they were on their way to Simra airport to take a flight to Kathmandu.
They later on handed them over to the local police who then escorted the two Indian officials to the Indo-Nepal border.
Colgate Palmolive had said in its annual report for the year 2007-08 that the ''operating conditions continued to be challenging and the unprecedented blockades and bandhs caused frequent supply chain disruptions, with the overall environment being tense and uncertain.''
The incident has once again proved that investing in Nepal is fraught with danger as the present government is unable to reign in its party members who have become so accustomed to threatening Indian companies in the past.
Nepal prime minister had promised to bring in an economic revolution and said his government would encourage foreign investors but Nepal's foreign minister Upendra Yadav had admitted this week that due to security concerns many foreign investors were shying away from investing in Nepal.
Indian company, Dabur Nepal, had lost valuable production days in September when it become a target for Maoists who forced to shut down the company for a few weeks demanding a 10 per cent bonus for its 700 employees. (See: Maoists shut Dabur's Nepal factory)
At that time, media had reported that the Maoists had sent warning letters to Indian companies asking them not to hire Indians at a higher salary than what they pay their Nepali employees and a few five star hotels as well as a leading Nepalese newspaper that employs a large number of Indians have received similar letters.