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Asian Management and Executive Salaries on the downturn
20th July 1997
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Further evidence that the golden decade of fast growth in South East Asia
and the "easy money" for most Asian economies is coming to an end is contained
in the latest rounds of salary surveys from Hay, CRG, and others which demonstrate
a levelling of salary increases, and in some instances a downturn. Lower
growth rates and stock market performance, plus the emergence of other developing
economies in Africa, Latin America and Eastern Europe means that the developing
nations of Asia are not the first choice of overseas investors as they have
been in the past. Asian economies and business is having to learn how to
compete against these new markets, which now offer the overseas investors
the same things that our own economies offered 10 years back.. low labour
costs, and plenty of it.
There is also a discernable trend, as foreshadowed in this column earlier this year, to tie salaries closer to company performance and long term benefits rather than short term perks. Additionally, several companies, especially in Singapore, are looking to training and development as a more cost effective investment than salaries to produce and retain quality staff. A recent survey by the CRG survey group, published in Asian Executive Digest shows declining salary rises at senior, middle, and junior management levels, particularly in the developed economies of Hong Kong, Singapore and Japan but also in developing economies such as Malaysia and Thailand. Certainly in Bangkok, with the Tailand economy in turmoil, executives are bracing themselves for very hard negotiations with the boss come the next salary review. Indonesia's fast increases in salaries is also expected to slow down soon. Some business practices that, in a global context reduce competitiveness, such as guangxi, low accountability in work performance, a hearty appetite among many for "face" enhancing perks that do little to increase productivity, and under the table payments, were accepted when Asian developing economies were the only choice, but now pose a serious problems for medium term global competitiveness. While it is accepted that other developing economies have similar problems, the growing cost of labour, property and increasing costs of doing business in Asia generally means there are less margins to accomodate such luxuries now. We have already noted in this column that Japan, where economic slowdown has been a fact of life for several years, is well on the way to revising its previously sacred cows of life long employment and cosy government/business deals as a result. We have still to see a determined effort from other countries to do likewise, and the rewards are there for those who react first. It is not all bad news of course; senior executive salaries in Hong Kong, Seoul, Tokyo, Taipei and Singapore still top, by 20 to 70%, those in cities such as London and Sydney, ignoring expat packages and especially after taking into account cost of living, and Kuala Lumpur, Bangkok and Jakarta are not far behind. But this simple comparason does indicate that a substantive "correction" is not far away.
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