51st APO Governing Body Meeting
20−22 April 2009, Colombo, Sri Lanka
Annual Report of the Secretary-General
By
Shigeo Takenaka
APO Secretary-General
Ladies and Gentlemen:
It is my pleasure to welcome the APO directors, advisers, and observers to the 51st Session of the APO Governing Body in Sri Lanka. On behalf of the APO member countries and the Secretariat, I would like to express my heartfelt gratitude to the Government of the Democratic Socialist Republic of Sri Lanka for hosting this APO meeting in Colombo, the nation’s capital and pearl of the Indian Ocean.
We are very honored that Prime Minister of the country as well as other distinguished dignitaries attended the inaugural session. Today, I would like to focus on three points: first, the impact of the global financial crisis on the APO; second, the progress of activities that I have initiated recently; and finally, our efforts to bolster some of the leading APO projects.
Ladies and gentlemen, we are meeting in the midst of an unprecedented global financial crisis. Originating in the USA, it quickly spread worldwide. No country is immune from it, and Asia is no exception, including APO member countries. For many, the crisis resulted in a reduction in exports, falling asset and stock values, business closures and lay-offs. The full magnitude of the crisis has yet to unfold, leading many people to believe that the situation will get worse before it gets better.
In connection with this, I would like to report to the meeting that the current crisis is also affecting our organization, specifically in relation to the budget. The main reason for this is the fluctuating exchange rates between the US dollar and the Japanese yen.
As the directors are aware, 2009 is the first year of our newly introduced biennial budget system. At the 50th GBM in Tehran last year, the Secretariat presented the Preliminary Budget for the 2009 and 2010 biennium, based on which the Governing Body decided the amount of total membership contributions for 2009 and 2010. While the amount of the total membership contributions is fixed, calculated, and paid in US dollars, most administrative expenses, which account for almost half of the total budget, are incurred in Japanese yen. With a strong yen, personnel and other administrative costs in US dollar terms have become significantly higher. In a nutshell, the recent appreciation of the yen against the US dollar has created a major challenge to the Secretariat in maintaining an appropriate balance between project and administrative costs.
When the Preliminary Budget for 2009 and 2010 was submitted to the GBM in Tehran in April 2008, the Secretariat had adopted the exchange rate of 110 yen to the US dollar. Given the rapid, sharp appreciation of the yen during 2008, the Secretariat had to revise that rate. The new rate of 105 yen to the US dollar was adopted for budget calculations when the detailed program plans for 2009 were presented to the Workshop Meeting in Siem Reap in October 2008. However, the appreciation of the yen continued even after that meeting. In the present Revised Budget for 2009, the Secretariat used the new rate of 95 yen to the US dollar. This nearly 14% appreciation of the yen has created a huge upward pressure on our administrative expenses in dollar terms.
Mindful of the need to maintain an appropriate balance between administrative and project costs and given that we have been constantly subjected to the vagaries of exchange rate fluctuations, the Secretariat would like to institute a proactive approach to reduce administrative and staff expenses in a more permanent, sustainable way. Therefore, the Secretariat proposes a comprehensive review of administrative and staff expenses, including the existing staff salary and benefit systems.
For the sake of stability and predictability relating to exchange rates, we may also need to look at options to make our budget less susceptible to currency fluctuations. In this regard, it may be useful to examine the practices of other international organizations in dealing with currency fluctuations. For example, some international agencies such as FAO, UNESCO, and the IAEA that are based in Europe have adopted a split assessment system. Therefore, the study of that type of system may help us identify suitable methods to mitigate the challenges of currency fluctuations. I welcome the directors’ views and advice on this matter.
However, initiating a comprehensive review of administrative expenses will take time. Completing studies on the practices of other organizations and designing an appropriate new system for the APO will take even longer. As a temporary solution, the Secretariat has therefore been exploring various cost-cutting measures. Most important among them was the suggestion by staff members to return salary voluntarily at the rate of 3% for general service staff, 4% for officers and directors, and 5% for the Secretary-General. This suggestion was supported by all staff members and took effect from April 2009 and will continue until April 2010. I am thankful to the staff for their support as it reflects a strong sense of commitment and dedication within the Secretariat.
Relating to finances, the Secretariat has continued its endeavors for effective utilization of the budget and financial discipline which I introduced earlier. These efforts have led to a marked improvement in our resource utilization rate, as well as in the disbursement rate of budget for both current and continuing projects. As a direct consequence of this, the total amount of continuing projects and unappropriated surplus has significantly declined.
With greater financial prudence, there is little chance that this declining trend will be reversed in the future. In the past, the high level of unappropriated surplus made it possible for the Secretariat to mount quite a few additional projects in the middle of the year and allowed the selection of more participants for projects. However, with a declining surplus it will become more difficult to do so.
The Secretariat also made progress in the area of personnel reform through the introduction of a performance-based staff appraisal system. Last December, we completed the first full cycle of the new performance appraisal system with all criteria in force. The new appraisal system contributed to improving the Secretariat work culture and staff motivation as well as to controlling personnel costs. At the same time, we realize that there is still a lot of room for improvement. We will continue to modify the appraisal system for greater organizational efficiency and effectiveness.
Turning to the second part of my report, I would like to update you on the progress of activities initiated last year. I will touch upon three specific areas: 1) APO centers of excellence; 2) evaluation of the impact of APO projects; and 3) DON Implementation.
The Secretariat followed up the suggestion made at the last GBM regarding the possibility of establishing centers of excellence. The idea was further discussed at the last WSM held in Cambodia in October 2008 and also at a small, informal, consultative meeting with the representatives of selected NPOs in Tokyo last February. Based on those discussions and suggestions, the Secretariat would like to propose a pilot project focusing on business excellence with SPRING Singapore as the pioneer center of excellence. A two-year tentative action plan has already been developed in consultation with SPRING Singapore. The action plan incorporates a number of activities including the creation of a database of experts on the subject, deputation of experts, and organization of multicountry observational missions from interested NPOs. We are certain that such a systematic approach will facilitate the transfer of learning and experience in the area of business excellence from SPRING Singapore to other NPOs. The Secretariat director of the Research and Planning Department will present a full report in the next agenda item.
To improve project evaluation, the Secretariat has identified ways to make the evaluations more realistic, as suggested during discussions at both GBMs and WSMs. A new project evaluation method to be applied on selected areas is now being finalized, with three-fold emphases: greater objectivity; greater depth of coverage; and more involvement of NPOs. To achieve greater objectivity, evaluations will be conducted by a team involving a third-party evaluator and a Secretariat staff member. Objectivity is also expected to improve by expanding the targeted respondents to include superiors of former participants. Greater depth of coverage will be achieved through visits by the evaluation team to actual sites in member countries to conduct face-to-face interviews. For smooth implementation, more NPO involvement and assistance are necessary. The Secretariat is hopeful that the next evaluation report which includes results of the new pioneer approach can be submitted to the WSM in October 2009 and that it will present a clearer picture of our contributions and their impact on the ground.
For the development of NPOs, last year we commenced in-country training programs for productivity and quality practitioners on a pilot basis in Pakistan, the Islamic Republic of Iran, and India. This country-by-country approach enabled the Secretariat to develop the capacities of 75 practitioners, helping those NPOs to create a critical mass of productivity practitioners in their countries. Encouraged by the positive reception and results of the three pilot projects in 2009, the Secretariat initiated a new project to strengthen NPOs through development of productivity practitioners using the same modality. The Secretariat has already received requests from six NPOs and we plan to conduct three basic courses, two intermediate ones, and one advanced course for those NPOs. I hope that other NPOs will also take advantage of this new project under DON Implementation.
Ladies and Gentlemen, now I would like to report on our efforts to bolster some of the leading APO projects. Related to our think tank role, last year I reported that we had published the first edition of the revised and, greatly improved APO Productivity Databook. You will be pleased to know that the book was well received by prominent policymakers and researchers worldwide, including those at the International Monetary Fund and Princeton University. The 2009 edition of the databook has just been released, with expanded economic indicators and productivity estimates, including total factor productivity analysis for some countries. With improved methodology and better-quality data and analyses, our intent is to make the databook a prime reference for decisionmakers both inside and outside the APO region. During the coming year, in addition to continuing efforts to improve the publication, we plan to initiate activities to strengthen or develop the institutional capabilities of member countries in computing their total factor productivity as a new element of this project.
Turning to our Green Productivity programs, they have expanded in areas like energy efficiency, the 3Rs, and greening supply chains. Our flagship project under the GP umbrella, the Eco-products International Fair, has grown from strength to strength. Last month, the EPIF 2009 was successfully organized in Manila, the Philippines, and despite the financial crisis more than 120 exhibitors took part. Similarly, the Eco-products Directory was published in conjunction with the EPIF and included a record number of more than 800 entries. The directory remains the only one of its kind in the world listing information on environment-friendly products and services in English.
Apart from efforts to expand those two leading APO projects, we will continue offering projects in areas such as innovation, knowledge management, food safety, export promotion, and access to markets. We will also continue our emphasis on the capability building of partners and stakeholders through training courses and investigating best practices beyond the region. More details of these projects will be given at the next WSM in the Philippines in October.
The Secretariat has also continued its initiative to transfer the Asian productivity experience to Africa under a special cash grant from the Government of Japan. In recognition of its contribution to the productivity movement in Africa, the APO was invited to the Summit Meeting of the Tokyo International Conference on African Development held last May. Another Basic Training Course for Productivity Practitioners, lasting four weeks, was conducted in Johannesburg, South Africa, with 25 participants from five PAPA member nations. These outreach programs made our productivity footprint larger and made the APO better known in more parts of the world.
Today we are faced with numerous changes and new challenges arising from the current crisis, which occurred so swiftly that even famed corporations were caught off guard. Many have responded by scaling down operations and undertaking retrenchments. Basically, the general preoccupation at present is with making short term solutions. This is understandable when immediate survival is at stake.
However, the remedy lies not in short-term fixes alone, but in remaining focused on the long term. Many experts, including those in governments, have spoken forcefully on the need for higher productivity to come out of this crisis. These tough times demand greater involvement of NPOs and a more prominent role for the productivity movement. I assure you that the APO remains vigilant and committed to assisting NPOs in developing their capabilities and in serving the needs of member countries.
Thank you.
