Dear Comrades, Friends, Ladies and Gentlemen,
Good morning.
Merger of UPAGE and SOASPower
I just heard the President of UPAGE, Comrade Abdul Rahman, mentioned that the UPAGE and SOASPower completed the merger last year only after five informal meetings and over a span of six months. Let me add this. I think if not for some technical issues with regard to the amendment to the legislation, the merger would have been completed in record time. Well done.
The merger is significant because it brings together two groups of members -- the executives and the non-executives. We must be very clear about this. Regardless whether they are executives or non-executives or whether they are Ordinary or General Branch members, a union member is a union member. The only difference is the type of benefits and help we can give them.
Mergers are not easy and straightforward. In fact, restructuring in any organization is never easy and straightforward. However, as the industry restructures, we have to keep up and make sure that we are in the best position to bring value to our members. If need be, we must also restructure and merge.
The swift merger of UPAGE and SOASPower holds many useful lessons for the other unions. We can learn from each other. I asked Comrade Nithiah Nathan to do a write up of the experience and lessons learnt in the merger and he had gladly done so. The two unions are now joined in a happy marriage. It is not the end. It is the beginning. The important thing now is to strengthen the team and make it stronger.
Challenges of Global Competition
The work ahead of you, as leaders of UPAGE, will be challenging. You are standing at the turning point of the development of our economy and as leaders you have an important role to play. I will elaborate.
The Gross Domestic Product, GDP, per capita of Singapore has risen steadily over the years. Our GDP per capita is now comparable to many of the developed countries. We have even overtaken several of them. What does this means to you and me? It means that we have to compete in a different sphere.
Singapore has a limited domestic market. We have to tap into the global market and the global network to grow. There is no other way. What it also means is that our workers have to compete with workers from around the world. As leaders, we must see to it that our workers are ready to survive and do well under this tide of global competition.
Job Shifts due to Global Competition
Let me give you some examples of the impact of global competition. We are no short of examples of manufacturing companies relocating to countries like China and regional countries. This has been a fact. Since the early days of our economic development, factories have relocated and new ones have come. What we have done is to move up the value chain and developed new industries. In order to survive, we will continue to find new industries to compete.
Global competition does not only affect manufacturing companies. The forces of global competition are also shifting the jobs in the service sector. The most obvious area is in the info communications sector.
On 17th December 2002, Neptune Orient Lines announced an eight-year outsourcing contract with Accenture Consulting. Accenture Consulting would take over the responsibility for the NOL Group's accounts payable, accounts receivable and accounts reconciliation processes. Accenture has a sizeable practice in Singapore. This is the interesting part. The operations will be done in Shanghai. Not Singapore.
The Business Times reported on 21st February 2003 that in London, British Telecom planned to save money by turning to cheaper centres in India. The plan was likely to lead to 700 British workers losing their jobs. Cost was a huge consideration for the company. In India, it would be able to get many highly-educated young men and women to work in the call centres -- for far lower wages than in Britain. Many of them are university graduates. Special schools had been set up in India. Many of the Indian workers adopt English names and cultivate British or American accents. The British Telecom would not be alone in turning to Indian call centres. HSBC, Prudential, Microsoft, American Express and GE Capital are some major companies which have already done so.
Satyam, a large software development company based in India, set up its office in Singapore last year. R-System, another US-listed Indian software company, has been operating in Singapore for many years. There are plenty of these companies in Singapore. They would work with partners in Singapore, secure projects and send most of the coding of the software development back to India. I am told the rates that they charge are only a fraction of what many of our Singapore companies has to charge to break even.
We will see greater job shifts in services, just as what we have seen in manufacturing. The competition will become stiffer.
Flexible Labour Market
There are many things we have to do. I would share two of them with you here.
First, we must maintain a flexible labour market.
I visited Germany last year. Germany was once an economic powerhouse in Europe. However, it is now under tremendous pressure to restructure. The German labour market is plagued with rigidity. Unless the current government in Germany can overcome the difficult task of injecting greater flexibility in the labour market, it would have a tough time ahead generating more jobs and achieve robust economic growth. Instead of investing in Germany the companies will invest in Central Europe where costs are lower, and labour more flexible. The plight of the German economy serves as a reminder for us. We need to make sure that our labour market remains flexible.
Seniority-based Wage System
Many of our companies are still trapped in a seniority-based wage system. The seniority-based wage system means workers are almost assured a pay increase for every year of service. Even if there is no increase in productivity, the wages go up, until they reach the top of the ladder. Some of us may ask, what is wrong with that? Does it not give a sense of security and certainty for our workers?
In a situation when there is no competition, local or globally, this is perfectly alright. However, we don't live in a world like that. Companies will have to compete. They will have to make sure that their costs are able to fight with other companies.
Take for example, two companies - a new company and a 20-year-old company. They provide the same service and compete for the same customers. The new company starts on a clean slate and employs workers without a wage bill burdened by the seniority-based structure. The 20-year-old company has a big lot of employees being paid a salary close to the top of their seniority-based wage system. We don't need an MBA graduate or a rocket scientist to see that the younger company would immediately have a cost advantage. The 20-year-old company can fight back with its track record. However, it would not go far with that. The reality is that it would still be under tremendous pressure to maintain a competitive cost structure. What happens? Retrenchment. Workers lose their jobs. Worse still, the older workers would be the first to be affected.
We have to restructure the seniority-wage system. The wage structure must be responsive to the performance of the company. We need to strike a balance between rewarding loyalty and productivity. The competitive base-up system was introduced to tackle this.
The wage system must have flexibility built in. It is a choice between losing a job completely and adjusting the wages to keep a job. The MVC concept was proposed to address this.
This is not a new subject. We have been discussing this for a long while. I spoke up on this in 1985. We have achieved some re-balancing. However, we need to move at a quicker pace. The pressure of global competition will make us see an even more pressing need to restructure our wage system. Otherwise, we would not be able to retain companies that are here nor would we be able to attract new companies to start operations here. It means that we will not be able to keep jobs and create new ones.
This is not the responsibility of only the employer. If nothing is done, our workers would be the ones who would suffer without a job. Therefore, the union has a key role in bringing about the change. Union leaders must understand the reasons for the change. Armed with this conviction, it can work with the management.
On the other hand, the management must also upgrade its human resource capability. Traditional human resource functions such as processing payroll and other administrative tasks are also under threat as companies look to cheaper alternatives in outsourcing. Human resource must take on a more strategic role. One immediate area that it can contribute is to structure a fair and effective wage system.
Increasing Productivity
Second, we must increase productivity. I am glad that Comrade Abdul Rahman spoke about increasing productivity and skills upgrading. These are important areas. I encourage the union to continue its effort to bring about improvements in these areas.
I would add that adjustments in work patterns, taking on new tasks and learning new skills can only succeed if we have the correct and positive attitude. It can sometimes be a bit stressful for some workers. In some instances, sacrifices might have to be made.
This is where the Union and its leaders, like all of you here today, has an important role to play. Give your members the moral support. Explain to them the significance of arming themselves with the skills to do the job better. Show them the way by setting the example for them. In the recent retrenchment exercise in PSA Corporation, almost all the workers in the operation side were saved the axe. Why? Because they had been keeping the operations lean and fit through constant improvements in work patterns and work methods. Many of them only saw the significance of their earlier sacrifices and pains, when the list of retrenchment was made known!
Conclusion
Let me wish you a successful TDC and a day of fruitful discussions.
Thank you.
