Developments in Asian Human Resources

Developments in Asian Human Resources
By Ames Gross
Fall 1999
Published in SHRM International Focus

The Asian Financial Crisis began in Thailand in July 1997 when the Thai currency, the baht, collapsed. The economic instability that ensued affected both domestic and foreign businesses throughout Asia, which, in turn, affected the region’s human resource and recruiting practices. Although many believe that the Asian crisis was a single, homogenous phenomenon, this is not the case. The crisis was composed of several distinct factors, and different countries were affected in different ways. For example, while the Thai economy was devastated, Taiwan’s economy flourished, showing only slight signs of being impacted by the crisis. This report will examine key Asian human resources and recruiting issues as the Asian economies recover.

Economic Overview

Although the crisis affected different countries in different ways, almost all of Asia was hit with a downfall in economic production. Thailand was the first to ask the International Monetary Fund (IMF) for aid. Korea announced emergency IMF measures soon thereafter. At the same time, Hong Kong’s stock market fell by 40%. Indonesia and Malaysia were also heavily affected, along with Singapore and the Philippines to a lesser extent. Unlike the other Asian countries, Taiwan was minimally affected by the downslide. It managed to maintain fairly steady GDP growth of approximately 5% throughout the crisis period.

The situation in Japan and China is different from the rest of Asia. China was almost entirely shielded from the crisis. During the crisis period in 1997 and 1998, China managed to grow its economy by about 7% per annum. However, despite weathering the crisis rather well, China has other concerns. In transitioning from a communist to a capitalist system, a large number of China’s State-owned companies are facing bankruptcy; they are not profitable without large government subsidies. Unemployment is a related problem; it currently reaches approximately 11% in urban areas. A large amount of bad bank loans seem to be adding to China’s difficulties as well. Even with its difficulties, however, China’s economy continues to grow steadily.

Although the crisis did have some effect on the Japanese economy, it is not the cause of Japan’s current economic malaise. Japan’s economic downturn began in the early to mid 1990s after the 1980s "bubble" economy burst. Between 1996 and 1998, Japan’s recession grew worse; the yen lost about 16% of its value; and unemployment rose. However, 1999’s first and second quarter growth rate figures were positive. This is largely due to huge stimulus spending by the government. Despite early signs of recovery, it will be some time before the unemployment rate -- which hit a record high of 4.9% in June -- begins to decline. The government has vowed to fight unemployment and is undertaking a variety of job-creation measures. Growth will be hindered, however, by Japan’s staggering amount of bad loans.

Despite the economic difficulties of 1997 and 1998, a number of Asia’s crisis economies have rebounded. In general, growth is expected to resume. To illustrate this, 1998 growth rates and estimated 1999 and 2000 growth rates for the region are displayed in Table 1 below.

Table 1: Recovering GDP growth in Asia.

Source: Asian Development Bank Statistics, 1999

While the crisis still persists in a number of Asian countries, especially Indonesia, most Asian nations are now on the slow road to recovery and will become stronger in the coming years. It is believed that new foreign investment will be the long-term investment that the region needs, as opposed to the "hot money" invested in stocks and short-term dollar loans that were more prominent before the crisis. Throughout Asia, stock markets are rising and currencies are finally gaining some strength and stability. Thus, with over 60% of the world’s population, there is little doubt that Asia will soon regain its position as the “growth region” of the world and the future "hot-spot" of the next century.

Major HR Trends in the Region

Background

There are a number of differences between the typical Asian and the typical “Western” worker. Asian workers, in general, seek a sense of belonging and take more pride in their companies than in their individual jobs. By comparison, workers in the West prefer to work independently. Due to the importance of relationships, remembering an employee’s name or birthday may mean almost as much as money. But of course, there are also a variety of differences among the different countries in Asia. Indonesian and Thai managers, for example, have very different styles than those in Hong Kong, Japan or Singapore.

Wages

With the weakening of the Asian economies over the past two years, employers have had to cut costs and many froze pay levels or even cut wages. However, with a recovery in sight, wages in Asia are rising, albeit not to pre-crisis levels. Hiring and recruiting efforts have also resumed in some areas. There is heightened pressure on firms to raise wages slowly and keep up with employee expectations. Such pressures are unavoidable in a recovery. For example, it is estimated that salaries in Singapore will increase by an estimated 3.3% in 1999 and by 4% in 2000. Wages in certain industries are expected to increase even more drastically. Employers in Singapore’s telecommunications industry expect to offer their employees approximately a 7% wage increase in the year 2000. In Hong Kong, the information technology sector expects salaries to rise by 7% in 2000. In general, to try to achieve stability, smaller businesses will be more likely to give their employees bigger wage increases than medium-sized and large-sized firms. Although pressure is beginning to mount and accelerate salary increases, most analysts do not believe that wages or wage rate increases will reach pre-crisis levels for quite some time. Estimated inflation and annual salary increases for 1999 are shown in the following table.

Table 2: 1999 Estimated Inflation and Annual Salary Increases

Source: William M. Mercer

Job-Hopping

Given incredible growth rates and tight labor markets, job-hopping was common before the crisis. During the crisis, rising unemployment rates put an end to this phenomenon. Now, in late 1999, there is already some indication of the return of job-hopping, especially for such positions as bank clerical staff and certain jobs in the electronics and petrochemical industries. Thus, employers are now concerned about potential labor shortages, which characterized the pre-crisis era.

Performance Rewards

Before the Asian economic crisis, many companies in Asia rewarded their employees with salary increases of approximately 10-15% annually. Further, at that time salaries and bonuses usually were based on an employee’s seniority rather than performance. Now, however, employees are rewarded with salaries and bonuses based on their own performance. This move is expected to help Asia-based companies keep talented employees, especially senior executives.

Expatriates

In general, the number of openings for expatriates and the appeal of expatriate packages are waning. During the pre-crisis period, expats fared extremely well, receiving high salaries with rich benefit packages. Now, however, many employers are either refraining from giving expatriates any special treatment at all, converting expat packages to local remuneration, and paying expats the same as they would pay local professionals.

In the past, some firms rated places like Vietnam, India and parts of Thailand as "hardship" posts. Many firms argue that today, with improvements in infrastructure, sanitation and communications, and decreasing political violence and crime, these places are better to live in than they used to be. Thus, many companies are gradually doing away with (or reducing) hardship premiums that have traditionally accounted for as much as 30% of an expatriate’s gross base salary.

Additionally, companies that paid schooling expenses for the children of managers are re-evaluating this expense. Many foreign firms are no longer paying for the children of their expat employees to go to the most expensive local schools. Finally, companies are increasingly selecting younger or older candidates, employees either without children, or those with few other expenses.

Demand for Executives Rising

At a time when many companies are still trying to come to grips with the Asian economic downturn, the demand for executives in the region is rising. In the second quarter of 1999, executive demand increased 40% compared with the second quarter of 1998. Hiring by IT companies in the second quarter of 1999 was especially strong, accounting for a 21% share of the total. In the second quarter of 1998, executive hiring by IT companies accounted for just 8% of the total. Executive position hiring in marketing, sales, advertising and public relations also increased in the second quarter of 1999 as a share of total hiring in Asia. On the other hand, the demand for executives at consumer products and industrial companies in Asia dropped substantially in the second quarter of 1999, as did the demand from financial-services companies. Tables 3 and 4 illustrate the demand for executives in Asia by both industry and job function.

Table 3: Where Executives are in Demand (by industry)

Source: Korn/Ferry International

Table 4: Where Executives are in Demand in Asia (by job function)

 Source: Korn/Ferry International

China

Post-Crisis Slow Down in the Chinese Economy

Prior to the Asian crisis, the Chinese economy grew at a steady rate of about 10% per year for 15 years. Although growth slowed during the crisis, China still managed to maintain a steady growth rate of about 7-8% throughout the period. However, since late 1999, following the worst part of the crisis, the economy has begun to slump. Growth rates have slowed to as little as 5%; high for some countries, but quite low for China. Chinese officials believe that it must have growth rates equal to at least 8% per year in order to create jobs for the workforce that expands by 9 million people each year.

The spring of 1999 brought unemployment levels to the highest officially acknowledged level in the history of the People’s Republic of China (PRC). Unemployment was estimated at 16 million, or 11% of the urban workforce. In 1998, as more and more State-owned enterprises began to collapse, the Ministry of Labor and Social Security began to focus on a major re-employment project, establishing re-employment centers to service those effected by the layoffs. Foreign companies employing workers with low skill levels should consider seeking candidates through the re-employment centers. Assisting with the government mission of re-employment for those laid-off from State firms can earn your company tax benefits, loan preferences, and good relationships with the local government.

China ’s Maturing Labor Market

China has been open to the West now for about 20 years. It is, therefore, no longer a new frontier for international companies. As China’s business climate continues to mature, international businesses are now making tactical decisions that will position them in the Chinese market for many years to come.

China ’s maturation process has had significant influence on her labor sector. The Chinese government has predicted that every year for the next several years three million workers will abandon their jobs in the State-owned enterprise sector and move to private and foreign invested enterprises. In comparison, only ten years ago labor mobility in China was almost non-existent. Out of 100 million State-sector employees, only a few more than 800,000 left their jobs for reasons other than death or retirement each year. It is obvious that the labor market has changed a great deal.

Amid this immense army of workers, a new managerial middle-class of educated, motivated and increasingly savvy workers is emerging. As the labor sector matures and this class of workers grows in size, China’s young and educated elites are becoming more exposed and aware of what it takes to make business successful and profitable. Such citizens read journals such as International Trade News and Economic Daily and have full knowledge of the labor environment in the foreign invested enterprise (FIE) sector.

The Chinese government is paying more attention to labor reform issues. The reform of State-owned enterprises (SOEs) has caused the government to concentrate on its legal protections for workers, including enforcement of employment contracts, wage levels, pension and insurance protections, and housing and educational benefits. Local Chinese workers are now knowledgeable about their legal rights, and expect them, at an absolute minimum. Foreign companies must remember that in the maturing Chinese labor market, providing attractive, generous, market-oriented employment packages is necessary to remain competitive. If such packages are not offered, knowledgeable and savvy Chinese employees will press for them. Any firm with a below average compensation package will suffer the consequences.

Compensation Packages

It is especially important for foreign firms in China to prove that they pay competitive salaries. To determine if your company is offering competitive wages, you may consult one of several salary surveys. General salary surveys exist in the major cities, and informal wage-benefit surveys, conducted by the American Embassy, are available through the US Foreign Commercial Service. These surveys offer insightful information. For example, the surveys show that key management salaries in China are catching up with those in Taiwan and even Hong Kong. This is because key Chinese managers are still getting large annual salary increases even though salary growth in general is slowing down in China.

In 1999, management and professional salaries increased in China’s high-tech sector by about 15%. However, wage growth as a whole in China slowed to about 6-8% during the same period. These figures, however, are not precise because they vary according to date and location. In order to obtain relevant data on wages, it is better for foreign companies to compile data from the particular area to which they want to relocate. Interviewing human resource directors at non-competitor foreign firms or commercial representatives at the U.S. Embassy will give some basic information sufficient for immediate needs. The bottom line is that compensation structures should be tied to a firm’s specific location rather than nationwide averages. But no matter where a firm is located in China, support staff salaries should be pegged at 3-5% above market to aid in retention. Managerial staff should be kept at 8%-10% above market.

Top Chinese managers are the exception to the above local-salary rule. Top executives in Beijing, Guangzhou and Shanghai should be paid the same salaries. In fact, even if your head office is in Xiamen, Suzhou or Tianjin, you may want to consider paying Beijing-level salaries. Talented candidates will be hard to attract unless they are compensated on par with executives in the major cities.

Benefits Packages

In addition to basic salary and cash allowances, foreign companies in China must offer their employees competitive benefits packages. Compensation packages at FIEs in China generally include group life and medical insurance. Benefits packages may also include an array of housing options, a pension plan, and tuition assistance for local professional training, such as an MBA or a CPCU, among other perks.

Health Insurance

In December 1998, after the November National Work Conference on Health Insurance, the Chinese State Council issued its “Decision on Basic Health Insurance for City and Town Workers.” The Decision describes the basic health insurance system developing in China. The Decision covers both private enterprises and government organizations. Individually owned businesses and township/village enterprises are not covered.

The Decision sets upper limits for the basic health fund at 6% of salary for the company’s contribution and 2% of salary for the individual’s contribution. With economic development, the percentages may be raised. The Decision also sets limits on payouts from the public pool to four times the average yearly wage in the area concerned. The Decision also limits spending on medical expenses. It calls for the Ministries of Labor and Social Security, Finance, and Health to set reimbursement limits for medicines and services, determine which diagnostic tests and which services will be covered, and select hospitals in each area, the services of which will be eligible for reimbursement.

Railroads, power companies, ocean shipping lines, and other large companies with offices nationwide also seem to be exempt from these regulations, as they are permitted to bring together their own medical funds. This would seem to create an opening for large foreign companies that operate nationally to apply to pool their funds nationally, rather than turn them over to the various local governments. However, government officials have not yet supported this theory.

Stock Options and Housing

Chinese income tax laws often make it desirable to provide greater subsidies and services rather than higher wages. For top managers, stock options might be offered. Such employees generally understand the advantages of stock options as opposed to outright stock compensation or cash bonuses. Thus, stock options can be an important retention tool.

Housing is another important benefit. A company may wish to offer company-owned, high-end housing to top Chinese managers. Not only will employees appreciate such a benefit, but also they become less inclined to change jobs, as it will mean uprooting their families. However, this kind of housing compensation can be very costly unless the housing is actually built on company premises by the employer. It is important to note that Chinese managers can be taxed on "rental allowances," making such benefits less attractive to both foreign companies and their managers. Local tax laws should thus be carefully analyzed before deciding upon such a plan.

Another option is for firms to offer housing loans to top managers. Such loans will also create a strong bond between the employee and the company. One American firm in China offers two types of housing loans -- loans through the Construction Bank of China that are guaranteed by the firm, and interest free loans to supervisors and top managers to cover a portion of the purchase price of a residence. The advantage of a housing loan program is that such loans are not taxable. Again, careful consideration of the local environment is important when settling on a housing program.

Training and Development

Training can be an effective retention tool. A company’s commitment to its senior managers’ professional development will result in their commitment to the company. Furthermore, the law states that employees are liable for training costs if they leave their employer within a certain time period after receiving the training. This can also aid in retention. While the law is primarily targeted at Chinese students studying abroad with government or corporate sponsorship, it is also legally enforceable against persons who have received training for which an employer has paid. Finally, if a top manager who recently received training at his or her employer’s expense is hired away by another employer, the new company may be held liable for the “debt” and could face possible penalties as well.

Japan

Economic Overview: The Road to Recovery?

Throughout the 1980s, Japan’s economy was the envy of the world. It had experienced tremendous economic success and sustained growth in a number of major sectors, including the automobile and consumer electronics industries. Its export-led economy boomed, and Japanese companies invested all over the world. By the end of the decade, however, Japan’s economy had developed an unsustainable “bubble.” When the bubble burst, the results were catastrophic. In the early 1990s, Japan’s stock market lost nearly 60% of its value, and property values dropped by as much as 80%. Furthermore, approximately 45% of Japan’s exports are sold to other Asian nations. Thus, the Asian financial crisis further crippled the nation’s economy.

The Japanese government has attempted to stimulate the economy through huge spending programs. To date, the government has pumped $600 billion into the economy. This has helped somewhat; Japan’s economy has grown in the first two quarters of this year. However, the economy is still weak, and the private sector is still in the early stages of painful restructuring. A graph illustrating the recent improvement in Japan’s economy is shown below.

Table 5: GDP Growth in Japan, 1998-1999 (by quarter)

 

 Source: Economic Planning Agency

 

Lifetime Employment

In the past, employment in Japan was characterized by the “lifetime employment” system. Under this system, large, powerful Japanese companies recruited graduates directly from their colleges and universities. Such recruits stayed with the same company throughout their career, slowly moving up the rigid seniority path. Salaries and benefits under this system were pre-determined and paid regularly regardless of performance. Employees with especially poor performance were dealt with by shifting them to "easier" jobs with lower salaries but enhanced titles, either in the same company or in a subsidiary. Each employee was viewed as a family member. It was virtually impossible to fire anyone, and almost unheard of for an employee to leave the company before retirement.

This system seemed to work well for many years. In fact, it was often praised as a model for other nations to follow. However, beginning in the early 1990s, the lifetime employment system became a burden rather than a benefit. Japanese companies are beginning to examine human resource techniques used in the West by U.S. and European companies. Some companies have begun to replace older, less effective, and more expensive employees with younger, less expensive (and less experienced) employees or with independent contractors. Benefits packages are being revamped to save money; company provided housing in particular is being phased out at many companies. Additionally, layoffs are no longer unusual. NEC, the giant global electronics company, plans to eliminate 15,000 jobs over the next three years, as does Sony.

Change in Japan is not easily or quickly achieved. However, given the current economic environment, some Japanese companies are being forced to rethink their human resource practices. While lifetime employment has hardly disappeared in Japan, the number of mid-career shifts and companies switching to performance-based pay is growing. Foreign companies looking to build a stable employee base in Japan should pay close attention to these new developments.

Pay for Performance

Under the lifetime employment system, salaries were based on age and seniority. Older employees received greater pay and usually had more responsibility. Bonuses fluctuated with company profits, but generally were awarded every year. Those with greater seniority received larger bonuses. Many Japanese companies still adhere to these practices. However, things are slowly changing. With regard to compensation, some companies are paying their new employees on the basis of their performance and experience, which was previously unheard of. For example, Itochu Corp., a huge Japanese trading company, has revamped its salary structure, providing incentives for exceptional workers. Last Spring, Daiwa Securities also began changing its pay system; it is abolishing the seniority system and replacing it with a merit-based system. The company’s retirement system is also undergoing restructuring. The pace of change is certainly very slow, but pay for performance is a growing trend in Japan.

Recruiting

Traditionally, Japan’s largest companies have built recruiting networks and relationships with colleges and universities from which they recruited every year. Almost all professional hiring was done at the entry-level; further job training for advanced positions was provided in-house throughout the employee’s career. To assist with recruiting, employees maintained close ties with their alma maters; they pushed hard to recruit their schools’ students each year. Smaller companies used the same techniques. However, they often were less successful, primarily because they had fewer employees and less clout.

As Japan’s economy changes, several companies are turning to new means of recruiting. These include using recruiting agencies, mid-career hires, and temporary employees. Foreign companies operating in Japan have used such methods for a while, as they did not have the connections necessary for successful college and university recruiting. Foreign companies also have relied on poaching employees from other companies (frowned upon by Japanese competitors), Japanese returnees, and, where justified, expatriates. Recruiting by foreign companies is often accomplished via word of mouth, recruiting agencies, and advertisements.

Although most Japanese companies still do not use recruiters, more and more companies are beginning to experiment with these and other unconventional employment methods. However, Japanese customs and laws often thwart these alternative methods. Lateral recruiting and hiring still usually carries a stigma. Moreover, Japanese law puts limits on the hiring of temporary employees; such contracts generally can last no longer than one year. Thus, successful recruiting remains a challenging task for both small and large Japanese companies as well as for foreign companies.

Despite these barriers, new recruiting practices are beginning to take hold. The Japanese are beginning to develop more flexible attitudes about recruiting and employment. With the difficult economic situation, some recent graduates have given up their dream of becoming "salarymen" and have taken temporary jobs, including assignments that could develop into permanent positions if they perform well.

Women in the Workforce

Traditionally, economic and career opportunities for women were quite limited. This accounts for the fact that in Japan, the percentage of corporate managers who are female is only 8.2%, while in the United States that figure is almost 43%, in the UK, more than 33% and in Germany, over 26%. Despite the many legal (though often not enforced) rights accorded to women in Japan after 1945, Japanese society remains closed and paternalistic.

Japan passed a voluntary equal opportunity law applicable to women thirteen years ago. More recently, the Labor Standard Law was revised to accord women equal treatment in the work place. The government has also defined sexual harassment and has outlawed workplace discrimination against women. However, centuries of tradition cannot be changed so quickly. Although women have entered professional positions in record numbers, Japan has a long way to go. Thus, in spite of these efforts, gender-based discrimination is rampant in Japan. In light of this, it is not uncommon for young, bright Japanese women to go abroad (often to the United States) for university training and then decide either to stay or, if they return, to work for a foreign company in Japan, at which such women feel better opportunities and treatment await.

Though there is a lot of bad news for women in Japan, there are some visible signs of both structural and symbolic change. For years, Nippon Life Insurance Company (popularly known as Nissei) has referred to female salespersons as “Nissei Ladies.” Today, they are called “partners,” as are their male counterparts. New laws also recognize the special work-related needs of women, including the need for mothers to avoid night work and other conditions that make it difficult to care for their children. It is apparent, however, that the rate of change is slow. It will be some time before Japanese women have the opportunities of their counterparts in the West.

The Four Tigers

The four "Tigers" of Asia -- Hong Kong, South Korea, Singapore and Taiwan -- demonstrated dramatic growth over the two decades that preceded the Asian economic crisis and offered attractive opportunities for Western businesses. However, the crisis hit many of the Tigers hard, with Korea taking the worst blow. Hong Kong and Singapore also suffered; only Taiwan got through the crisis without suffering much of an impact. Today, in late 1999, Korea and Singapore are rebounding and Taiwan’s economy remains healthy, while Hong Kong’s difficulties continue.

Each of the Asian Tigers presents distinctive human resources issues that employers accustomed to Western business practices must understand in order to successfully operate in these markets. Compensation packages, business cultures and labor laws are complex and quite different in each of these countries.

Hong Kong

Economic Overview

Over the past 18 months, Hong Kong has suffered record unemployment and sharply falling real estate and stock prices. However, things are looking up. Contrary to predictions that GDP would continue to fall, the economy managed 0.5% growth for the second quarter of 1999, exceeding expectations. It appears that improvement will continue through the second half of 1999.

Unemployment

Unemployment hit a record high, 6.3%, in the first quarter of 1999. Since then, it has fallen to 6.1% (for the second quarter of 1999). Underemployment (generally, the number of workers with part-time work who would prefer to work full-time) has also fallen. Employers, too, are more optimistic. In a July-September 1999 survey by Morgan & Banks, about 40% of companies surveyed said that they planned to increase permanent staff, while only 11.3% were planning reductions. It is expected that the media and public relations sectors will have the highest percentages of jobs available, followed by information technology, financial services and insurance.

Although unemployment projections are looking less dire, concern remains that migrants from the mainland looking for a better life will flood Hong Kong. It is expected that close to 2 million mainlanders will enter Hong Kong in the next year. This will have a substantial impact on the labor market and a negative impact on already high unemployment levels. To compensate for the expected influx, Hong Kong will have to intensify its employment services, build more service centers and allocate more resources to help new migrants (and unemployed Hong Kong residents) find jobs.

Youth Employment

Of all those affected by rising unemployment, the young have experienced the worst of it. The unemployment rate for people aged 15-19 in Hong Kong jumped from 10.6% in the first quarter of 1997 (prior to the crisis) to 23% in the first quarter of 1999. About 17,000 Hong Kong youths are currently unemployed, and with 30,000 secondary school graduates entering the job market each year, this figure is expected to grow. To help alleviate the problem, the government is introducing a youth pre-employment training program to provide unemployed teenagers with the skills that they need to enter the job market. The program aims to teach youngsters aged 15-19 job-hunting techniques and other skills, including the importance of inter-personal relationships, computer applications, and team-building skills, that will be useful to them on their entry into the work force.

Wages

Despite the difficult economic environment, many companies in Hong Kong continue to pay wage increases. A recent survey by Hewitt Associates indicated that in 1999, approximately three-fourths of all companies have made salary increases over the past year, averaging 2%. The remaining one-fourth froze salaries. The information technology sector in particular indicated high increases; it is expected that IT salaries will rise by 7% in 2000. Guaranteed and variable bonus levels remain unchanged. Unlike employees in many other Asian countries, Hong Kong employees rank pay before job security, prestige and performance as their most important criterion. Hong Kong, after all, remains first and foremost a commercial center.

Unions

With record high unemployment, workers are increasingly aware of the precariousness of their situation. Many are now turning to Hong Kong’s unions to learn what rights they have and to ask for help in fighting employer ultimatums. Unions are taking this opportunity to increase their membership and become more active. One of Hong Kong’s major unions -- the Federation of Trade Unions -- has set a target of recruiting 20,000 new individual members, which would constitute a 10% growth.

Despite the above, unions in Hong Kong lack muscle in comparison to unions in Europe, the United States, or Korea. Although unions are legal in Hong Kong, employers are under no obligation to deal with them. A preliminary collective-bargaining law that would have obliged companies to deal with unions was repealed almost immediately after the handover to China. However, in spite of their limited legal standing, unions in Hong Kong have more power than elsewhere in China, where they remain primarily social clubs.

Singapore

Singapore ’s Economy Recovering

During the first half of 1999, Singapore registered a growth rate of 4-5%. Thus, Singapore is well on its way to recovery. Moreover, while unemployment registered 4.4% in the last quarter of 1998, Singapore’s labor market has shown improvement; in the first quarter of 1999, unemployment eased to 3.9%. The Ministry of Labor offered much assistance during the crisis period, developing Singapore’s workforce through new training programs, redeploying displaced workers, and creating new jobs.

Training Essential for Economic Recovery

The government of Singapore spent more than S$258 million (approximately US$152 million) in 1998 on developing its workers’ skills. More than 20,000 workers from approximately 250 companies participated in this program. In addition, the government launched its "Manpower 2000" blueprint -- a strategic plan to create a national system of "learning for life" for Singapore’s workers -- in July of 1999. This program requires employers to invest in training and upgrading employee skills to help them compete more effectively.

Wages

Although Singapore technically emerged from its recession in the first quarter of 1999, the National Wages Council has recommended another year of wage restraint in order to facilitate a full economic recovery. The Council, whose objectives include enhancing Singapore’s attractiveness to foreign investors, helping companies regain cost competitiveness, preserving jobs, and minimizing unemployment, also wishes to incorporate greater flexibility in the wage system. The flexibility that would ensue from a variable wage component would give companies the ability to adjust their wage costs downward in the event of another economic recession or a business downturn.

Number of Older Workers Increases

Traditionally, employers in Singapore have had a negative attitude towards hiring older workers. However, in the face of an increasingly aging population, employers in Singapore are going to have to rethink this attitude. In 1998, 14% of Singapore’s population was 55 or older. Singapore’s Ministry of Manpower has projected that this figure will increase to 27% by the year 2000, impacting the composition of the labor force quite significantly. Thus, the government is beginning to push employers to discard their pre-conceived notions about age. Singapore is also taking measures to improve the employment scenario for older persons, including extending retirement age, reducing the costs of hiring older workers and upgrading the skills of older employees.

Taiwan

Economic Overview

Taiwan ’s economy was the least effected by the Asian economic crisis. Taiwan’s mostly small and mid-sized companies were able to move and adapt rapidly to the changing market situation during the crisis, limiting its impact.

Taiwan ’s unemployment rate hit an all time high of 2.84% in May 1999. Although very low by international standards, this is extremely high for Taiwan. Some labor leaders blame the government for contributing to unemployment, due to policies that allow companies in some sectors, especially high-tech, to employ relatively inexpensive foreign workers.

New Measures to Discourage Massive Layoffs

Taiwan ’s Council of Labor Affairs (CLA) will draft a new set of policies to track major layoffs by Taiwanese corporations. Companies that wrongly lay-off workers without proper compensation will be penalized, according to the new regulations. The CLA also plans to set up a special fund to protect the interests of jobless workers, as well as a special relief fund to safeguard the rights and interests of workers in plant closings.

Taiwan Labor Force Ranks Fifth in the World

The quality of Taiwan’s labor force was ranked fifth out of 49 countries in a June 1999 assessment by Business Environment Risk Intelligence. The survey gauges the quality of a labor force in accordance with the country’s labor rules and regulations, relative productivity, attitude of employees, and technical levels. The countries ranked ahead of Taiwan were Singapore, Switzerland, Belgium and Japan.

An Attractive Place for Foreign Workers

Taiwan offers exciting opportunities for foreign employees. While the long hours, difficult commutes, and low base salaries that characterize employment in Taiwan are not necessarily attractive, the chance to live in one of the world’s most vibrant economies and the opportunity to have a significant impact in a company represent a very attractive upside. Many educated, non-expatriate foreigners work in Taiwan as liaisons between their Taiwanese employers and foreign customers. Less educated foreigners in Taiwan help fill many blue-collar jobs, especially in factories.

There are limitations to working in Taiwan. The government’s alien labor laws make it hard for foreigners to work for new start-up companies. Regulations cap the number of foreigners that any one company can employ at the same time. In addition, foreigners working at Taiwanese companies must learn to work within the very paternalistic Chinese corporate culture. The poor flow of information and the complicated decision-making processes that characterize Taiwanese business can be very difficult to deal with.

South Korea

Unemployment Rate Falls

Korea was hard hit by the Asian crisis. To dig itself out, South Korea pursued the region’s most aggressive financial reform program. The result was a startling recovery. The Korean economy grew 4.6% in the first quarter of 1999 and 9.8% in the second quarter. Moreover, through consistent restructuring and market-opening policies, it is estimated that Korea will return to a 5-6% annual growth rate by the year 2000.

With regard to unemployment, previous to the crisis Korea’s unemployment rate was approximately 2%. The unemployment rate peaked in December 1998 at 7.9%. Since then, the rate of unemployment has fallen each month. For 1999, the unemployment rate is expected to be 6.5%.

Female Workers

Women comprise about 40% of the overall workforce in Korea. However, their status is generally lower than that of their male counterparts. Women are hired when extra workers were needed and then demoted or fired in hard times. Thus, it is no surprise that when the Asian crisis hit in 1997, women were the first to be laid-off.

Despite signs of recovery in South Korea, women’s salaries and benefits still lag behind male employees. To counter this trend, a women’s trade union was formed in 1999 to bring women workers together and to fight common problems. Since Korean unions are usually company based, women who lose their jobs also lose their union representation. The new union alleviates this problem. This women’s union is the first of its kind in Korea.

Small and Medium Sized Business Employees Fare Best

With recovery at hand, businesses in Korea are more willing to share profits with their employees this year. Interestingly, small and medium sized businesses are faring better than larger ones. According to a survey by the Korea Industrial Complex Corporation, 72.1% of small and medium sized business owners said that they intended to award their employees Chusok (the Korean equivalent of Thanksgiving Day) bonuses. Only 53.4% of such companies gave these bonuses last year. The percentage of large company employees receiving such bonuses is much lower.

Southeast Asia

Economic Recovery Begins

Southeast Asia -- Indonesia, Malaysia, the Philippines and Thailand -- was devastated by the crisis. While in the early and mid 1990s these countries had a growing middle class and had earned the nickname “the new Tigers,” by 1998 the region’s economies were virtually wiped out. Today, the region is recovering, albeit at a slow pace.

Unemployment

As the Southeast Asian economies have slowly recovered, unemployment rates have dropped. In Malaysia, lay-offs consistently topped 500 per week. Now, downsizing figures are dropping. They dipped to their lowest point this year, when, in the first week of July, only 274 workers were laid off by 32 companies.

To combat the unemployment problem, the governments of Southeast Asia are instituting new programs. The Thai government, for example, announced a US$1.5 billion program in March 1999 to create about 500,000 jobs. The program will primarily benefit unskilled laborers. It is anticipated that this program will help reduce the unemployment rate to 4.2% by the end of 1999, down from 5.7% in May 1999.

Wages

Wages dropped significantly in Southeast Asia during the crisis. With the slow economic turnaround, workers are beginning to demand that salaries be raised once more. Thai labor leaders called for a new minimum daily wage of 200 baht (approximately US$5) for Bangkok and other large Thai cities in June 1999. This would be an approximately 20% increase from the current minimum wage of 168 baht. Employers have agreed to workers’ demands, and the effective date for the new wage is January 2000.

In Malaysia, the wage system is criticized as too rigid. It does not reward productivity; instead, it gives priority to seniority. Thus, in June 1999 the Malaysian government called for a new private sector wage system that links salary increases with productivity gains. Employers generally agree that a fairer system is needed. Such a system would also enable them to make quick adjustments in the event of another economic downturn.

Unions

There have been many new developments with regard to unions in the region. For example, the Philippine Chamber of Commerce and Industry, the Employers Confederation of the Philippines, and several large labor unions announced a new social pact that is expected to reduce labor unrest in the country. The pact stipulates that strikes and layoffs should be only the last resort. However, even as the effects of the crisis linger, various Filipino labor groups have already begun to file for wage hikes in their respective regions. Business groups have also experienced difficulty in maintaining the agreement.

In Malaysia, a spirit of cooperation has prevailed in union-management relations. For the two-year period between 1997-1999, trade unions compromised with employers so that both parties could survive the crisis period. During the worst of the crisis, workers at many companies actually agreed to take pay cuts in order to keep their jobs and help cut costs. Although unions generally make hefty wage demands, in mid-1999 several trade unions offered not to make such demands in order to help companies through the recovery period.

Indonesia Attempting to Improve Workforce Quality

In comparison with that of its neighbors, Indonesia’s workforce is less educated and not as well trained. The government realizes that the country will not be able to compete with other Asian nations unless the quality of its workforce improves. Indonesia is thus intensifying efforts to develop its workers. Educational and training institutions have been asked to establish partnerships with the private sector. For example, one goal is to develop more engineering programs in order to make Indonesia’s graduates more competitive in the global technical job market.

Female Workers Dominate Low-skill Jobs in the Philippines

Women accounted for 37.5% of the Filipino labor force in June 1999. Women dominate certain professions, including: clerical work (57.9%), sales (67.3%), and service positions (57.6%). The Department of Labor and Employment is actively engaged in implementing programs to further the advancement of women workers. Such programs include those to promote equal employment opportunities and enhance women’s participation in unions and policy formulation.

Conclusion

Despite the havoc wrecked by the Asian financial crisis, it did have some positive effects. For example, the crisis led to improved relations between employers and employees, as they were forced to work together. Ineffective human resource techniques, such as seniority-based pay and lifetime employment, have also been minimized as a result of the crisis. The crisis served as a wake-up call for jobseekers as well. Both employees who were laid-off as a result of the crisis and those who managed to retain their positions learned a valuable lesson: job security cannot be taken for granted.

Now more than ever, innovation and creativity are appreciated and desired skills. Fluency in English remains a distinct advantage. As is the case throughout the world, high-tech skills are also much in demand in Asia. Going forward, companies are increasingly recruiting workers who have an added edge -- the ability to be good leaders, to think strategically, or to look beyond national boundaries and think at a global level. For companies in Asia, finding such employees is a challenging task, but a must if your company is to be successful.