TAIPEI (Reuters) - With exports plunging and orders drying up, there is little reason for cheer this Lunar New Year for Asian companies that are calling off their usual lavish parties and cancelling generous cash and gift bonuses.
“It will be hard to handle psychologically,” said Hsieh Chua-chih, secretary-general of the Taiwan Confederation of Trade Unions. “Employees will find it hard to accept as it’s an important period and they need to give money to their family.”
The Lunar New Year festival is the main shopping and partying event of the calendar in East Asia. In the past, Taiwan companies would throw million-dollar parties and dole out TV sets and stereos to employees along with envelopes stuffed with cash.
But this year, amidst a global economic crisis that has pushed the unemployment rate in Taiwan to a five-year high and sent exports plunging by a record 42 percent, companies are cutting costs even as they try to hold onto their workforce in the hope of an economic turnaround.
With export-dependent Asian economies such as China, South Korea and Japan showing similar signs of weakness, it’s no surprise that austere corporate Lunar New Year parties are all the rage as Asia prepares to welcome the Year of the Ox.
Hon Hai, a Taiwan high-tech firm that makes parts for iPods, Nintendo consoles and Nokia phones, will hold a modest party this year rather than the T$200 million ($6 million) bash it held last year, giving away cash and gift prizes, including a car, worth millions. “The party will be a bit lower-key,” said a company publicist, declining to provide details. “As long as everyone has a good time, then it’s all right.”
Trade-reliant Asian economies are reeling from a global slump, with Singapore, Hong Kong and Japan already in recession and major companies in the region cutting production, freezing job recruitment and laying off workers to save money.
Taiwan’s economic slowdown has snowballed with alarming speed. Exports, which were still growing by double-digits as recently as August, have tumbled in the past few months.
Meanwhile, many factory workers are being forced to take unpaid leave for up to three days a week so their employers can reduce salary expenses as orders dwindle.
For many employees, just being able to keep their job is gift enough for the New Year given the grim economic forecasts.
“Everybody knows the top priority now is to remain on the job without any unrealistic wishes,” said Kevin Gao, 27, a Beijing website employee whose overtime pay will be cut and company party scaled back from a lavish banquet to a simple dinner.
“I used to consider quitting my current job for a better one, but now, I’m more than happy to have someone pay me.”
Across the region, bonuses, which in good years were at least equivalent to a month’s salary, are being canceled due to the economic downturn.
“On the bonus issue, it will definitely save companies a lot,” said Daniel Soh, an economist at Forecast Ltd in Singapore. In South Korea, Korean Airlines and several leading banks have announced they will cut bonuses, while the main telecom carrier KT Corp. has frozen salaries. In China, some companies are axing the traditional 13th month salary.
It’s not clear how much this will feed into the local economies but shops in Taiwan complain that business is far from brisk compared to the same time last year. Many people are cancelling or scaling back holiday plans and putting on hold expensive purchases, such as new cars and household electronics.
“Over Spring Festival, we’ll go to a cheap place and spend less time there,” said Yan Jen-liang, 33, a Taipei metal-worker who will lose his bonus due to lack of product orders.
“We might just go to the countryside,” he said.
About 20 percent of Taiwan firms will eliminate bonuses this year, the local United Daily News said. Other firms might cut them back or shelve gifts to employees that in better years included laptop commuters, holidays and even cars.
Industry experts say it’s all about cutting costs to ride out the recession without having to retrench skilled workers.
“In Asia there’s much more of a culture of trying to retain employment,” said Derek Berry, a human capital expert with Mercer Singapore.” The risk of not having the right people is higher, so companies are trying to be as flexible as possible.”
In past years, corporate Lunar New Year parties were so lavish that they attracted television coverage. This year, even companies that aren’t seeing profits plunge are cutting back as they bunker down for an uncertain future.
“We’re in a difficult time, and there’s no clarity on when we’re going to come out of it,” said Berry.
Additional reporting by Lee Chyen Yee in Taipei, Rhee So-eui and Park Jungyoun in Seoul and Michael Wei in Beijing; Editing by Megan Goldin