"Employers’ Orgs should shift to consulting from advocacy"
Dr. Rajen Mehrotra, Senior Specialist on the Employers' Activities of the International Labour Organisation's New Delhi-based Sub-regional Office for South Asia, has been frequently visiting Nepal, developing the ILO Toolkit on Enhancing Productivity and Competitiveness at the Enterprise Level and was recently in Kathmandu to launch that Toolkit by conducting a training programme. On the sidelines of the programme, he talked to New Business Age explaining some of the labour relations issues facing the South Asian region. Excerpts from the interview:
What is the background to this project?
Our role is to strengthen the employers’ organisation, which is FNCCI. We want to build the capacity of the employers’ organisation and it is in this context that we have taken up productivity and competitiveness. Enterprises will have to survive and grow, no matter what the competition. There is a role for employer organisations in this: they have to come up with services, which can benefit their members. Predominantly, employers’ organisations have been playing advocacy roles but that has to gradually shift into a consulting role where the enterprises can benefit out of the services the organisations provide. It is in this background that we started this project on competitiveness and productivity to strengthen the capacity of FNCCI. The project is funded by the Norwegian government.
How is your observation of the Nepali corporates in terms of productivity, competitiveness?
The enterprises are at various stages. Most of them are catering to the domestic market. Then there are enterprises catering to the export market. The latter are really very price-sensitive and tend to try and see what they can best achieve. Most enterprises have been badly affected by a fall in demand. So they are trying to cut costs as much as possible. These are transitional phases which an organisation goes through. In the long run, the market is bound to pick up because every country in South Asia is growing economically. And they all have substantial population. That is true also in Nepal though Nepali industries were very heavily dependent on the tourism industry, which, at the moment, has been badly affected. But it is a matter of time. It will once again get back to its normal phase.
When there is a sudden fall in demand, it becomes essential to see how you can sustain the business operation for that period. We have been trying to come forward and tackle this problem at the industries.
As a labour expert, what is your observation about the recent trends in the labour movement in Nepal vis-à-vis the South Asian region?
I think, in Nepal there has recently been a landmark achievement in the labour movement. When 50 enterprises were closed last year, FNCCI and the central trade unions joined forces and these enterprises were reopened. This has led to a fairly good understanding between the central trade unions and the FNCCI. They came forward with a charter under social dialogue to look at the labour law reforms jointly. The second national labour conference was held in January this year, in which the government also participated. A tripartite agreement was also signed to look into areas needing reforms. The central trade unions have come together with the central employer organisation and they are trying to find solutions to the problems to help both the sides - helping the industries to grow and helping the employees to benefit from it. There would be individual enterprise-based problems, which need to be sorted out separately but at the national level a remarkable effort has been initiated.
They are talking about forming a federation of all the labour unions. What is your comment on that?
I have no information about that. But such a move is always good because there is multiplicity of trade unions in each of the countries in South Asia and there is a need for the unions to come together on a common platform as a federation to try and solve the problems. So it is a welcome step if that is taking place.
In your presentation in the seminar you said that the trade unions in South Asian region are driven more by political objectives rather than by the enterprise interests. Would you like to elaborate on that?
We have to recognise that the trade union movement in every country in South Asia was historically one part of the freedom movement. Hence trade unions are affiliated to political parties and this is the reality. Therefore, quite often the unions also are under pressure on political issues. That is why, to a certain extent, the unions get down to political issues rather than enterprise related issues and to that extent the workmen also get involved. This historical legacy will remain there.
What can be done to reconcile the divergence of the interests of the employers who are pressing for more labour market flexibility and of the unions who are demanding more social security?
It means you cannot have labour market flexibility if you do not address some social security concerns. So the need of the hour is that both the unions and the employer organisations at the central level should come together and work out a viable model through social dialogues. This is more urgent now because the enterprises are required to become more and more competitive day-by-day and product life cycles are going to get shorter. Thus the upgrading of the employees' skills is the need of the hour. There will be a tendency for automation. At the same time, we must be fair to the people that are working in the organisations. If one tends to take a policy of hire and fire, the unions will never accept it.
"Is there any tax benefit?"
Hiroyuki Yanagi, the Managing Director of Yamaha Motor India (P) Ltd. was in Kathmandu in mid-June for, as he put it, "clarifying the marketing strategy to the company's Nepali associates to increase the business". During his stay he also declared open the Yamaha Club and discussed the recent trends in the motorbike business and strategies of Yamaha with New Business Age. Excepts from the interview:
What are the recent trends in motorcycle sales in different countries?
All the countries are growing from the volume standpoint. Especially, Brazil, Russia, India and China are growing at a tremendous pace. ASEAN countries too are growing markets. In some markets, four wheelers affect the motorcycle business, but in many cases it is not affected so quickly because while some motorcycle riders may graduate to cars, new motorcycle buyers do emerge. Similarly, some car users like to own motorcycles for fun and Yamaha is naturally their preferred brand due to its sporty features.
How are the motorcycle majors like Yamaha and its competitors going about to explore new markets or new products?
We are competing by giving new products. New product means the additional value that we can give to the market. It may be in terms of utility vehicle or commuter vehicle. But now, motorcycles are increasingly being used for pleasure rides. To address that preference of the customers, Yamaha has adopted the philosophy of making and selling sporty, stylish and innovative motorcycles. We are changing our product as well as our marketing strategy based on this philosophy.
How do you state Yamaha policy for the Indian vs. the Nepali market?
There is no difference. We sell motorbikes everywhere with the same central philosophy summarised in the three key words - sporty, stylish, innovative.
Now there are some motorcycle assembling plants that just started in Nepal. This indicates that there does exist a market for at least a small-scale assembly plant in Nepal. Is Yamaha too considering to set up one?
We don't have such consideration. At least not now. We must first increase our market share in this country. We have a good manufacturing facilities in India from where we can serve the market here.
If not for assembling, what about the a manufacturing plant for some components?
Is there any tax benefit?
If you assemble, you pay less tax as compared to importing. The difference is somewhere at 20 percent.
We need to study what kind of possibilities are available. Twenty percent is big amount. But the policies are not so clear, as I understand.
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