Tuesday, 8 March 2011

Unhappy holidays for Cambodia’s economy?

Photo by: Sovan Philong
People march past Hun Sen park during a protest on Human Rights Day in December last year.

via CAAI

Monday, 07 March 2011 22:04 James O'Toole

Workers across the Kingdom will enjoy a day off on Tuesday to celebrate International Women’s Day.

Next month will bring three days off for Khmer New Year, and after six more public holidays in May, June will begin with a day off for Children’s Day.

All told, Cambodians will enjoy 26 public holidays this year, a total among the highest of any country in the world.

While workers will assuredly enjoy the break tomorrow, some observers are raising questions as to whether this surfeit of days off is introducing a hurdle to Cambodia’s development.

“It’s a clear economic impediment,” said Stephen Higgins, chief executive officer of ANZ Royal Bank.

“Any reduction in economic activity means that Cambodia is not meeting its growth potential.”

Regional powerhouses Hong Kong and Singapore enjoy 17 and 11 holidays, respectively, while workers in neighbouring Vietnam and Laos earn just nine and 10.

Holiday totals in Western countries, by and large, are similarly low, with the United States and the United Kingdom enjoying 10 and nine public holidays this year, respectively.

In the Philippines – which, at 21, still has 19 percent fewer public holidays than Cambodia – a group of seven foreign chambers of commerce released a study in December arguing that the large number of holidays was raising costs for employers by millions of dollars while serving as a deterrent to foreign investors.

"Every paid holiday goes to the bottom line of the balance sheet, and, like minimum wages, can pressure firms that operate on low profit margins to reduce their work force, close, or move into the underground economy," the study said.

Significant underemployment and informal economic activity mitigate the effect of Cambodia’s holiday glut, said Michael Smiddy, a former senior consultant at Emerging Markets Consulting in Phnom Penh.

Many businesses choose to stay open during some holidays, while other key sectors are largely unaffected, he added.

“You can’t harvest more rice just because there are less holidays,” he said.

“The same number of tourists would still come and spend the same amount.”

Other industries, however, feel the effects of public shutdowns more acutely.

Sjaak de Klein, the country manager for transportation and logistics firm TNT, said importers and exporters whose shipments require processing by the government see their activities in many cases delayed unnecessarily by the excess of holidays, reducing the Kingdom’s competitiveness.

Public holidays also typically create a multiplier effect in slowing down work, de Klein added, as many employees choose to take annual leave around their official days off.

“Especially with a middle class arising, this could be a big impact on a rapidly expanding economy,” he said in an email.

In manufacturing, too, the excess of holidays is felt in the form of either stalled production or increased labour costs, as employees earn overtime pay on the many public holidays they choose to work.

“This is an issue that we have been grappling with for a long time and we have reflected to the government on numerous occasions,” said Ken Loo, secretary general of the Garment Manufacturers Association in Cambodia.

Chea Peng Chheang, a secretary of state at the Ministry of Economy and Finance, said he did not believe the issue posed a challenge to Cambodia’s growth.

“I think that the high number of public holidays in Cambodia does not affect the Cambodian economy, because these days have been set out in the government’s laws and schedules with clear planning,” he said.

Ye Samphy, manager of training and communications at the Labour Ministry’s Arbitration Council Foundation, noted that other countries have annual leave requirements that bring their overall amount of days off closer to the total seen in Cambodia.

Under Cambodian law, full-time employees in the Kingdom are entitled to 18 days of annual leave, plus one extra day for every three years of continuous service.

This total is roughly in line with the personal leave provided in many other countries, though above nations such as Singapore, where employees who have worked for five years at a particular company get just 12 days leave.

TNT's de Klein said a reduction in public holidays could be balanced with annual leave increases in the private sector, thereby allowing workers the same amount of days off while reducing the number of overall economic “shutdowns” over the course of the year.

Higgins, meanwhile, said a simple glance at the calendar suggested obvious starting points for reform.

“Some of these international days do not require a public holiday to celebrate them, whether that’s International Women’s Day, International Human Rights Day – I don’t understand why they need a holiday to celebrate that,” he said.


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