Public Holidays Research Paper June 2013
Can Nepal afford to pay NPR21.7bn for public holidays? Nepal has a total of 41 public holidays which is 3 to 4 times higher than tnternational averages. A single public holiday costs the economy NPR 530 million and a total of 41 public holidays costs the economy a whopping NPR 21.7 billion per year. There is no differentiation between public holidays and bank holidays In a regular year, on an average, there are at least 35 public holidays and 313 weekdays, out of which 52 workdays are half days. Since all public holidays are bank holidays, 11.18% of weekdays are bank holidays which directly puts a downward pressure on the productivity and hence the GDP. Despite BFIs having longer working hours, lack of synchronization with the private sector creates an issue in availing of financial services. There is lack of alignment with international market standards; whereby the Nepali economy is open on Sundays, whereas international markets are closed, putting a limitation on international transactions. Civil servants currently work a 7.5 hour day with a total of 1543 hours in a year. BFIs on the other hand work for 1780 hours, with the private sector working the most at 1962 hours.
Since the declaration of Nepal as a democratic republic, the number of public holidays has been on the rise. This has been perceived as a hurdle for the business sector as it hampers the continuity of public and financial services which makes it difficult to do business and impacts the economy. Currently, Nepal has a total of 41 public holidays; a single public holiday costs the economy NPR 530 million and a total of 41 public holidays costs the economy a whopping NPR 21.7 billion per year.
Dashain: Taking Blessings from the
As there is no differentiation between public holidays and bank elders holidays, government offices and banks and financial institutions (BFIs) are closed on all public holidays. This does not allow the general public to avail financial services during these days which slows down the operations of the economy.
Therefore, the Federation of Nepalese Confederation of Commerce and Industry (FNCCI) raised this as a major issue on September 30, 2010 to the Government through the Business Environment, Labor Relations and Industrial Security (BELRIS) Holi: Festival of Colors Working Group of the Nepal Business Forum.
Holidays on the rise in Nepal Nepal is a country rich in culture and varied ethnicities. With diverse cultures comes a varied list of occasions celebrated by the multiethnic population. Since the declaration of Nepal as a democratic republic, various minorities in Nepal started voicing their demands for public holidays during their respective religious occasions. The almost four year old secular state has since been struggling to prove its multicultural credentials. The government thought it would be rational to grant all their requests, as a result of which the number of public holidays has been climbing. The Labour Rules of Nepal, 1993, mandate organizations to provide 13 public holidays a year in addition to Labour Day (14 public holidays in total) however, the number of national public holidays has reached 41 in Nepal (out of which four holidays are limited for the Kathmandu Valley and three for women). This far exceeds the international average, which is 8 to 15 days a year.
Role of the Nepal Business Forum The Nepal Business Forum through its Business Environment, Labour Relations and Industrial Security Working Group raised this issue as major bottleneck in doing business. The high number of public holidays has created a hurdle for the business sector, as it hampers continuity in public and financial services. What adds to the problem is that despite BFIs having longer working hours, lack of synchronization with the private sector creates an issue in availing
of financial services. There is also a lack of alignment with international market standards; whereby the Nepali economy is open on Sundays, whereas international markets are closed, putting a limitation on international transactions. Such issues make business transactions more difficult. Therefore, the Working Group recommended the possibilities of delinking public holidays and bank holidays. Moreover, with initiation from the Ministry of Finance, a secretarial level com-
mittee was formed to look into this issue. A decrease in the existing number of holidays to 15 with 10 days of optional holidays was suggested by the committee, along with the adoption of a two day weekend to compensate for the reduction in public holidays. Following which the issue was forwarded to the Finance, Monetary and Insurance Affairs Working Group to take on a coordinated approach with the Nepal Bankers’ Association and the Nepal Rastra Bank.
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Public Holidays
Public Holidays Putting a Downward Pressure on the Economy
Downward pressure on Economy
There is clear positive relationship between public holidays and the rate of GDP. However, the social benefits derived by the economy through public holidays cannot be ignored. Public holidays bring in societal benefits which directly help improve motivation levels and productivity of employees in a one day weekend culture. It is also likely to positively impact spending on recreational activities, including eating out and domestic tourism. In a regular
year, on an average, there are at least 35 public holidays and 313 weekdays, out of which 52 workdays are half days. Since all public holidays are bank holidays, bank holidays mean that 11.18% of weekdays are bank holidays which directly puts a downward pressure on the productivity and hence the GDP. Currently there are 41 public holidays in Nepal, and if each public holiday costs the economy NPR 530 million , a total of 41 public holidays
costs the economy a whopping NPR21.7 billion per year. Instead of creating a favorable business climate, the long list of public holidays is only adding obstacles of doing business in Nepal. The long list of public holidays coupled with bureaucratic hurdles has made it difficult for projects to finish on time, companies to reach their optimum capacity, and hampered the overall investment climate.
Possibility in Delinking Bank and Public Holidays Central Bank of Nepal: Nepal Rastra Bank
As per the analysis of working hours conducted, civil servants currently work a 7.5 hour day with a total of 1543 hours in a year. BFIs on the other hand work for 1780 hours, with the private sector working the most at 1962 hours. According to the International Labor Organization (ILO) standards, as per the Working Hour Conventions, employees can be engaged in work for a maximum of 8 hours and 48 hours a week. The current working hours of government and private employees is still under the maximum hour limit which leaves scope for expansion of working hours to increase productivity.
Reforms hopes to increase productivity
Announcing public holidays for employees and organizations is a universal practice enforced legally through acts and regulations. The Labor Rules specify that companies must give at least 14 days of paid holidays. The Government of Nepal (Allocation of Business) Rules, 1996, outlines functions and responsibilities under purview of Ministry of Home Affairs (MoHA). One of the responsibilities is declaration of public holidays, pub-
lic ceremonies and issuance of notice for official attendance. Upon approval from the Cabinet, the MoHA has the sole authority to announce public holidays. The MoHA announces the list of public holidays at the start of every year. The Nepal Rastra Bank (NRB) Act declares NRB as an autonomous and corporate body with perpetual succession. The Act also gives powers to the governor to take decision for opening and
closing branch offices and other offices of the bank . On account of being an autonomous body, NRB has full rights to declare a separate list of bank holidays for BFIs. However, since NRB is a government entity as well, they claim all 41 days as public holidays. The delinking of bank and public holidays seems problematic as there is a chance of high resistance from NRB employees.
Reforms hoped to curb losses to the economy; increase productivity Given the current political situation wherein elections for the constituent assembly is yet to take place, any major amendments undertaken by the interim government will be faced with heavy criticism. Therefore, it is important to consider ways to reduce the number of public holidays as reduction in the number of holidays will have a number of benefits to the economy. Reduction in the number of public holidays: Given the costs to the economy, Nepal should consider reducing its number of holidays to be more comparable with international practice. The recommendation made by the MoF
to reduce the number to 15 plus 10 optional holidays should be adopted in the long run. With a reduction of one public holiday, the economy can save NPR 530 million. Currently, considering the reduction of the number of public holidays from the existing 41 days to 15, which is a reduction of 26 public holidays. Therefore the aforementioned change would help save a total of NPR 13.8 billion. Delinking bank and public holidays: Bank holidays and public holidays should be delinked to ensure that the working hours of BFIs can be aligned with that of its customers. NRB being an au-
tonomous body requires no such permission from either the MoHA or the MoF. The definition of public holidays needs to be changed in the Negotiable Instruments Act , as it currently defines a public holiday as "a day declared by Government of Nepal to be a public holiday and it includes the day on which the Banking business does not take place." Once public holidays are de-linked with bank holidays, this definition of a public holiday will have to be updated to a holiday announced by the government for government offices only.
Research Paper
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Reducing the number of public holidays and delinking bank and public holidays can only take place once a stable government is in place. Once this has taken place, the MoHA can take the recommendation to the Cabinet, and upon approval, the MoHA can announce the aforementioned changes. Following which the NRB has to issue a notice to all BFIs stating such a change.
a two day weekend should be adopted simultaneously with the reduction in public holidays. This will help Nepal align its practices with the international market, allowing it to provide full fledged services to its customers when it is opened. The government must ensure that offices dealing with international public relations stay open, so as to facilitate trade on public holidays.
Alignment with international practices: In order to ensure acceptance of the reduced number of public holidays,
Longer working hours per year, leading to less unpredictability: Despite a two day weekend, due to longer
work hours during the weekday, the total number of hours worked by an employee in a year increases. A two day weekend helps rejuvenate employees and also increase their productivity. Additionally, with a reduction in the number of public holidays, there will be less chances of a holiday falling in the middle of the week, which will reduce unpredictability of situations. This coupled with the fact that the number of working hours per day and per year will increase, will help in increasing efficiency of employees.
Computation of impact of Public Value
Value in millions %
Growth %
Agriculture Sector Agriculture and Forestry Fishery
Public Holiday %
Remark value
51,076.0
34.8
4.86
0
0.00
500.7
0.3
8.84
0
0.00
Agriculture sector is not impacted by a public holiday
Industrial sector is marginally impacted
35.1 Non Agriculture Industry Mining and Quarrying
816.6
0.6
5.03
10
0.22
Manufacturing (Industrial Production)
9,054.7
6.2
1.28
10
2.48
Electricity, Gas and Water
1,656.5
1.1
7.39
10
0.45
Construction
9,877.2
6.7
-0.07
10
2.71
14.6 Service Wholesale and Retail Trade
20,909.5
14.2
3.79
0
0.00
Gaining sectors during a public holiday
2,616.4
1.8
8.28
0
0.00
Gaining sectors during a public holiday
12,240.6
8.3
6.84
25
8.38
6,840.3
4.7
3.47
25
4.69
Real estate, renting and business
11,999.1
8.2
2.97
50
16.44
Public administration and defense
3,108.7
2.1
5.61
100
8.52
Education
8,084.0
5.5
4.97
0
0.00
Health and Social Work
2,271.2
1.5
5.47
25
1.56
Telecommunication sector is only partially impacted Only partially impacted as banking services are taken in advance or after a public holiday Impacted due to closure of public and financial services Due to closure of public administration most of the other sectors of the economy are impacted Education sector is not impacted as they follow a planned calender year Health sector is marginally affected
5,810.2
4
9.1
50
7.96
Marginally Impacted
Hotels and Restaurant Transport, Storage and Communication Financial Intermediation
Other Community, Social and Personal Service
50.3 Gross Value Added Financial Intermediation services indirectly measured Gross value added at basic prices Taxes less subsidies on products Gross Domestic Product at producers price
146,861.70
1%
2189.4983
5040.1 141,821.60 13,880.90 155,817.40
Total Value of Goods and Services produced in a day Agriculture Sector
402.36 141.23
35.1%
Non Agriculture Sector
261.13
64.9%
Total Impact during a Public holiday
53.40
Per day (% of GDP per day)
13.3%
To estimate the impact an additional public holiday where both the government and financial intermediaries are closed, it is assumed that the agriculture, education, wholesale and retail, and hospitality sector is not impacted while the rest are impacted but by a varied margin for each of the sectors. But the sectors gaining from a public holiday only account for about 16% of the economy, while the losers account to almost 43.4% of the economy. Therefore the overall impact is a negative one.
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