Let’s Focus On :::: Asia is a region of economic extremes.
At one end of the spectrum there is Singapore, an advanced economy with a per capita GDP in 2017 of almost USD53,000, closing in on the United States (USD57,466) and leaving the UK in its dust (USD39,899).
At the other end are the emerging economies of Cambodia and Myanmar, each of whom recorded per capita GDP in 2017 of barely more than USD1,000. The performance of Laos was twice as impressive – all the way up at USD2,159.
A snapshot of the prospects for the less developed economies of ASEAN would actually be fairly positive at this time, compared to their immediate past. As they emerge from decades of turbulence, political trends are becoming more favorable to business and inward investment numbers are encouraging.
However, it is difficult to see how current business models will be able to bridge the gap between Southeast Asia’s rich and poor neighbors – to say nothing of the world’s more wealthy countries.
Productivity a key challenge
A key challenge for all the economies of Southeast Asia is productivity. For most Asian countries, the per capita GDP gap with the US is largely explained by labor productivity shortfalls of 80% or more against the US level.
Even Singapore is plagued by poor productivity. According to a recent report, low productivity has been the bane of the economy for years, but it appears to be finally improving this year. “Appears”, as it remains unclear if real progress has been made.
Productivity growth is projected to reach about 3% this year – the highest since 2010, and a big improvement on last year’s 1% expansion.
According to the OECD, the region needs to sustain strong productivity growth to close the gap in relative living standards vis-à-vis the more advanced economies. Growth will increasingly depend upon improving resource allocation and their usage within sectors of the economy – through investments in human capital, technology and infrastructure.
The fact remains that the productivity challenge for several of the poorer Southeast Asian countries is considerable. The less developed Mekong region, for example, is still in transition from agriculture to industry. 61% of Laos’ workforce is engaged in agriculture. In Vietnam the figure is 41%, and in Myanmar 50%.
Transitioning of workforce
Transitioning this huge number of agricultural employees into a 21st century workforce is clearly a huge task.
The solutions put forward by many national governments are unsurprising: they seek to leapfrog the traditionally lengthy process of industrialisation by driving digital transformation, including automation, and developing a skilled workforce capable of competing globally in a world built on technology.
In this regard, automation is potentially coming to the rescue: advanced robotics, machine learning, AI that can outperform humans – all these technologies can deliver reduced labour costs, improve productivity and even help create new business models.
And here we’re speaking only of improvements in day-to-day business processes – we must not forget that automation also enables us to tackle societal “moonshots” such as curing disease or contributing solutions to the climate change challenge. And who is to say that such innovations cannot come from labs, incubators and university campuses in Southeast Asia?
The problem is that adopting automation will disrupt long-standing models of work. Research by McKinsey Global Institute estimates that up to 30% of work activities globally could be displaced through automation by 2030. A further study conducted by the University of Oxford showed that two-thirds of all current jobs could disappear from the workforce in the next 15 to 20 years, as automation takes over.
This is a particular concern in the developing regions of Southeast Asia, where dreams of sustainable national prosperity being realized through low-cost labor are already souring. The conclusion cannot be avoided that people will need to switch occupational categories to remain employable.
Driving productivity through technology
The potential impact of automation on productivity is huge. A new report from McKinsey & Co says disruptive digital technologies could help Southeast Asian countries become true “factories to the world,” generating anywhere from $216 billion to $627 billion worth of productivity gains.
The consultancy does however see some obstacles that ASEAN manufacturers need to overcome. These include low labour productivity, and some ASEAN companies may struggle to compensate for “insufficient experience with available technology as well as data shortfalls,” which could hinder their adoption of new tech.
As technology continues to shape different sectors, we can clearly see an increasing divide between the labour markets of countries who have the skills for the new digital economy and those who do not.
Thus governments across the region are faced with the need to overcome the challenge of improving productivity through automation, without creating undesirable numbers of unemployed citizens.
Building a digital, mobile workforce
Enterprises and governments must find a way to balance automation and its productivity benefits with the societal changes that it will bring. They must plan for long-term innovation and productivity enhancements, through providing training in the whole range of technology skills to build a digital, mobile workforce.
Training and education are absolutely key. Students with the right qualifications are able to work with technology instead of being displaced by it.
Once machines are assigned to take care of mundane, repetitive tasks, employees are free to tackle more valuable work that requires judgment calls and human empathy. This can be termed the attended automation model – man working with machine, instead of machine replacing man.
Enabling this on a large scale, though, requires a government willing to invest in education infrastructure and a safety net for workers as they make the change as well as businesses willing to shoulder some of the cost.
If we are to ensure the new world of technology benefits all citizens, the disruption that automation and digital transformation are bringing to the workplace must be addressed. Bold decisions are called for to ensure no-one is left behind.
Anthea Yuk, is a Specialist Market Manager, Clarity 360 Abu Dhabi UAE
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