Can Cambodia stay competitive with so many public holidays?

Cambodia likely became the country with the largest number of public holidays in the world on Tuesday, raising questions about the ability of Cambodia to stay economically competitive with so many mandatory leave days.

Cambodia will observe the “Day of Remembrance” on May 20, a politically fraught date that was originally established by the Vietnamese-backed government in 1984 as a “Day of Hatred against the genocidal Pol Pot-Ieng Sary-Khieu Samphan clique and the Sihanouk-Son Sann reactionary groups”.

But politics aside, the announcement – which brings Cambodia’s number of public holidays to 28 – could hurt the country’s ability to attract future investment, according to Stephen Higgins, managing partner at Mekong Strategic Partners.

“Without questioning the appropriateness of a holiday to respect the victims of the Khmer Rouge, there is absolutely no question that 28 days holiday is too many,” Higgins said. “I don’t think you would find a single business person in Cambodia who thinks the number of holidays is good for the country.”

Foreign investors have long complained about Cambodia’s persistently high energy and logistics costs compared to regional neighbours. More recently, they have expressed concerns about a series of populist policies enacted by Prime Minister Hun Sen’s government in the past year, including a minimum wage hike and mandatory employer contributions to the National Social Security Fund, which raise the cost of doing business in the Kingdom.

Ngeth Chou, a senior consultant at Emerging Markets Consulting, agreed with Higgins, noting that the number of holidays could deter new investors to the Kindgom.“For the existing investors, they might not be troubled,” Chou said.

“But for new investors that are considering to invest, they might complain a lot about this.”

Other analysts were less concerned and suggested the impact of the move would be minimal.

“The reality is most Khmer employees rarely take all the time they are entitled to, and even the government offices are working on less important holidays,” said Anthony Galliano, CEO of Cambodian Investment Management. “So while in practice the entitlements exist, the reality is not all of it is taken and more and more workers voluntarily curtail their work absences.”

Miguel Chanco, the lead Asean analyst at the Economist Intelligence Unit, said the announcement would only have a “marginal impact on economic activity and on foreign investor appetite”, as long as the days were announced beforehand.

“What would be more worrying is if Cambodia started to practice what is done in the Philippines, where governments, past and present, have announced sudden and unexpected holidays, leaving businesses with little time to plan and adjust,” Chanco said.

There is some disagreement about the exact number of public holidays in countries around the world. Indian media reports from 2015, for example, claim the country had the most public holidays with 21, while other reports suggested Sri Lanka held the top spot with 25.

The average number of holidays for countries in the G20 – the 20 nations that account for 80 percent of world trade – is 12. With regards to Cambodia’s neigbours, Thailand has 20 public holidays this year, while Vietnam has 12 and Laos has 10.

Read more...