How can ASEAN nations unlock the benefits of the Fourth Industrial Revolution?

The effects of previous industrial revolutions have been well documented. If we go back to the very first one, manufacturing moved from homes to the newly created factories. With the shift, some skills were carried over but most had to be adapted to new working conditions. The second and third revolutions saw a similar shift. With every industrial revolution there has been a requirement for a skill change. We are seeing the same trend with the industrial revolution occurring today - Industry 4.0.

However, this is perhaps the first time that countries and companies have had to worry about how their manpower will keep up with the pace of change. Previous revolutions were seen as job and growth creators; with Industry 4.0 there is a concern that it may eradicate jobs and lead to unemployment.

Disruptive technologies like artificial intelligence are transforming global production systems. Factory processes and the management of global supply chains are all being impacted. This is creating a new wave of competition among countries because, if adopted correctly Industry 4.0 can unlock a 30-40% increase in productivity.

However, a crucial factor to unlocking this potential is labour, which needs to be upskilled to handle these technologies. We also can not run away from the fact that some jobs will be lost. The people doing these jobs need to be reskilled to continue contributing.

As other nations lead the charge in embracing the Fourth Industrial Revolution, ASEAN countries have so far failed to keep up. This is an issue as China, already a manufacturing hub, has a clear plan in place.

Countries such as Vietnam and Thailand were slowly emerging as manufacturing bases within their own right, partly due to rising costs in China. But with China leapfrogging ASEAN with their “Made in China 2025” plan, there is a risk that if labour issues and Industry 4.0 are not addressed quickly by ASEAN, some of their manufacturing base will be relocated back to China.

In order to seize the opportunity that Industry 4.0 presents, workforces need to be prepared and equipped with the right skills. In an ASEAN context, this will represent unprecedented demands on workforces which need to be addressed for the countries to remain competitive.

ASEAN countries have historically relied on low skilled labour as their source of competitive advantage. For example, Indonesia, as one of the major developing countries, still relies on basic manufacturing and its Manufacturing Value Added rate is one fifth of the more advanced industrialised countries.

Thus, the global shift to automation is two pronged for ASEAN countries. Firstly, it means that other countries will soon have low cost production capabilities. Secondly, it means that a huge part of jobs in ASEAN will be threatened by automation. This was recently demonstrated by the UN’s International Labour Organisation declaration that Vietnam, Cambodia and Indonesia face the highest number of workers at risk from automation.

If we take the automotive sector, for example, ASEAN is the seventh largest producer globally, with over 800,000 employed within the sector. A majority within this sector are low-skill workers; those who will be most affected by automation. Not only will we see these jobs being replaced but there will also be an increase in demand for higher skill workers with R&D and engineering capabilities.

The first step is for governments to identify that there is a skills gap, which some are beginning to realize. The Vietnamese Government recently released a report that found that, in terms of skilled workers Vietnam can send overseas under the ASEAN Free Labour Movement, the country has the lowest percentage of eligible workers within ASEAN.

The next step is for governments to address the skills gap and be prepared to fully embrace Industry 4.0. This requires the formulation and implementation of a strategic industrial direction which focuses on developing skills, including private sector partnerships and infrastructure and capital requirement. A nationwide capability and capacity building programme needs to be rolled out in ASEAN countries. The exception is Singapore where, through their SkillsFuture initiative, they have already begun to roll out their programme.

All of this is possible. For proof, ASEAN nations need only look at South Korea’s transformation. The South Korean government embarked on a series of well thought out five-year plans that placed major emphasis on human resource improvement, along with increased productivity, infrastructure development and key industry prioritization.

Since those plans were formulated in the 1950s and the South Korean economy transformed from an agriculture based economy to a service based economy, the service sector grew from 3% to 63% by 2014. Its GDP ranking improved from 38th in 1961 to 11th globally in 2015 and enrollments in schools went from 29.3% to 99.6% in 2014, and enrollment rates for university increased from 9% to 80% in 2014.

South Korea’s success shows that, with a visionary government that supports its people and implements and monitors close partnerships with private sectors, a workforce can be transformed to unlock huge economic potential.