HRD Initiatives Underpinning APEC Economic Integration
Strategic Human Resource Management for Successful Foreign Investment in APEC Project Report | Reiko Toyoshima Program Officer for APEC HRDWG CBN Human Resource Development Department Institute for International Studies and Training [Date of Issue: 31/March/2015 No.0241-0968]
Date of Issue: 31/March/2015
HRD Initiatives Underpinning APEC Economic Integration
Strategic Human Resource Management for Successful Foreign Investment in APEC Project Report
Program Officer for APEC HRDWG CBN
Human Resource Development Department
Institute for International Studies and Training
Institute for International Studies and Training (IIST) has been conducting projects with the aim to develop managerial human resources in global businesses engaged in foreign direct investment in the APEC region in order to contribute to the region's ongoing economic development.
The Asia-Pacific Economic Cooperation (APEC) is a framework for economic cooperation comprising 21 member economies from the Asia-Pacific region. Since the forum was established in 1989 with the aim of realizing sustained growth and prosperity for the region, APEC has engaged in a range of initiatives and discussion in relation to trade and investment liberalization as well as economic and technical cooperation. As a result, the total trade volume for the APEC region has grown around seven times over the last 25 years, realizing a high economic growth rate. Today the APEC region is a world growth engine, accounting for 40 percent of world population, 60 percent of gross domestic product (GDP) and 50 percent of trade.
IIST has participated in APEC Human Resources Development Working Group (HRDWG) Capacity Building Network (CBN) as the organization representing Japan ever since APEC's establishment, implementing various projects designed to develop human resources who can rise to new challenges presented by economic liberalization. There are major differences among APEC members in terms of population scale and GDP, while they are also extremely diverse culturally. Our APEC projects exploit that diversity to engage in discussion with an added value unique to APEC. As part of these endeavors, IIST has been implementing the project entitled "Strategic Human Resource Management for Successful Foreign Investment in APEC" since July 2014.
Foreign direct investment (FDI) driving the region's economic growth has continued to evince robust growth. In 2013, regional investment grew eight percent year-on-year (US$757 billion in total), with around half of world FDI absorbed by APEC. As investment opportunities have expanded, there have been a growing number of cases of not only large companies but also small and medium enterprises setting up operations in various parts of the region. Opportunities for companies in the APEC region to form partnerships with foreign investors from both within and beyond the region have also increased. Utilizing talented local human resources is essential in making FDI succeed. For many companies, however, cultural, social and linguistic differences stand in their way, with recruiting, developing and retaining local human resources representing a real challenge.
In this light, the project aims to identify and analyze success factors in human resource management (HRM) required for successful FDI by companies expanding offshore and their local investment partners, creating prototype HRM guidelines. Eight experts selected from six APEC economies conducted interviews with companies that have actually come in and set up operations in the APEC region, studying examples of HRM successes and failures in local operations and developing cases from these. To present the results of this work and exchange views, local government representatives and businesspeople were invited along to a workshop in Taipei in January 2015.
At the workshop
At the workshop, APEC experts gave presentations on HRM at various companies' local operations based on their respective cases. While the companies in the cases were diverse in terms of business type and scale, they all employed a range of means in relation to remuneration, human resource development (HRD) systems and welfare to boost the motivation of local employees as well as the local retention ratio, learning a great deal from each other. Conversely, cases were also presented of big companies introducing their own HRM methods into the local operation in which they had invested, only to run into problems because of the different culture at the local operation. The common lesson was that HRM systems need to be adjusted to local social conditions in case HRM and HRD systems from home fail to function effectively when exported directly into local operations.
During the discussion, the view was expressed that companies engaging in FDI may first need to understand the social background of economies in which they plan to invest, including politics, social systems, culture and economy, spend time determining the capacities they need, and then take steps including the development of HRD systems. It was also suggested local community support and the utilization of reliable local partners as means of finding the right personnel. It was emphasized that as part of companies' FDI preparation, in addition to the usual analysis of market surveys, strategies and capital procurement, it is also important to consider what kind of personnel they will recruit, develop and retain, and what they need to know in order to do so. In addition, where the main purpose of offshore expansion was traditionally to secure a cheap labor force, more companies are now viewing offshore operations as an opportunity to lock in their own sustained growth, so they are looking for talented human resources to assist them in developing business rooted in local society. It was suggested that, to help foreign companies achieve that objective, local governments could make effective use of existing vocational education and training centers and work with industry to develop human resources with the skills sought by industry.
Participants agreed that it was important that companies engaged in FDI did not view local staff simply as labor but rather respected them as important team members underpinning the company's growth, ensuring that the company and local staff all share the same corporate philosophy. It was also noted that to retain talented local human resources, while companies certainly needed to offer pay packages geared to employee abilities, welfare benefits and career paths, beyond simply providing a better deal, they also had to show what added value their company offered that couldn't be replicated elsewhere-what skills the employee stood to acquire, for example, or what unique experience they could build.
Commemorative photograph with APEC experts (Taipei)
At the end of the workshop, a draft of prototype HRM guidelines was presented, and participants discussed which items would be included in the guidelines to benefit companies engaged in FDI. The prototype HRM guidelines will be finalized based on the workshop discussion and published as a report together with the cases developed through the project in April, as well as being made available on the APEC website and other related sources. We hope that the project results will be utilized by APEC to help facilitate trade and investment promotion in the region.
(original article : Japanese)
• APEC HRD-CBN Project "Strategic Human Resource Management for Successful Foreign Investment in APEC" Workshop in Taipei