Patrick Agudo Waterman

 

Too many holidays have harmed the Philippines’ ability to compete for investments with neighboring countries in ASEAN.

 

Congress needs to be fully informed of the economic consequences before supporting legislation to add another holiday.

 Hidden cost of holidays in national competitiveness

By Patrick Agudo Waterman

On November 24, 2011, Malacañang issued Proclamation no. 295 declaring the regular, special non-working and special holidays for 2012. Notably, the Office of the President has established 16 holidays for the upcoming 2012 calendar year (excluding Eid’l Fitr and Eid’l Adha; status and dates to be officially proclaimed). Filipino vacationers are fortunate that they will be able to enjoy six long weekends in 2012.

Too much of a good thing – the Philippine paradox.

However, employers are not as pleased with the Aquino Administration’s 2012 holiday selection as the excessive amount of non-working holidays continue to hinder business planning and reduce the overall competitiveness of the Philippines. For 2012, the Palace has added Chinese New Year and November 2, occasions not previously honored, as additional special non-working holiday.

Additionally, business already remains skeptical of Malacañang’s commitment to the recently released 2012 holiday schedule as the Palace has a history of declaring additional special non-working holidays with short notice. In 2010, the business community was encouraged by a proclamation containing the official list of paid holidays for 2011 because it reduced the 21 holidays in 2010 to 16 for 2011, in line with the 15 holiday average amongst the 6 large ASEAN economies.

However, Malacañang added four additional special non-working holidays with short notice in 2011:

1. Black Saturday, April 23, 2011 Declared April 18, 2011

2. 150th Anniversary of Jose Rizal*, June 20, 2011 Declared April 26, 2011

3. Special non-working*, October 31, 2011 Declared October 10,2011

4. Eidul Adha*, November 7, 2011 Declared October 20, 2011

*Weekday

Cost for Business

Business operating costs are an important facet of Philippine competiveness and are constantly being monitored by investors in deciding where to locate, expand and or close operations. Excessive holidays negatively affect calculations by domestic and foreign firms when making investment decisions.

The four unanticipated additional non-working holidays in 2011 have resulted in lost productivity for employers who practice observance and have incurred extra costs for those firms that must remain open on such days. Particularly, the Philippines electronic manufacturing and business process outsourcing (BPO) industries are suffering millions of dollars in unexpected labor cost. As both industries have a combined workforce of approximately one million people that need to operate twenty-four hours a day, seven days a week. It is important to note that the Philippines also has one of the highest minimum wages in ASEAN thus, when the government declares a holiday, hefty overtime bonuses are mandated by law for those employees who are forced to work.

Local holidays too

In another dimension, local city and provincial non-working holidays also add to business costs and affect Philippine competitiveness. Last November 23, Malacañang declared Friday, December 2, 2011 a special non-working day in the city of Pasay, Metro Manila, in celebration of its 148th Foundation Day. Pasay is home to the Department of Foreign Affairs (DFA), Senate of the Philippines, the Philippine Department of Trade and Industry's export promotions agency and many of our member companies’ offices.

Pending Legislation

Additionally, there are numerous bills pending in the 15th Congress to establish new holidays. Last November 16, the House Committee on Basic Education and Culture reported out for floor deliberation a measure to declare September 3 of every year as National Victory and Liberation Day in the Philippines, this would add another holiday to the calendar. This is worrisome to investors because the burden of more holidays looms.

The holiday problem arose over time as an excessive amount of holidays accumulated from politicians’ attempts to boost popularity ratings. Now any reduction in the number of holidays by the Aquino Administration would be viewed as highly unpopular, although a reform would create more jobs and improve competitiveness.

Recommendations

With above-average credit ratings, stable banking system, vast natural resources and a strong work force, the Philippines’ is still an ideal investment destination for many industries. However with 20 holidays, the Philippines has emerged as the country with the highest number in Asia in 2011. Vietnam for example only had nine holidays for the same year. Too many holidays have harmed the Philippines’ ability to compete for investments with neighboring countries in ASEAN. The following are suggestions or recommendations that may address the growing concern that the Philippines is not at par with its neighbors when it comes to the number of holidays:

First, the number of Philippine non-working holidays should be capped to 15, to match the regional average; a new law is needed to set limits on the total number of non-working holidays. This legislation should also allow firms that export goods and services to pay regular wages for working on such days given that compensatory days are awarded at a later more convenient date.

Second, the Aquino Administration should avoid the declaration of short notice holidays and prioritize the issuance of a listing of non-working holidays for the next two years or at the very least six months prior to the beginning of the calendar year, as mandated RA 9492 “An Act Rationalizing the Celebration of National Holidays.”

Third, the Aquino Administration must consult business executives and additional stakeholders before declaring a short notice non-working holiday deemed as necessary. Presently, the Palace has the power to declare holidays autonomously, without any checks or balance.

Fourth, Congress should not seek to support the creation of holidays to honor specific working groups or additional national heroes. There are too many specific working groups and national heroes to individually honor. Labor Day and National Heroes Day already celebrate Filipino workers and Philippine National Heroes.

Congress needs to be fully informed of the economic consequences before supporting legislation to add another holiday. Awareness of the current competitive environment, will inhibit Congress to take leadership in pressuring the Aquino Administration to rationalize the number holidays and pass a bill to address the excessive problem.

The Council hosts regular members meetings featuring members of the Aquino Administration, officials from the U.S. government and members of Philippine Congress. In 2012, we will use these discussions in Manila and Washington D.C. as opportunities to advocate for the recommendations above.

Patrick Agudo Waterman Philippine Affairs Manager at the U.S.-ASEAN Business Council in Washington, D.C.  Contact: This e-mail address is being protected from spambots. You need JavaScript enabled to view it
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