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A near two-billion productivity mine

South Asia presents a huge opportunity to transform 25% of world’s population into productive societies through innovative applications of APO best practices.
by Dilip Kumar Gayen

20 September 2017

Improved manpower productivity in the five South Asian countries (SACs) would have a positive impact on GDP; the general challenges lie in forecasting internal demand, planning for more effective production techniques with optimal utilization of manpower, and increasing employment along with per capita incomes. Other challenges are specific to the five SACs. The first is the burden of large populations. At present, Bangladesh is home to 0.164 billion, India to 1.339 billion, Nepal to 0.029 billion, Pakistan to 0.197 billion, and Sri Lanka to 0.020 billion, for a SAC total of 1.75 billion, or approximately 25% of the world population.

The second challenge is formal-sector employment generation for these mostly unemployed populations, as they are not currently contributing much to GDP. The third challenge is raising low per capita incomes. Most rural employment still depends on agriculture and agro-based activities, with accompanying technological constraints and low capital investment. From 1961 to 2010, the average real GDP growth rate was 5.2% in SACs, but that of per capita income was much less. Finally, there is little indigenous manufacturing technology available to meet the enormous internal demand of their large populations, making SACs dependent on imported technology and goods. This is also related to low manpower productivity. All these challenges make it difficult to transform the large SAC populations into productive societies that contribute to GDP and higher standards of living.

At the same time, those challenges could unlock global opportunities for investment, filling demands for technology, and the creation of large markets in SACs. In particular, the populations of the five countries represent ready-made markets. The most important challenge is how to improve low labor productivity (LP) and contribute to GDP. Table 1 shows historical LP growth rates in SACs.

The LP rate in India and Sri Lanka grew remarkably at 4–5% from 2001 to 2010, although it was much lower in the other three SACs. From a global perspective, the LP growth rate in the 20 APO economies (APO20) was 2.7% in 1971–2008, which was about double that in the USA and 60% greater than in the 15 EU members (EU15). The LP level of the APO20 remained markedly lower, however: it was about 15% of that in the USA and 20% of that in the EU15 in 2008. There is therefore ample scope for SACs to contribute to overall APO20 productivity improvement and raise collective living standards.

It should be noted that in the last two decades, the main driver of Indian LP growth was the IT sector, while productivity in non-IT sectors was still very low. The challenges now is about identifying factors that could increase LP and manpower utilization in SACs.

Improving LP in the manufacturing sector requires encouraging both IT and non-IT sectors. In the non-IT sector, manufacturing has strong linkages to employment, infrastructure, and economic transactions. Potential solutions involve many areas and multiple factors. Macro factors are national economic policy and its execution; micro factors involve raising manufacturing efficiency through productivity and quality initiatives.

Technology and processes make the difference
In the micro approach, production efficiency on the shopfloor is most important factor for LP in the manufacturing and non-IT sectors. Studies in SACs found that  new, need-based technology and manufacturing processes should be emphasized. In most SACs, these sectors are unorganized and depend on traditional production systems in micro and small units, where workers are engaged at low cost, with many on daily wages. New technology with applications of productivity tools like lean manufacturing, total productive maintenance, and total quality management would facilitate reductions in process loss and optimize the utilization of resources. In combination with a commitment to continuous improvement, this could be a possible solution to increasing LP.

Most government policies focus on employment generation based on the advantage of low-cost manpower, leading to the selection of labor-intensive technology. After sustainable economic growth is achieved in SACs, they could opt for semi- and fully automated technologies and processes. The countries would then be able to focus on the best quality practices in selected manufacturing subsectors for more efficient systems with better process control. A solution to this would be innovation through employee participation in management and encouraging workers through financial incentives. Technical skill training and upgrading the level of education are also essential for shopfloor innovation. Comparatively large SMEs could set up their own R&D facilities under government subsidies to achieve this.

Over the last 56 years, the APO has provided knowledge and training to its member countries in areas to raise LP. In addition to its training courses, research, forums, consultancy services, etc., the APO could encourage innovative country-specific productivity improvement suggestions and action plans. A Knowledge Management Team within the APO Secretariat could analyze the suggestions and devise new projects on raising LP in all its members as well as incorporating new elements into national manpower planning and strategy.

Government policy can pave the way
At macro level, governments of SACs require flexible labor laws to attract FDI and technology inflows to manufacturing units. The “Made in India” initiative is one such example. Other examples of macro policies to enhance LP include developing internal competitiveness among industries in the same sector by encouraging entrepreneurs. Planning for industrial and economic growth should focus on national strengths, opportunities, and priority areas. The creation of industrial and economic zones is one method to provide adequate infrastructure for industry groups. Stronger trade promotion centers and organizations encourage firms to participate in international trade fairs.

SACs could develop an international trade council for cooperation and mutual competition to foster greater efficiency. Industry-friendly schemes and awareness programs on the importance of LP to GDP could be devised to connect with rural and underutilized groups, increasing manpower availability. Infrastructure in industrial zones should include living facilities for workers to ensure 24-hour manpower availability; public- and private-sector partnerships in the creation of those zones result in better infrastructure.

Emphasizing labor-intensive SMEs would further increase per capita income and create internal demand. Better security and legal enforcement would also encourage business start-ups, as would the promotion of entrepreneurship. National initiatives to create partnerships between local entrepreneurs and international businesses in the same industry could result in enhanced LP along with technology transfers.

Improve manpower efficiency through training: SACs must initiate skill training programs by establishing skill councils, as started in India from the beginning of this decade. Those councils improve manpower efficiency by enhancing the quality and quantity of training available. Capital investment in skills and technical capacity development should be directed by sector-specific planning. Professional attitudes and responsibility demonstrated in the workplace are ideally viewed by employers as a form of value added, resulting in higher earnings for the workforce.
Driving social changes for women’s contribution to the economy: Awareness programs on the impact of changing technology encourage new forms of social and economic bonding. Women should be encouraged to seek employment in industry through education and increased familial and social acceptance of their role in the workplace. A study for the UNCTD conducted by our team under NPC found that building amicable relationships between labor and management results in peaceful, more productive working environments.

Improvement of the rural sector and its economy: Employment pressure in the agriculture sector in SACs, which are mostly underdeveloped and less technology equipped, is a causes of low incomes and low LP in SACs. Governments of SACs should modernize the agriculture sector with more technology and commercialization of agriculture, provide high-yielding seeds, develop rural infrastructure, place more agricultural land under irrigation facilities, ensure an uninterrupted power supply, promote the use of IT and telecommunications, develop local markets, ensure banking system access for each rural citizen, and market and promote rural artisans. These would not only increase rural income and development but also improve LP. Higher LP would certainly create surplus labor in rural economies. Shifting this augmented labor to industry and industrial zones could create other avenues of LP improvement through more employment opportunities with better technology and techniques of production.

Rural infrastructure for sustainable growth: Prioritize rural-sector development with the provision of basic infrastructure like connectivity with urban and industrial zones via rail and road and IT infrastructure so that information on various aspects of requirements can percolate through rural communities. This will enhance market integration, which is one of the best solutions for promoting rural growth as well as LP through reducing inequalities between various regions and sectors. Ganga Bridge in Bihar, India, is an example. It has reduced the time and monetary costs required for farmers in rural areas in north Bihar to reach markets in Patna, the largest city in the state, which increased the income and productivity of rural people in adjacent districts. The Jamuna Bridge in Bangladesh is another good example of spatial infrastructure for better connectivity. The bridge has opened market access for producers in the lagging northwest area of Bangladesh around the Rajshahi division, which helped farmers to diversify into high-value crops and reduced input prices, increasing LP with GDP. Improvement in governance of SACs is important for sustainable growth, economic development, GDP, and LP.

Policy strategies: stakeholder engagement is the key
SAC governments should devise specific action plans involving skill councils as soon as possible. Joint consultative or advisory policy teams for promoting and monitoring LP, standards of living, and GDP growth would be helpful in guiding periodic modifications as needed. These teams should consist of representatives from relevant ministries, local national productivity organizations (NPOs), skill councils, national planning commissions, and quality councils. The interrelationships among these organizations are explained in the Figure.

Figure. Interrelationships among national policy and strategy joint consultative teams.

Source: Prepared by the author based on work experience and research in industries and the government sector, including project planning, gap analysis and implementation.

It is important to note that coordination and accountability among team members are essential for optimal planning, strategy, and execution. A common SAC consultative or advisory team could be developed for knowledge management and international cooperation under the national foreign policy framework.

Dilip PhotoGayen is an industrial engineer, management consultant, and researcher engaged in quality and productivity improvement at the shopfloor level through lean, total productive maintenance, and total quality management techniques. He also specializes in evaluation and impact assessment of government schemes on LP.

 

1 Comment

  1. Mr. Dilip does a good job addressing the challenges and opportunities on manpower productivity. He has beautifully described how technology intervention and processes will help to improve labor productivity.
    Good work! keep it up!

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