The Law and the Labour Market
Waterfronts from Singapore to Sydney
When I arrived in Sydney early this year to take up the new position at National Terminals, I thought I knew what I was going into, I thought I knew what state the Australian waterfront was in. I should have expected what was going to confront me. What I did finish up facing was something much worse and much more daunting.
I found the waterfront culture so similar to the coal mining culture that I had just left after 10 years, that it wasn't funny. It is exactly the same. Its main characteristic is that the workers belong to the union, they don't belong to your company. That really is the main problem.
There were several main features of the coal loader reforms. One was user ownership. When the beneficiaries are the owners it is remarkable how much interest they take in everything being efficient.
Another is true enterprise philosophy. I must say that I was struck by the talk before lunch today, by Professor Blandy. I think that what he said is the theory of what we have done in Newcastle. I know, from some of the questions, a lot of you here thought that perhaps he is a bit soft, but I hope I can demonstrate to you that he is not. He is concerned with making people want to work for you, rather than for the unions. Another feature is technology. Reforming the coal loaders was not just about work practices, it was about upgrading technology into this century.
The elimination of demarcation, another important element, is not only about union demarcation, its also about the demarcation between, for instance, the coal loader and the State Rail Authority, or between the coal loader and the Maritime Services Board. The elimination of those demarcations was very beneficial because, instead of having them planning their railway system or their ports separately from us planning our coal loaders, we are doing it all in harmony.
Competition between ports is another very healthy thing. When I went to Newcastle in 1983, I set myself a five-year goal to be more efficient and cheaper than the Queensland coal loaders. Well, it took about 7 years, but we got there. That is competition for you. It may seem to have taken a long time. However, coal loading in Newcastle is the oldest industry in Australia, and with nearly 200 years of work practices to overcome, seven years was not really such a long time.
Add to that the reduction in Government involvement. With the NSW coal loaders, the Marine Services Board was clearly driving the whole system, an MSB under a regime that clearly was not very healthy, involving the sorts of things that port reform is all about changing: over-manning, bureaucracy, people not being accountable for what they are doing, or not really knowing what they are doing. We found it too difficult to reform the government operations. The best thing was to move away from them, and that is what happened.
The Newcastle coal loaders were way down the bottom of world productivity in 1986. The United States produced over 100,000 tonnes per man, Canada was just behind, South Africa was well down Ä but with cheap labour it didn't matter very much. Queensland was around 80 and we at Newcastle were at 40. By 1990 we had gone right up to the top with the USA. In 1986 dollars the exporters were paying 6 dollars a tonne and today they are paying just under 4 dollars a tonne. In real terms it is about half, when adjusted for inflation. During that same time the tonnage has gone from 20 million in 1986 to 36 million in 1991.
Going back a bit further, the tonnage in 1981 was 12 million. If you are from NSW, or from the mining industry you will remember "Wran's Navy" in 1981. "Wran's Navy" consisted of over 50 ships waiting for coal off Newcastle. That was with 12 million tons per year. Now we are doing three times that tonnage and there are no ships waiting.
When I moved into the container business this year I moved into a company that had only been formed about 3 years ago as a joint venture between the Australian National Line, about 60%, and Howard Smith, 40%. They had joined together to form a strong Australian-owned container terminal operator who could offer genuine competition to overseas operators.
The formation of this company was before the government waterfront reform process officially started in 1989, during the opening stages of the inquiry that led up to that reform. In forming this company A.N.L. and Howard Smith could see that the future of the waterfront lay in bigger operations, to give you economies of scale, so you could invest in state-of-the-art technology.
This is a new industry that is going to be built on economics of scale and genuine competition. Genuine competition doesn't mean having 100 little back-yard operators in a port. Genuine competition is when you get two or three healthy operators, free of inefficient work practices, competing with each other for Australia's benefit. It is not the quantity of competition, it is the quality that counts.
It is useful to compare how we reformed the coal chain of Newcastle with what has to be done now in the container terminals. There has to be common objectives, systems that work across the waterfront. One of the things we had to do in the Hunter Valley coal industry, because it is impossible to bring everything under one ownership, was to make sure that the planning was done in a centralised way. In doing that we got together the management of all the different bodies who were moving goods to and from the waterfront into a planning body.
What we forgot was that there were 36 unions between the mine and the port. Any one of those unions, if it so decided, could stop the coal chain. So the reason for forming the coal chain council, as we called it, was not to allow the unions to run the waterfront, but so that we could get the 36 unions to act responsibly to the Hunter Valley coal industry. We formed the Coal Chain Council, not the unions, and the union representatives had to sit in a room with about a dozen people, four of them, four of us and a few government people, and discuss things every month. They also had to realise, particularly the unions down the coal chain, that if they stopped work in one place, every other part of the chain would eventually stop.
The container industry is not as simple as that, because it is not one product, but the principles are the same. I see, at the moment, Australian waterfront employees on one side and the waterfront unions on the other, that's all got to change. Instead of having opposing sides, we need to work together, to stop competing where we should be co-ordinating, so we can compete vigorously in the commercial world.
Three significant things improved the coal chain and, I think, will improve the situation on the waterfront. One is to increase capacity, second is to eliminate interfaces where we can, but where we can't to co-ordinate them better, and third is to manage industrial relations. Manage is really the operative word here.
There was a question to the Professor this morning about unions. I've watched the Waterside Workers Federation very closely, particularly this year, and I have to say that it's the most awesome body that I have ever come across. The reason is that its members have absolute loyalty to it. When they have a stop work meeting, 85% or 90% turn up. In any other industry 20% will turn up, or 15%. So you know from that that the members are loyal. They are loyal to that union, they are not loyal to National Terminals, or any other employer. That's what we have to change.
With the coal loaders, we were fortunate, we were slightly outside the general waterfront situation, partly because of our ownership being through the coal industry, partly because the management of our company had been lucky and smart enough to make industrial agreements many years before this waterfront reform. It was the beginning of the two enterprise agreement. Now when this waterfront reform process started in 1989, we stayed outside it and did not put our hands up for any of the $300 million redundancy money. Some of my shareholders said, "David, get into that, this is 300 million," because we had to down-size our operations in Newcastle when we merged the two coal loaders. We cut the number of employees from 600 to 250 in 18 months. None of that was with money that came from this waterfront process.
The reason I kept out of it, was because I knew that if you took the money, you had to be in the process, and the process was so imperfect. We had to come away from that. When you are three quarters of the way down the tunnel, you don't turn around and try and go back. You have to push through it, and out the other end.
About the general waterfront, there are some positive aspects. One of the most positive aspects is the fact that everyone is talking about it. Probably they are exaggerating its importance to the micro-economic reform of Australia. There are lots of other things that have to happen to fix Australia's economy. But the importance of the waterfront, as I see it, is two-fold. Firstly, the obvious one, so that exporters can export more reliably and more efficiently and more economically. The other one, which is not so obvious, is that with an efficient waterfront Australia has a chance to maintain itself on the world's shipping lanes. Without an efficient waterfront, we won't. The world's ships will stop at Singapore and Australia will be fed from there by feeder services. I predict if we don't get this waterfront reform in place in the next year or two, that will be happening. I don't mean by the year 2000, I mean by about the year 1995.
I can count three new services that have started from Singapore to Australia, and another one is starting this year. It is remarkable what they are doing in Singapore. Their waterfront is remarkable in its size, it's remarkable in its efficiency, it's remarkable in its low cost, it's remarkable in the way it works. The most remarkable thing is that it could end up driving Australia's economy.
So we need to reform quickly, not only in increased capacity, reduced interfaces and better industrial relations, but in reduced government interference.
Companies need to be able to make a reasonable return on their investment, so it is axiomatic that there needs to be a rationalisation among operators to eliminate unnecessary and cut-throat competition. This can happen while preserving true, healthy competition among significant operators. The world's two largest ports Ä Hong Kong and Singapore Ä achieve their high efficiency with only two operators and one operator respectively.
An example of the reduction of interfaces would be the integration of port operators and transport companies. In today's investment climate this may be difficult, so at least we need to co-ordinate the operations between companies. I am pleased to say that this process is being developed.
This sort of co-ordination for mutual advantage is essential to an improvement in industrial relations. Once employers are co-operating, it is easier to bring unions into the planning process and develop mutual understanding and trust. This will take a year or two.
While I am not suggesting that a soft approach should be taken, I think calls for the army to be brought in are not constructive. We are talking about ordinary human relations, which should mean getting people to work together with pride for common objectives.
The introduction of enterprise-based agreements (EBA's) at the workplace is the beginning of what I am talking about in this area. These EBA's achieve three things:
- 1. An immediate reduction in number of employees to
more appropriate levels thus giving our operations
a chance of being competitive;
- 2. Changes to working arrangements and practices which should, if properly implemented, sustain improved competitiveness through:
- reduced men on machines;
- continuity of operations;
- multi-skilling and increased skill levels for key positions;
- 3. The introduction of a change in the culture of relationships between management and employees.
- 2. Changes to working arrangements and practices which should, if properly implemented, sustain improved competitiveness through:
I believe that we are now starting to turn the corner. It is important, however, that people continue around the corner and not be afraid of what is there. I detect a tendency at the moment to baulk. Possible the over-exposure in the media and the development through that of an atmosphere of confrontation is not very helpful. Assuming we get around the philosophical corner, I can see significant improvements in reliability, competitiveness and efficiency but there is going to need to be further reform beyond the current process.
However, the effect this can have on solving Australia's economic woes has undoubtedly been exaggerated and, in fact, we will only test our improved efficiency if the Australian economy becomes more vibrant and that, I believe, requires much greater fundamental change to our economic management than what is being displayed at the moment. There is no doubt in my mind that the continuation of high interest rates through 1989-1990 has killed off a large slice of our economic activity and it is going to be a long haul back.
All the reforms I've mentioned are essential if the
waterfront is to move towards world competitive levels.
They can be done and they will work, because they
brought the Newcastle coal loaders up to world standard
from a position like that of the waterfront now. This
is a bigger and harder task, but there is no alternative
to its implementation and success.