January 23, 2006	Monday	Zilhaj 22, 1426

IS profit-sharing between shareholders and workers of major companies the right solution for export problems by globalization of trade under the WTO regime? As major companies in the West face critical export problems and loose a part of their domestic market as well and incur losses,( which threaten to get out of hand), profit-sharing is being suggested as a remedy by the president of Germany Horst Kohler. It has been welcomed by major labour leaders.

The German president resigned as the managing director of the IMF to take up the top job in his country, which has an unemployment rate of 11.2 per cent and an economic growth rate of 1.7 per cent along with a host of economic problems.

His call for profit sharing with labour in a country where workers are well-paid, has been welcomed by the political leaders as well. But, the wages are under pressure from cheap Chinese labour and products.

He preferred profit-sharing to drastic waste cuts and says that can help to narrow the divide between the rich and the poor.

He was speaking at a time when General Motors— the worlds largest automobile-maker— has announced it will cut its expenditure by $14 billion. The cut will be in the wages of workers, particularly the health care cost.

The company has incurred a loss of $6 billion in the first nine months of 2005 and proposes to reduce its staff by 30,000 as it cannot withstand the external competition.

Similar cuts in wages have been made by many other Western export industries, particularly the highly competitive automobile companies. He says that in the era of globalization, sharing the capital needs can help narrow the growing divide between the rich and the poor.

Using his insight into the world economy which he gained as chief of the IMF, Mr. Kohler says that today employers and employees have to realize they are in the same boat as part of a company facing worldwide competition.

He said, so far many firms have shied away from such moves, as they believed that labour policies gave them little room in terms of salaries. He has also urged German companies to think about a form of basic income, which will support the unemployed as well.

It is unusual for a German president with his restricted authority to come forward to make such economic and political suggestions, but he thinks that the German economic situation is such that he has to speak forth in view of the new realities created by the increasing space of globalization and the problems that Europe as a whole face, particularly in respect of employment. The unemployment rate in the Euro region is 8.3 per cent.

Globalization means greater competition in the area of exports, but also exposure of each country to cheap imports from other countries. The Chinese exports to most countries have increased, followed by India’s and that has aggravated the unemployment situation in many countries. Such countries have to reduce their cost of production and exports and that includes the developing countries exposed to cheaper imports from outside.

Enlightened leaders in these countries want to replace the confrontational situation in their midst with a pattern of partnership so that workers will swim and share the losses in an economy. The leaders want to opt for special measures to protect the economy and make it more vibrant.

In Pakistan, profit-sharing has been tried rather haphazardly and so found little favour with workers. When the minority shareholders do not get a fair share from majority shareholders and controllers of companies, a fair sharing of profits for labour is out of question. It becomes more of a sham exercise of social justice than a fair division of the profits.

The Securities and Exchange Commission of Pakistan’s response to such a situation is to reduce the number of persons needed to float a company and finally brought it down to one-person firm. But that has not become popular because of the scarcity of banks loans for the underprivileged.

Earlier, foreign companies had a record of treating their employees fairly. Some even thought that employees in some of companies got far more than they deserved. Following nationalization of industries and banks of the 1970’s, workers got a good deal and now following their privatization, their workers are to be retained for at least a year and in many cases the privatized enterprises have been expanded, hence the opposition to the privatization of such enterprises including the oil and gas companies has been small.

There has been talk of the government coming up with a radical labour policy for long. But while facets of the policy have been revealed in bits, the whole policy has not been brought out. Anyway what is acceptable to workers is not palatable to the employers and what employers like is anathema to the workers.

The employers have been agitating for the right to hire and fire as in the West, but the government is not agreeable to giving such rights to the employers in law while in practice they keep sacking people. Meanwhile, the notorious group system, otherwise known as the contract system of employment, continues with its varied abuses in the textile industry.

Foreign company chiefs agree that labour is cheap in Pakistan, but not when it is calculated in terms of real productivity, it is often low. A Japanese manager of a company asks what could he do with a worker who has not mans the assembly line but can not read the manual.

The urgency for efficiency in the industry is underscored by the soaring price of oil, which touched its peak of $70.85 a barrel in August last.

The real enemy of the workers in Pakistan is not so much the low wages as much as the high inflation which has again crossed eight per cent. It means they can buy less goods with the existing level of wages.

In such a situation, a real and substantial profit-sharing can be helpful in making workers feel more like partners in the global economic game- rather than mere wage earners who can be very helpful to the country.

That demands a far different approach to workers and their wages. Globalization is a game, which we cannot resist but we can convert it to our advantage if we produce the goods, the world wants at lower prices and with better quality, buttressed by efficient business practices. Much of that has to begin with cheap electric power from the new dams, which are to come up.

In the reorganized set-up, workers should be real partners and not marginal players for wages. The government will collect Rs5.5 billion as workers welfare tax this year. That is shown in the budget papers as tax revenue and merged with the rest of the tax income. The budgeted income last year was Rs6.88 billion but the actual receipt was Rs5 billion to be followed by Rs5.5 billion next year.

Why this amount is being shown as separate tax income and made to merge with the overall tax income instead of being used outright for the welfare of the workers? But the exercise is repeated year after year.