52nd APO Governing Body Meeting
20–22 April 2010, Kuala Lumpur, Malaysia
Annual Report of the Secretary-General
by Mr. Shigeo Takenaka
APO Secretary-General
Ladies and Gentlemen:
It is my great pleasure to welcome the APO Directors, advisers, and observers to the 52nd session of the APO Governing Body. I would like to put on record our heartfelt gratitude to the Government of Malaysia for hosting this meeting in this rapidly developing yet green capital of Kuala Lumpur. I also thank Director General Mohammad Razali Hussain, of the Malaysia Productivity Corporation and his team members for their hard work and meticulous preparations to ensure a smooth, productive meeting.
An important item on the GBM’s agenda this year is to decide the amount of the total membership contributions for 2011 and 2012. The Secretariat’s proposal on the amount is explained in detail in two documents: “Total Membership Contributions for the 2011–2012 Biennium” and “Secretariat’s Proposals on Cost Reduction Measures.” I am sure that all of you have read the two documents carefully to determine your governments’ positions on this very important matter.
I do not intend to use up your time by repeating the details contained in those documents. Instead, I would like to underline a few points that I think are particularly important.
First of all, the Secretariat’s intention is to ensure that the level of budget for 2011–2012 is substantially the same as that for 2008. Two years ago when we proposed a 3.2% increase for the 2009–2010 budget, the objective was also to secure substantially the same financial resources for the biennium as allocated for 2008. Our position this year is therefore consistent with the one we took two years ago because we believe that most, if not all, member governments want us to maintain the current level of APO activities. In addition, I think that many governments would like us to expand our activities. However, some member countries whose economies did very well in the last three years and whose membership contributions will consequently increase by a large percentage may feel that APO activities should be curtailed at this juncture. Maybe this is a good opportunity to dwell on this issue and have a thorough discussion among member governments.
The second point is that we foresaw that a major gap between revenue and expenditure in 2011 and 2012 would be created by the sharp rise in the value of yen and proposed to fill that gap almost solely by reducing Secretariat personnel costs. That is why the proposed average salary reduction is as much as 18%, and for some individuals the cuts are even deeper. The unprecedented sharp reductions represent our efforts to avoid major increases in the amount of membership contributions for some countries and to respond to the persistent calls for personnel cost reductions.
The third point is that because we can start the reduction measures only from the beginning of July this year, the impact in 2010 will be only half of what we can expect in 2011/2012. This forces us to propose tapping the working capital fund so that we will be able to cover a shortfall to the tune of $0.5 million in the 2010 budget. However, the working capital fund must be reimbursed sooner or later, and we believe that in the current uncertain economic situation, it would be prudent to do so at the earliest possible date. Therefore we propose to reimburse the funds as soon as feasible. The call for a 2.1% increase in the amount of total membership contributions for 2011 and 2012 is based only on the need to cover the inevitable shortfall that we expect this year.
I very much hope that member governments understand the enormous adverse impact that the sharp appreciation of the yen has had on our administrative costs and the unprecedented sacrifice that all the people working in the Secretariat are prepared to make at this time and will agree to our proposal to tap the working capital fund for 2010 and replenish it in 2011 and 2012 by increasing the amount of total membership contributions by 2.1%. Even with these measures, we will not be able to restore the balance between administrative and project costs during 2011 and 2012. This will remain a longer-term objective.
Ladies and gentlemen, at the last WSM held in Manila, the Philippines, I reviewed what had been achieved and what was still undone during my Secretary-Generalship on the program side of APO activities. As this is my last attendance at the GBM as Secretary-General of the organization, let me do the same from the perspective of the administrative and organizational side.
First of all, I want to call your attention to the reorganization of the Secretariat from six departments to four, which took place a little over three years ago. We abolished the Environment Department and most of the functions of that department were integrated with those of the Industry Department. We also abolished the Information and Public Relations Department and all of its functions were taken over by the Administration and Finance Department. At the WSM in Bali, Indonesia, held in March 2007, I pledged that, “In spite of the regrouping of departments into a leaner set-up, let me assure you that the functions of the previous departments will remain solid as they were integrated with the other departments.”
Looking back, I believe that we have honored that commitment to maintain those functions. Our activities in the environmental field after the reorganization have been as vigorous as they were before. If we compare the EPIFs before and after reorganization, for example, they improved afterward in terms of the number of visitors.
In terms of information and public relations activities, we have improved our Web sites both in English and Japanese considerably. Now our Web sites cover more news in a more timely fashion. We include photos more frequently to make our sites reader-friendly and attractive. Thanks to these efforts, the number of visitors to our English site has doubled in the past three years.
The bold layout change of the Secretariat office which occurred in conjunction with the reorganization served to curb a rent hike by reducing the office space by 25%. More importantly, it contributed greatly to facilitating communication between departments by removing tall partitions and high steel cabinets that had separated them. The change has made interdepartmental cooperation much easier, resulting in better coordination.
Second, I would like to refer to the introduction of a performance-based staff appraisal system that started three years ago. Before that, there was an inflexible promotion system under which practically every staff member received an automatic one-step promotion regardless of whether he or she performed well or not. The new system tried to change this by linking staff salary adjustments with work performance.
The old system had the advantage that everybody was happy because everybody was entitled to an automatic promotion. It had also the disadvantage that it was the best way to discourage hard work and tolerate inefficiency. Whatever the advantages and disadvantages of the old system, our organization was no longer in a position to afford such a luxury.
With the introduction of the new system three years ago, we had cases where some high performers received salary increases they could never have dreamed of receiving under the old system. We also had cases where some people received no salary increase or even a salary reduction. Although such differentiation produced some tensions among staff members who were not accustomed to it, I believe that the new system has contributed to the improvement of the Secretariat’s overall work culture and staff motivation.
Appraisal of the officers was assisted by the introduction of a new project report system in the fall of 2006. The system is for internal use and replaces the old system with a much more systematic, comprehensive report format. Under the new reporting system, officers in charge are expected to cover six points in project reports: 1) overview, 2) assessment by third parties, 3) role of the officer, 4) assessment and observations by the officer, 5) rating of the project by the officer, and 6) suggestions and recommendation by the officer. Under the last heading, the officer is expected to make suggestions and recommendations for future improvements and follow-up.
The new system was originally intended to keep the Secretary-General and all Secretariat staff informed of the results of project implementation in a systematic, timely manner. But gradually it has become a very good medium for officers to propose new, innovative ideas within the Secretariat. Many of the new initiatives undertaken by the Secretariat recently such as the introduction of B/C category projects and the expansion of e-learning projects have originated from ideas suggested by officers in their reports.
The new reporting system also facilitates mutual understanding of what other officers are doing in implementing his or her projects and in coping with difficulties faced. In a nutshell, everybody knows what everybody else is doing both in Tokyo and while abroad much more clearly before. This new environment has also helped us assess officers more accurately and objectively.
Having said all this, I know full well that assessing other people is never easy. Finding the assessment system that is most appropriate for an organization is also difficult. After practicing the management-by-objective system for three years, I cannot help but feel that we are still long way from our goal. We can only make improvements by dealing with issues as they come along one by one.
The third point I wish to make is progress achieved in the financial discipline of the organization. From 2006, the Secretariat started undertaking a review of the financial procedures to attain greater clarity, efficiency, and accountability. Although the effect of each revision we made was small, their sum total was not.
With the cooperation of NPOs, we were able to calculate in the middle of a year how much had been spent in implementing completed projects and thus were able to predict how much additional budget was available in the rest of that year. Therefore from 2006 we have been able to introduce additional projects for implementation in the middle of that fiscal year. In 2006 and 2007, we implemented eight additional projects, in 2008 four additional projects, and in 2009 two additional projects. The gradual reduction in the number of additional projects has been due to increased activities of the APO in recent years. This has been assisted by the Secretariat officers who have been pushing hard to hold projects as scheduled, thus reducing postponements or cancellations. The overall result has been to maximize the benefits to member governments.
The reform measures summarized above can be described as achievements, because, in my mind at least, their merits far outweighed their demerits. I cannot be that confident when it comes to the personnel cost-cutting measures we are proposing at this session. Before discussing this issue, let me review what we have done in the last five and one-half years in this area.
During the two years from May 2005 to April 2007, we implemented a voluntary salary return by Secretariat staff. At that time, a uniform rate of 3% was applied to everybody from the Secretary-General to general service staff. From April 2009, we are implementing another voluntary return, which is planned to continue until the end of April this year. This time, after some discussion among ourselves, it was agreed that the rates applied to general service staff, professional staff, and the Secretary-General would be 3%, 4%, and 5%, respectively. Roughly speaking, the average reduction rate is about 4%.
So you can see how deep the 18% salary cut is compared with what we experienced before. While we appreciate that these drastic measures are necessary to cope with the current very unfavorable economic situation, we are concerned about their long-term impact on the sustainability of the organization.
The biggest asset of any organization is the people working in it. In an organization like the APO, the quality of people working in the Secretariat plays a crucial role in determining the quality of activities there. Fortunately, out of loyalty to the organization, I know that most of the professionals we want to retain will stay even after the introduction of the salary reductions. But when due to personal or other reasons they must leave the Secretariat in future, it may not be easy to hire someone with comparable qualifications. There have already been some signs of that effect recently.
Under the best of circumstances, hiring competent people with sufficient professional knowledge and good communication skills is not easy. But since last year, I feel that it has become more difficult to recruit the type of professionals we want. This situation will not be eased by the more drastic personnel cost reduction measures we are about to undertake.
The point I want to make is that the measures we propose are emergency measures conceived in the light of the fact that some countries must increase their membership contributions by more than 40% even with the modest 2.1% increase proposed for the amount of total membership contributions for 2011/2012. Therefore, when the situation is stabilized in future, we will probably need to ask for a revision of the measures for the sake of the long-term sustainability of the organization. We would like to have your understanding when we do so.
On the revenue side, other than compulsory membership contributions, the Secretariat has recently been informed by the Japanese government that it had to discontinue the special cash grant for our African Program due to budgetary constraints. Fortunately, however, the Government of the Republic of China stepped in and offered US$150,000 in funding for the African Program in 2010. Moreover, the Republic of Korea agreed to resume its special cash grant program and has already provided US$50,000 for 2010.
We truly appreciate these generous gestures by the Republic of China and the Republic of Korea and hope that all the economically successful countries will consider assisting the APO financially over and above their compulsory membership contributions. It is also hoped that once its economic circumstances improve, Japan will return to funding the African Program or initiate a new program based on a special cash grant.
Now, please allow me to touch on some significant developments that took place on the program side after the last WSM. The first development was the Eco-products International Fair held in Jakarta, Indonesia, in early March this year. More than 160 exhibitors participated in the fair, which attracted over 90,000 visitors. Together with the international conference that focused on eco-service and eco-finance, the fair was a major success. I would like to take this opportunity to thank the Indonesian government for its wholehearted cooperation. The next EPIF is scheduled to be held in New Delhi, India, in March 2011.
The next development was the publication of the third edition of the APO Productivity Databook in early April. In this edition, we were able to compute total factor productivity for Fiji, Indonesia, the Philippines, and Thailand in addition to Japan, the Republic of China, and the Republic of Korea. Moreover, the new publication successfully computed the labor productivity of 12 member economies, using a GDP-per-actual-hour basis rather than the traditional GDP-per-worker basis. This puts the APO firmly on the map as a depository of reliable labor productivity statistics on our region.
The last development was progress made in the research on knowledge management. Case Studies for Small and Medium Enterprises was published last fall, and Knowledge Management Tools and Techniques Manual will come out shortly. When the Practical Guide on Knowledge Management for SME Owners/Managers is completed in August, the trilogy will make the APO a unique center that will be able to disseminate the benefits of KM to SMEs around the world.
All in all, I can say that in the last five and one-half years, the APO has become a leaner, functionally more efficient, and financially more disciplined organization. Of course we know full well that there is still a lot of room for improvement. With the help of member governments, I can assure you that the Secretariat will continue to work hard to improve efficiency and increase benefits to our members. As mentioned this morning by the honorable Minister in his keynote speech, the productivity movement is like a marathon without a finish line. In concluding my last GBM statement, I thank member governments for their support and encouragement during my Secretary-Generalship.
Thank you.
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