Mr Toshimasa Asaka
Deputy Managing Director, Matsushita Electric Asia Pte Ltd

Mr Fuyuki Seki
Chairman, Consumer Electronics Industry Skills Standards Committee

Distinguished Guests

Ladies and Gentlemen

Last year, the Singapore economy recovered robustly from the 1997 downturn. The stock market recorded an all-time high. We were all looking forward to a growth rate of 5 to 7% this year. But a sudden change of events worsened by the Sept 11 terrorist attacks, has wiped out the optimistic outlook. The economy is now expected to contract by some 3% this year.

The output of the manufacturing sector dropped by almost a quarter in September – the sharpest fall since the 1985 recession. In the same month, the output of the electronics industry fell by a third. The electronics Purchasing Manager Index or PMI declined for the 9^th consecutive month to 44.2 in September. A PMI reading below 50 denotes a contraction.

In October, the PMI new orders index increased by 4.7 points to 50.8. However, the overall outlook for the next few months is still bleak. Weak demand is expected to prevail for the major electronics products and components, including semiconductors, telecommunication equipment, computers and computer peripherals. Worldwide semiconductor sales are expected to fall by 25 to 30% this year – a sharp contrast to the +37% growth last year.

Despite the poor prospects facing us, we must not lose heart. Such volatility is a typical feature of the new economy. Though little can be done to influence the course of external events, we can be proactive in terms of repositioning ourselves to weather any turbulence that come our way.

The temptation in these difficult times is to abandon manufacturing and go just for services. There has been a lot of talk about this lately. This is dangerous. First, the manufacturing sector contributes about 25% of our GDP growth and provides employment to more than 20% of our workforce.

Second, and more importantly, the services sector cannot succeed in a vacuum. It needs the manufacturing sector to support it. Many companies providing services like printing, packaging, logistics, transport and finance exist because of the manufacturing companies located here.

Many of our hotels, retailers and realtors depend on the visitors and foreign staff who are here because of the work they do in our manufacturing sector. One manufacturing job can create about two to four supporting service jobs.

The solution, therefore, is to strengthen our manufacturing base by moving on to higher value-added activities in areas where we can excel. This is the objective of EDB’s Industry 21 Plan. The Plan spells out the development of specific manufacturing industries like electronics, chemicals and engineering to sustain Singapore’s competitiveness and provide jobs for our people.

Finland is an example of a country that has done this well. A small country with just over five million people, it has overtaken manufacturing giants like the United States, Japan and Germany. This year it was ranked number one by the Global Competitiveness Report. It was in 16^th position five years ago.

One of the key reasons for Finland’s success is its targeted approach towards higher value-added activities in specific manufacturing industries, like electronics and telecommunications. Though the country has no obvious advantages in telecommunications, it has become a leading player in that field. Some may well say that Finland is over-exposed to one sub-sector of manufacturing. However, it is taking the ride on telecommunications for now.

The success of Nokia epitomises Finland’s success. From a company making rubber bands and snow tires, Nokia has transformed itself into a highly successful global telecommunications company and overtaken the American conglomerate, Motorola. Today in Helsinki, many companies cluster around Nokia, resulting in a mobile Silicon Valley.

In the seventies, Singapore adopted a labour-intensive export-oriented industrialisation strategy to provide jobs for our people. Matsushita was among the first few foreign companies that responded to our call. In 1972, Matsushita set up a plant in Singapore to manufacture refrigeration compressors for the world market.

In the eighties, the labour market tightened. And there was upward pressure on wages. To sustain our competitiveness, we began to restructure our economy towards higher value-added activities. Automation and mechanisation were promoted. Greater emphasis was placed on skills development. Matsushita’s investments in Singapore also moved from the manufacturing of low-tech consumer electronic appliances to advanced technology products, such as semiconductors, display devices and telecommunications equipment.

Today, one of the components that Matsushita produces in Singapore is the vibrator used in Nokia handphones. It has become a standard item - alerting owners when their phones are in silent mode. Matsushita supplies about 70% of the vibrators in Nokia phone. All the key parts in these vibrators are made in Singapore.

The competition for labour-intensive manufacturing has become keener. Countries in Asia, Latin America and even Eastern Europe that have a big population base are competing with Singapore. China and India are entering the foray, and the competition is accelerating. With a population of over 1 billion, China has an enormous supply of labour. Compared to Singapore, wages in China are much lower, only one-twelfth. The hourly wages (including supplementary benefits) of manufacturing workers in China is about 85 cents compared to $13 in Singapore.

To sustain its competitiveness, Singapore’s manufacturing sector has to restructure itself to higher value-added activities such as product development, process engineering and testing. I am glad that Matsushita’s activities in Singapore have moved in this direction.

In 1990, Matsushita established an Audio & Video Research Centre in Singapore as well as a Human Development Centre to accelerate skills development. In April this year, its Asia-Oceania regional role was transferred from Osaka to Singapore. From regional support, the company in Singapore has moved to regional headquarter management.

Unlike other manufacturing companies that are freezing training and retrenching staff, Matsushita is consolidating its operations here. It is seizing the window of opportunity offered by the downturn to train and prepare for the upswing. To accelerate this process, Matsushita is spearheading the implementation of the National Skills Recognition System or NSRS in the consumer electronics industry.

Working in collaboration with the PSB, Matsushita has already developed a functional map that identifies the key competencies for success in consumer electronics manufacturing. The first five skills standards and their accompanying OJT blueprints for training staff have been developed. They provide skills in higher valued-added areas like wire bonding, machining of crankshaft and maintenance of machines. Another five standards and training blueprints are in the pipeline.

I am glad that Matsushita is making these skills standards and training blueprints available to the whole industry. The training programmes leading to NSRS certification conducted by its Human Development Centre will be open to all companies in the industry.

Furthermore, Matsushita has set up an NSRS Skills Assessment Centre for the whole industry. Any company can send its staff to these centres for training and skills assessment.

The NSRS is not just about establishing performance standards and qualifications. It is also about enhancing self-worth and professionalising work. The overall objective is to enhance the competitiveness of companies. The government is committed to the programme. Some $200 million have been provided to implement the NSRS.

Since its launch last year, 51 industries have begun implementing the NSRS. These include industries as varied as jewellery, mechatronics and retail. Over 300 skills standards have been developed and more than 25,000 workers trained. This is encouraging. However, there are still many companies that are holding back. Rather than training their people and preparing for the upswing, many are reducing their training effort because of the downturn.

I urge all organisations that have not already done so to emulate the fine example of Matsushita and implement the NSRS for their people. It is our passport to competitiveness and employability. The government will continue to provide the infrastructure and financial assistance for companies to develop their people. However, companies must play their part.

On this note, it is my pleasure to launch the NSRS in the consumer electronics industry. I wish to commend Matsushita Electric Asia for its leadership. Thank you.

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