Mr Ng Chee Keong, Group President, PSA
Mr John de Payva, President, NTUC
Advisors to SPWU Mr Zainul Abidin Rasheed, Prof Koo Tsai Kee
Mr Lee Mun How, President, SPWU
Distinguished Guests, Delegates, Ladies and Gentlemen: Good morning!
Despite the slowing exports and growing competition, it is encouraging to know that PSA Corporation chalked up an eight per cent growth in container volumes, which were handled at our local ports, to hit 16.8 million TEUs (Twenty-foot Equivalent Units) in 2002. The strong overseas performance also helped to lift PSA's combined local and overseas volume by 28 per cent to hit a record of 24.5 million TEUs.
While PSA turned in some encouraging results, there are signs that challenging times lie ahead for local operations. The growth in cargo volumes tapered off towards the end of 2002 despite the traditionally busy holiday season. Volumes grew just 6 per cent to 1.39 million TEUs in December 2002, when compared to a year ago. The after-effects of the recent changes in customer base would also kick in.
We can expect the competition to intensify.
Regional ports will handle more cargo as the regional economies grow. When the cargo produced by an economy reaches a certain level, it makes business sense for shipping lines to make direct calls rather than tranship through a hub port. I know this because I used to work for Neptune Orient Lines, and it made sense for us to call direct at a port when our volumes reached a sufficiently high level. Beyond a certain volume, the double handling costs involved in transhipment becomes too high. The customer liked it also as the direct call meant faster delivery to destination. For example, the Osaka and Kobe ports lost the lucrative Korean transhipment cargo when Korean exports reached a volume to justify the construction of deep water berths at Busan. Osaka and Kobe ports fell back to their principle role of handling Japanese cargoes. Today the same story is being repeated elsewhere. For example, China's booming southern port of Shenzhen reported a 50 per cent surge in container traffic last year. So Hong Kong is feeling the heat from the increasingly tough competition from its neighbouring ports in China. Other Chinese ports, such as Shanghai, are charging up the ranks of leading container ports of the world.
When the volumes through a port reaches critical mass, the port can then compete for transhipment cargoes and establish itself as a competing hub. This happens all over the world. In fact, PSA's Hesse-Noord Natie in Antwep, Belgium must surely aim at attracting a share of the traffic that goes through the gate port of Rotterdam. (Technically we consider transhipment as movements via feeder ships to a hub port. However, in principle, the same should apply to goods that move to a hub port by other modes of transportation.)
Competition is a fact of life. We need to recognise this, adapt to changing conditions, and work together to stay ahead of the race.
First, the role of Government is to create the conditions that allow businesses to thrive. This includes pricing the factors of production competitively, where Government has an influence over the pricing. The cost structure of businesses can vary from industry to industry. In this regard, the Government needs to understand how businesses compete in the various industries and see how it can make the conditions more conducive for businesses to thrive. When the businesses thrive, there will be more jobs.
Second, human capital is a key competitive tool that needs to be developed properly and harnessed fully. Many aspects of the business model can be easily copied by competitors. If we invest in sophisticated machines, our competitors can do so too. If we buy the latest state-of-the-art software, nothing stops our competitors from also acquiring such software. If we give huge discounts, so can our competitors. The prices of some of their factors of production may be lower and they could sustain an even larger discount and for a longer period than us. So where does that leave us? Our people, and by this I mean everyone in the organisation. Managers, as leaders in the company, are responsible for this factor.
Everyone in the organisations needs to stay focused and be committed to the mission. We need to put our brains to everything we do. We must compete on knowledge and on the effective application of knowledge. The late Nobel laureate for Physics Dr Richard Feynman once wrote, "You can know the name of a bird in all the languages of the world, but when you're finished, you'll know absolutely nothing whatever about the bird... So let's look at the bird and see what it's doing -- that's what counts. I learned very early the difference between knowing the name of something and knowing something."
We need to tap on the collective power of the knowledge in each worker, in each operator, in each supervisor and in each manager to work together as a team to create value. How can we use our collective knowledge to operate more efficiently? How can we apply our collective knowledge to exceed the expectations of our customers? How can we think out of the box to improve our service standards and offerings? How can we increase our productivity so that each of our workers can create value a few times higher than each worker from the competitors? Given our operating environment, how can we bring the best out of everyone to create a sustainable competitive advantage over the rest?
The late Konosuke Matsushita, founder of the Japanese company that makes products under well-known brands like National and Panasonic once asked his employees: "How should you justify your continued employment with the company? Have you justified your employment if you have added value equal to your pay?" Most of them thought so. But he told them that they were wrong. They needed to justify their continued employment by adding value many times their pay. Konosuke Matsushita got it absolutely right! It is absolutely necessary for us to achieve this, now that our costs are high.
Most of us use PCs, and other electronic gadgets. We know that the prices fall quite quickly. Therefore the manufacturers of these items have to produce them at lower cost. They are challenged all the time to reduce the cost, even as wage levels go up. They have to achieve huge reductions in cost within months, not years. Typically they find new ways of manufacturing, and use fewer workers. They need to sell a lot more units to realise the added value to keep the business viable. As global competition intensifies, the same challenge is faced by service companies.
As PSA Corporation adapts to the rising tide of global competition, it would need to re-organise. This is necessary to stay ahead. For PSA, it means handling more TEUs per worker. How many TEUs a terminal can handle per hour is good for the customer. But for the terminal operator, it is how many TEUs per worker handled that improves the bottomline. When the business grows while it re-organises, workers can be absorbed into the company. But this may not always be possible and some workers will be affected. Unfortunately, some would have to be placed out. When this happens, it pains us in the unions. While by accepting lay-offs protect those who remain, we must also look after those displaced. For those who have put in long and loyal service to the company, we should recognise their past contributions. Both the union and the management should do their best to help these people adjust to the loss of their jobs. Besides the financial aspect, many of these workers would also need the emotional and psychological support to cope with the setback, and ensure that it is temporary. It will be temporary only if the displaced workers find new jobs.
It is not easy to deal with such a situation. We have managed industrial relations very well over the years. We stand out from the rest of the world. The paralysing strikes at the US West Coast ports last year stand as testimony to the importance of our harmonious partnership.
The union has a critical role to play. The event today is an important one for SPWU, as a new Executive Council would be elected into office. I am heartened to hear in the remarks made by Comrade Lee Mun Hou earlier that communication and leadership development would be given attention by the newly elected Council. I believe that communication and leadership development are important areas to tackle, especially so in the difficult times ahead.
As we continue into an uncertain economic climate for the next four to five years, the Union will need leaders with the commitment and integrity to find a balance between safeguarding the interests of the members on one hand, and working with the management to ensure that the company remain competitive on the other. Having a huge heart to serve our members alone will not be enough. Without the necessary skills and knowledge, frustration can set in fairly quickly. Therefore, I would urge the leaders to upgrade themselves through training. This would also set the example for the people whom they serve on the importance of continuing learning. Those who are more experienced should take it as their duty to mentor those who have just started off as a leader.
At the same time, our communication channels will be important pillars in ensuring that the union movement as a whole remains a cohesive one in times of the economic uncertainty. Understanding and trust need time and effort to build. The Convention today can help you enhance understanding and trust. I hope that while you engage in the discussions today, to not forget to use this opportunity to renew bonds and strengthen the mutual understanding that you have established with one another. It is the spirit of camaraderie and the spirit of mutual aid that will eventually enable the union to meet the challenges ahead of us.
