Ladies and Gentlemen:

It is with the greatest pleasure that I welcome the APO Directors, Advisers, and Observers to the 54th session of the APO Governing Body in Singapore. I would like to express my gratitude to the Government of Singapore and SPRING Singapore for hosting this GBM. This will be an exceptionally important GBM as two critical decisions must be made.

 

APO Secretariat Relocation

First, at the last GBM, the Government of Japan (GoJ) announced the withdrawal of its voluntary contribution for Secretariat office rent from 2012, meaning that rent should be covered by membership contributions. As the office rent was not factored into the 2012 budget approved last year, the GBM decided that the Secretariat should explore the option of moving its office from its current location in Tokyo to other areas, including outside Japan. I also noted that some comments made during the last GBM stated that the additional burden of the office rent should neither be passed on to member countries nor adversely affect the quality and quantity of projects. The Secretariat noted those comments, but after examining various possibilities it is clear that further cutting of administrative costs alone cannot make up for the withdrawal of the rental grant from the GoJ.

The options explored by the Secretariat included reducing the current office space or finding a cheaper location within Tokyo. The Secretariat, with the support of the GoJ, also sought collaborations with Japanese educational institutions and local governments with the aim of securing rent-free office space. I would like to thank the APO Directors who provided advice on the office relocation and on the possibility of relocating the Secretariat to other member countries.

The office relocation issue will affect the budget for 2012 and the subsequent 2013/2014 biennium, which I will elaborate on later. This relocation issue must be resolved decisively at this GBM, otherwise not only will the effectiveness of APO operations be compromised but the morale of Secretariat staff will also be adversely affected. I request the Governing Body to consider the various options in the reference paper (Ref. No. 2) and their implications carefully and come to a definitive decision.

 

Membership Contribution Formula

Second, the Governing Body must decide on the new membership contribution formula. At the 53rd GBM held in Malaysia, the apportionment of the adjusted membership contribution amounts for the 2011–2012 biennium was adopted but the Secretariat was asked to continue the review of the formula and prepare options to be submitted to this GBM for discussion and approval.

In July 2011, the Secretariat circulated five options to APO Directors for their comments. As this was an urgent, high-priority area, I consulted the APO Chair and Vice Chairs and we decided to form a task force comprising APO Directors and chaired by the Government of Malaysia to finalize the review of the contribution formula and ultimately reach an agreement. I would like to express my appreciation to the task force members for examining the options and making recommendations to the GBM. I sincerely hope that the Governing Body, based upon a shared spirit of mutual cooperation and accommodation, will reach a consensus and decide on a new contribution formula that addresses the significant fluctuations in individual membership contributions from biennium to biennium as seen under the present three-year average GNI formula.

 

APO Program and Financial Estimates for 2012

I would like to thank the APO Directors for approving the Program and Financial Estimates for 2012 as circulated at the beginning of February. Apart from changes in the project lineup, the major change in the Financial Estimates for 2012 was the revision of the yen-dollar exchange rate from ¥85 to ¥75.

I would like to reiterate the point made at the last WSM that budgetary difficulties have occurred due to the strong yen, which has risen to historic highs against the US dollar. With most of the Secretariat’s administrative expenditures incurred in yen, the ¥75 rate alone translates to a 12% increase in administrative costs in US dollar terms or about US$800,000. Compounding this, the Secretariat now must pay office rent equivalent to about US$800,000 as in 2011. The combined effect is that the APO has US$1.6 million less in terms of the budget for 2012 compared with 2011.

 

Cost-Effectiveness of the Secretariat

As this was already anticipated after the 2011 GBM, the Secretariat implemented further cost-cutting measures that reduced administrative and project costs in 2011. These measures, together with the cancellation of two projects in 2011, enabled the Secretariat to maintain the same number of projects for 2012 as proposed at the 2011 GBM. Substantial savings were achieved by managing administrative costs incurred in yen which were reduced by about 20% compared with 2010. This was mainly due to drastic cuts in staff salaries by an average of 18% and up to 33% for the Secretary-General implemented from July 2010.

In addition, the Secretariat had no choice but to delay filling professional staff positions as it was not possible to recruit while the location of the office remained uncertain. Thus, some Secretariat staff must cover additional portfolios, such as the Director for Agriculture is concurrently the Director for Research & Planning. However, this situation is not tenable if we want to maintain the APO at the present level of professionalism.

 

Expanding Roles of Secretariat Staff

The Secretariat staff have multiple roles. Apart from the core duties of ensuring that APO programs and projects are planned and implemented smoothly, our professional staff also serve as speakers and experts in projects and proactively seek opportunities for collaboration with other international organizations.

For example, one Secretariat staff member was invited as an expert to an international forum organized by the UN Centre for Regional Development, National Environment Agency of Singapore, and Japan’s Ministry of the Environment. Another officer was invited to attend a roundtable organized by the UN Food and Agriculture Organization to validate a UN study. At the end of 2011, an APO representative was invited to speak at a conference organized by the UAE’s Dubai Chamber of Commerce and Industry on promoting corporate governance. This type of work, with expenses paid by the host organizations, is important to raise the visibility of APO, create goodwill, and reciprocate similar pro bono work from other organizations.

For Secretariat staff to continue playing such demanding and diverse roles, they must be developed and equipped with the appropriate skills. At the same time, our talent pool must be expanded. Continuing salary cuts would be a quick solution to reduce administrative expenses in the short run but will lead the organization further down a slippery slope and deprive the APO Secretariat of the ability to attract and retain the best talent.

Even though the 2010 GBM agreed to review these salary cuts within two years, I have decided to put this on hold until after this GBM. This will allow me, as the Secretary-General, to begin a comprehensive organizational review of the Secretariat, including structure and remuneration packages, taking into account the policy directions of recent GBMs and the decision on the new office location. This is necessary to ensure that the organization has the capabilities and resources to implement the planned 2013/2014 program. It will also lay the foundation for the APO Secretariat to fulfill its responsibilities to its stakeholders and achieve the vision of being a leading international organization on productivity enhancement.

 

2011 Programs and Projects

Last September, the APO 50th anniversary publication project generously funded by the ROC was launched in Taipei. It was attended by top government officials and business executives as well as experts appointed to research the productivity-related topics in the publication. This publication will not only capture the 50 years of the productivity movement but also a range of productivity-related trends that are anticipated to have an impact on economic development in the Asia-Pacific. The final publication will be an excellent reference for knowledge sharing and will be presented at an international conference later.

The Center of Excellence (COE) program established in 2009 with SPRING Singapore as the first COE for Business Excellence (BE) has helped member countries strengthen BE and quality award programs. I was particularly pleased to note that Pakistan launched its Prime Minister Quality Award program last year with the assistance of BE experts dispatched by the COE, training workshops for BE assessors and consultants, and the training manuals that resulted from those workshops.

Other activities under the COE included a self-help manual to guide SMEs on their BE journey and a multicountry observational study mission to study quality award systems after which participants developed action plans for their countries. The COE is a core program of the APO. One immediate task is to identify a new competency area for the next COE. The Secretariat will thus be inviting new COE proposals from member countries to be discussed at the next WSM.

The Eco-products International Fair (EPIF), launched in 2004, has since spawned similar national events in member countries such as Malaysia and the Philippines. Last year, another successful EPIF was held in New Delhi, India, in collaboration with the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry; National Productivity Council; and Confederation of Indian Industry. That was the first time that the EPIF was held in South Asia.

The next EPIF was originally scheduled for this year but was postponed to 2013 so that a thorough review could be conducted to determine how it could be more effective in promoting Green Productivity (GP), one of the APO’s strategic directions. However, the Eco-products Database and related 8th edition of the Eco-products Directory were completed as planned last year to continue to promote GP. The directory has been distributed at international events throughout the Asia-Pacific.

Since 2008, the APO has been working with member countries to collect and analyze productivity data so that their sources of economic growth can be compared using an internationally recognized, consistent methodology. Subsequently, the APO Productivity Databook project focused on widening the scope of productivity indicators including the computation of total factor productivity (TFP). The forthcoming 2012 edition contains TFP estimates for 13 member countries.

The Productivity Databook is often cited by research institutions and the media, including The Economist, when reporting on productivity and economic growth in the Asia-Pacific. Like the EPIF, this is another major APO project and we will be reviewing its scope as well as exploring collaborative efforts with other organizations to optimize resources and ensure that it remains relevant to member countries.

Public-sector productivity has been identified by member countries as immensely important to their economic development. Last year, the APO focused on adapting knowledge management (KM) and lean management techniques for the public sector to promote innovation and improve service quality. A research project on KM in the public sector began last year and the findings will be published in 2012. The APO also conducted a study on best practices in lean management which can be used to develop new training courses. In the 2013/2014 biennium, projects on applying quality assurance and performance management tools in the public sector are planned.

In the agriculture and food sector, the priority is to examine the impact of climate change on agricultural productivity and promote appropriate farm practices to reduce greenhouse gas emissions while enhancing food safety. These projects supplement ongoing projects to green food supply chains such as the Special Program for Strengthening the Capacity of Food Supply Chain Management in Asian Least Developed Countries funded by the GoJ. The APO also organized workshops and established demonstration companies in Bangladesh, the Islamic Republic of Iran, and Pakistan to promote modern food safety management systems and build safe and competitive food supply chains.

The APO continued to address specific needs of member countries through individual-country projects after multicountry ones. Those projects, such as on community-based rural tourism (CBRT) and the One Village, One Product (OVOP) movement, allowed the APO to support national programs that bring together large groups of stakeholders. By supporting Lao PDR, the Philippines, and Vietnam in organizing national conferences and workshops on CBRT and OVOP, the APO increased its outreach and influenced policymakers. Special programs to stimulate agribusinesses and rural enterprises in the Mekong region were also supported by the GoJ.

Training remains a core APO activity. Last year, face-to-face and videoconference-based e-learning training courses covered topics ranging from productivity consultancy and material flow cost accounting to lean management, international agriculture trade and others. At the previous WSM in Lao PDR, several NPO Heads requested that APO training courses be internationally accredited. This is a new area that the Secretariat will examine in consultation with NPOs.

 

Collaboration with International Partners

Last year, the GBM asked the Secretariat to obtain additional funding from members and other organizations. As mentioned earlier, building relationships with international organizations forms a key part of that strategy. The APO obtained funding from the Colombo Plan and the United Nations Environment Programme (UNEP) for a workshop held in Fiji and the support of the International Energy Agency for a project in the ROC.

In addition, collaboration with the Food and Agriculture Organization of the UN and Asian Development Bank Institute is ongoing, which enabled the APO to train an additional eight participants from member countries, enrich projects with more resource persons, and enhance the visibility of the APO and NPOs.

 

Cash grants and cash flow

The Secretariat is very grateful for the special cash grants graciously provided by the ROC, Japan, ROK, and Thailand. Those helped us to fund new programs and partially made up the shortfall in the budget for 2012 caused by the withdrawal of the rental cash grant from Japan. The Secretariat understands the budgetary constraints of member countries in this global economic climate but would greatly appreciate it if members could continue to offer cash grants.

Last year, I appealed to members to pay their membership contributions in the first quarter of every year to alleviate the perpetual tight situation faced by the Secretariat in the first half of each year. I am pleased to note that many members heeded the appeal and I continue to urge members to continue this good practice.

 

Operational Improvements

As promised at the last GBM, the Secretariat tried hard to improve its operational effectiveness despite the difficult circumstances. The Secretariat is aware that valuable taxpayer monies fund APO operations. The strategic planning process was the first significant step to ensure that future programs and projects achieve the planned objectives and provide value to taxpayers of member countries. The key difference from past years is that a minimum two-year time frame was adopted for all projects to ensure continuity and be more outcome focused. This approach was used in the last WSM held in Lao PDR where the delegates worked with the Secretariat to develop the new project lineup for 2013 and 2014.

The Secretariat will continue to review and streamline processes with the help of IT and Internet technologies including the use of social media. The objective is to improve our technology platform continuously and achieve better alignment with organizational needs, both within the Secretariat and among NPOs, participants, and experts.

One example of leveraging technology was extending the outreach of e-learning through structured web-based self-learning courses via a dedicated web portal last year. The pilot self-learning course was a success, attracting almost 3,000 individuals from 70 countries. NPOs also endorsed this new modality as an excellent, cost-effective way to disseminate knowledge. However, unexpected issues were seen during the pilot course, and the Secretariat will study the feedback and experiment with the technology before full launch of self-learning courses in 2013.

At the last WSM, NPO Heads welcomed the Secretariat’s initiative to reduce project implementation costs for both the NPO and Secretariat by co-hosting only one reception instead of having two separate ones from 2013. In addition, the Secretariat seeks the views of APO Directors and NPO Heads on streamlining both the GBM and WSM to shorten the length and reduce the cost burden for both the host country and Secretariat. Such changes will create additional challenges for Secretariat staff supporting the GBM and WSM but are necessary to improve the overall efficiency and effectiveness of the APO.

 

Preliminary Program Plan and Budget for the 2013/2014 Biennium

After the GBM approved the new APO strategic directions last year, the Secretariat held a strategic planning session with WSM delegates to draft an action plan to reflect the revised directions. To increase the number of videoconferencing e-learning courses, the Secretariat proposed that local implementation costs be borne by participating member countries following the standard APO practice for multicountry projects. However, it was noted that most member countries were not in favor of this proposal and the number of e-learning courses had to be reduced.

The preliminary lineup of projects for 2013 and 2014 and the budget are presented in Document No. 5. Given the uncertain outlook for the US dollar, the Secretariat proposes that the 2012 exchange rate, i.e., ¥75 to the US dollar, be maintained for the 2013/2014 biennium. The Secretariat has prepared two budget options. The first is to maintain the same amount as for the 2011/2012 biennium, i.e., $11,986,035. The second option includes an increase of 2.9% to $12,333,035 to accommodate requests by WSM delegates to host more multicountry projects. To limit the number of possible scenarios, the 2.9% increase was pegged to the same amount of rent that the Secretariat would have to pay for cheaper office premises in the suburbs of Tokyo if it moves there.

There are four possible scenarios. The first two scenarios assume rent-free office space for the Secretariat. In these two cases, the number of multicountry projects for 2013 would be 56 and 64 for budget options 1 ($11,986,035) and 2 ($12,333,035), respectively. The next two scenarios assume that rent must be paid, and the number of multicountry projects for 2013 would drop to 52 and 56 for budget options 1 and 2, respectively.

 

Conclusion

In a nutshell, the APO, like all the member economies it serves, is facing challenges unprecedented in its 51 years of history and must respond quickly. The decisions made at this GBM will define the next chapter of the APO and the productivity movement throughout the Asia-Pacific.

My annual report has one consistent theme: expect changes. Changes are necessary to transform the APO and prepare the organization to expand its activities as well as its membership, which is the theme of the policy directives by APO Directors at this GBM. I look forward to hearing innovative ideas and directions to lead the APO into its next phase of growth.

Last but not least, I echo the earlier remarks of Chair Azman Hashim who called for a radical shift and a paradigm shift in regard to the need to review the APO and its sustainability to ultimately meet the needs of member countries.

Photo courtesy of SPRING Singapore