Progressive and Flexible Labour Practices, Transparency In Communications and Workforce Training are Key to ASEAN Economic Advancement: Mercer Study
20 October 2008
A study by Mercer, a leading global provider of consulting, outsourcing, and investment services, has made the following key findings:
- A reaffirmation that progressive labour practices are a key factor influencing business and foreign direct investment decisions, and that ASEAN must review its labour practices to create a more favourable investment environment.
- Labour law flexibility is one of the key drivers of competitiveness.
- There is a unique “ASEAN way” of partnership that could potentially be ASEAN's comparative advantage.
- Skills training for the workforce is critical to raising labour quality, especially by aligning education policy with industrial planning.
- Capacity building in the area of labour market statistics is necessary to enable countries to gather and use labour market data for effective governance and fact-based decision-making.
2. The Ministry of Manpower, together with Mercer, will present the commissioned report for the Association of South East Asian Nations entitled Progressive Labour Practices to Enhance the Competitiveness of ASEAN.
3. The study1 examines the labour practices across the 10 ASEAN markets and the impact of ASEAN integration on labour markets. The insights from the study will be presented at the upcoming ASEAN Human Resources Summit2 to be held in Singapore on 22 October 2008.
4. Mr Ong Yen Her, Divisional Director, Labour Relations and Workplaces, Ministry of Manpower, said that progressive labour practices help to create a favourable workplace environment that motivates the workforce to be more productive and helps organisations to be more competitive.
5. “Such practices, supplemented by a legal framework that strikes a balance between protection and flexibility, would result in a conducive environment for foreign investment, economic growth and job creation, for the benefit of the region,” Mr Ong commented.
6. “As ASEAN forges ahead with closer economic integration through the formation of the ASEAN Economic Community by 2015, it would be useful for ASEAN countries to continue to build on the strong tripartite relations among the governments and social partners. Good tripartite relations are key to ensuring harmonious industrial relations, which would allow the region to focus on productivity-enhancing work instead of mediating disputes,” added Mr Ong.
7. Ms Su-Yen Wong, Managing Director of ASEAN, Mercer said that in order for ASEAN to continue as an attractive investment destination, worker productivity must increase. “Historically, ASEAN has been more productive than India, but that advantage is now eroding, with the gap narrowing to 33 per cent in 2006 from 70 percent in 1990. Similarly, China's output per worker overtook ASEAN in 2004 and that gap is widening. Being more productive means a better and higher level of output that will generate a cycle of economic development and prosperity,” said Ms Wong who will be speaking at the ASEAN Human Resources Summit.
8. For a summary of the Progressive Labour Practices to Enhance the Competitiveness of ASEAN, please see Annex B.
More information on the ASEAN Human Resources Summit can be found in Annex A
The ASEAN Human Resources Summit
Organised by the Ministry of Manpower, Singapore, at the Shangri-La Hotel on 22 October 2008, the ASEAN Human Resources Summit is a distinctively ASEAN platform where employers, HR and Industrial Relations practitioners and government officials from the region gather to share their insights on progressive HR practices in ASEAN. The ASEAN Human Resources Summit was an initiative endorsed at the 20th ASEAN Labour Minister's Labour Meeting in held in Bangkok in May 2008
2. This inaugural event aims to promote the adoption and development of progressive HR practices within ASEAN. The summit will also showcase impactful HR practices and research findings from the region.
3. Besides fostering the sharing and learning of best practices among ASEAN countries in preparation for ASEAN's integration in 2015 and beyond in the area of HR development, the summit is also designed to be a valuable networking platform for employers, HR or Industrial Relations practitioners and government officials.
4. Key highlights of the Summit include:
- Mercer's study on the relevance of progressive labour practices in enhancing competitiveness in ASEAN
- The International Labour Organisation's (ILO) latest study of the labour and social trends in ASEAN
- Case studies from various ASEAN countries, including insights into their labour environment and best practices from ASEAN-based companies
- Opportunities to establish a rapport and network with senior tripartite representatives in ASEAN
5. Speakers at the Summit will also include Dr Soeung Rathchavy, Deputy Secretary-General, ASEAN, Dr Gyorgy Sziraczki, Senior Economist, International Labour Organisation Regional Office for Asia and the Pacific, as well as Dr Bambang Widianto, Indonesia Deputy Minister for the Evaluation of Development Performance. The Guest-of-Honour will be Singapore's Minister for Manpower Gan Kim Yong.
Mercer is a leading global provider of consulting, outsourcing and investment services. Mercer works with clients to solve their most complex benefit and human capital issues, designing and helping manage health, retirement and other benefits. It is a leader in benefit outsourcing. Mercer's investment services include investment consulting and multi-manager investment management. Mercer's 18,000 employees are based in more than 40 countries. The company is a wholly owned subsidiary of Marsh & McLennan Companies, Inc., which lists its stock (ticker symbol: MMC) on the New York, Chicago and London stock exchanges. For more information, visit the Mercer website.
About the Ministry of Manpower, Singapore
Guided by our Vision of “A Great Workforce A Great Workplace”, the Ministry of Manpower works to achieve a globally competitive workforce and great workplace for a cohesive society and a secure economic future for all Singaporeans.
The Ministry seeks to enable Singaporeans to meet the challenges of the global economy in the 21st century, to have the skills and the opportunity to realise their potential, have rewarding careers in quality work environments, and to enjoy economic security. A great workplace goes beyond a safe, healthy and harmonious organisational work environment, to include a strong tripartite framework and relationship between the government, employer organisations and worker organisations.
Executive Summary of Mercer's Study on Progressive Labour Practices to Enhance the Competitiveness of ASEAN
As ASEAN forges ahead with closer economic integration through the formation of the ASEAN Economic Community by 2015, it is important for ASEAN countries to review their labour practices to ensure that these practices meet the changing economic and social needs. In May 2007, the 5th ASEAN Senior Labour Officials Meeting (SLOM) decided to commission Mercer to embark on a study on Progressive Labour Practices to Enhance the Competitiveness of ASEAN. The intention is for the study to identify areas in which ASEAN countries could prepare their labour markets and develop their human capital in order to maximise the benefits from regional integration and address potential challenges. It would provide the basis for ASEAN countries to work, both individually as the national level and collectively as a region, towards creating a more favourable investment environment by putting in place progressive labour practices. The findings from this study were presented at the 20th ASEAN Labour Ministers Meeting (ALMM) in May 2008.
2. The study was conducted over the period from July 2007 to April 2008, with approximately 150 interviews conducted with employers, employees and government representatives from diverse industries throughout ASEAN. It also involved a benchmarking of 90 proprietary site-selection cases with Mercer clients globally to determine the competitiveness of ASEAN labour markets for foreign investments, and the conduct of secondary research of trends in blocs such as the European Union (EU), and the North American Free Trade Agreement (NAFTA). The key recommendations are as follows:
a. Labour law flexibility is one of the key drivers of competitiveness
ASEAN labour ministries should conduct regular reviews of labour laws and policies in consultation with a broad-based group of stakeholders to ensure that labour markets are sufficiently flexible and responsive to changes in economic conditions. Doing so would foster a conducive environment for business investments at the national level and increase ASEAN's economic competitiveness.
b. There is a unique “ASEAN way” of partnership that could potentially be ASEAN's comparative advantage. ASEAN should build on this to deepen tripartite consultations and dialogue in the policy making process
The extent to which unions, employers, and government seek harmony is unique to ASEAN. All the tripartite partners have a strong interest and willingness to invest in advancing labour relations and developing ways to bridge gaps. This requires active, government-driven leadership to foster a longer-term view of relationship development among the parties at the national level. Tripartite efforts to work towards a harmonious relationship and promote a more transparent and consultative process will increase the potential for policy decisions and outcomes that benefit each country. Such decisions would also help minimise disputes, allowing each country and the region to focus on productivity-enhancing activities instead of settling confrontations and disputes.
For a start, national governments should take the lead to foster strong relations with tripartite stakeholders at all levels, i.e. provincial, sectoral, regional and national. This can be achieved by (i) institutionalising mechanisms for communication and collaboration across organisations; (ii) actively involving stakeholders in social and labour policy formulation; and (iii) improving governmental support for dispute mediation and arbitration to strengthen industrial relations. National governments can further promote progressive labour practices by providing economic incentives for cooperation and celebrating cooperative organizations and practices. Governments can also take the initiative to facilitate lasting tripartite relations by building knowledge across stakeholder groups, enabling parties to understand each other's issues and perspectives and increasing their capacity to think strategically about human capital and labour market development. Examples of such activities include (i) training human resource managers on business and labour legislation; (ii) training government officials on business practices and human resource management; and (iii) training employee groups on economic and business concepts. Cultivating good tripartite relations will lay the foundation for greater cooperation through building consensus rather than competition. Labour policy-makers can also initiate an ASEAN-level platform to promote progressive labour practices and foster communication among ASEAN member states.
c. Skills training for the workforce is critical to raising labour quality, especially by aligning education policy with industrial planning
Strategic labour market development demands that education, industrial development, and labour governmental functions are linked so that they can share information and jointly address common challenges. In highly functional governments, all the key stakeholders are active participants in governmental processes, and governmental operations are well integrated vertically (through central levels of government) as well as horizontally (across governmental functions). Every government stands to be more effective and can save resources by refining their operations through more “joined-up” governance.
Specifically, labour ministries should work closely with trade, industry, education and planning ministries to integrate national manpower and education planning with economic planning. Harmonising education policy with manpower and industrial planning at the national level will improve the quality of future labour supply and national competitiveness. Doing so maximizes the returns on strategic investments in education and training, by equipping the workforce with the right capabilities for growth industries. Industrial planning and economic development departments should be consulted on manpower planning and allocation due to their access to information on investor needs and strategic plans in the short to medium-term future. In particular, technical and vocational training should be closely linked to business needs. Governments can develop technical curriculum in partnership with leaders in the industry, employee organizations, and professional organizations. Co-investment schemes between governments and the business community can be customised to address sector-specific needs, which would encourage firms to take a long-term view of their human capital development plans. This can be complemented with economic incentives to adopt higher value-added processes that encourage skills development and technology-driven skills transfer from international companies.
d. Capacity building in the area of labour market statistics is necessary to enable countries to gather and use labour market data for effective governance and fact-based decision-making
There is a lack of quality labour market data in ASEAN. Labour market data is often not well-collected nor well-shared. In the absence of such critical information, it is impossible to develop labour markets strategically at the national and regional levels. Strengthening labour data collection, quality, use and sharing across ministries and government is fundamental to good governance and fact-based decision making in the immediate term and for accurate labour forecasting and national planning. Businesses and employee organisations also benefit from information sharing, since this facilitates issue-based discussions. Accordingly, governments should invest in capacity building in the area of labour market statistics as a key enabler to better policy making.