For more about the East-West Center, see http://www.eastwestcenter.org/William "Whit" Lloyd, Visiting Fellow at the East-West Center in Washington, explains that "Automation will result in the obsolescence of jobs in industries ranging from textiles to automotive manufacturing. Southeast Asia's labor force and economic growth must address this challenge head on.

Lloyd, William (Whit)

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Number 504 | April 21, 2020 EastWestCenter.org/APB William “Whit” Lloyd, VisiƟng Fellow at the East‐West Center in Washington, explains that “AutomaƟon will result in the obsolescence of jobs in industries ranging from texƟles to automoƟve manufacturing. Southeast Asia’s labor force and economic growth must address this challenge head on.” Trends around much of the world toward greater automaƟon are acceleraƟng, with significant implicaƟons for workers. In 2018, McKinsey & Co. released a document claiming that, by 2030, up to 375 million people worldwide may forfeit their current jobs due to automaƟon and technological disrupƟon. ASEAN is especially likely to be affected. According to the InternaƟonal Labor OrganizaƟon (ILO), the impact of technological disrupƟon on ASEAN will be profound. AutomaƟon will result in the obsolescence of jobs in industries ranging from texƟles to automoƟve manufacturing. Southeast Asia’s labor force and economic growth must address this challenge head on. Perhaps the most visible technology being widely adopted is automaƟon. Robots are replacing low‐skilled manufacturing jobs. Among Indonesia and Thailand’s manufacturing workforce, 60 and 73 percent, respecƟvely, are at “high” risk of having their jobs automated, according to the ILO. In addiƟon, automaƟon is currently replacing low‐skilled jobs in countries such as the Philippines, Thailand, and Vietnam, countries that have uƟlized low skilled labor to manufacture and export electronics valued at around $400 billion in 2014. Furthermore, texƟles will be disrupted through the advent of 3D prinƟng. TexƟles can instead be produced in the same locaƟon they will be purchased by consumers, contribuƟng to an overall decline in texƟle exports from Southeast Asia. Although largescale 3D prinƟng may sƟll be 10 years away, automaƟon is happening now. According to a 2016 study conducted by the ILO, Thailand is the eighth largest consumer of roboƟcs in the world, with Indonesia, Singapore, and Vietnam also experiencing increases in their consumpƟon. The ASEAN Post has reported Thailand’s “Thailand 4.0” plan, iniƟated in 2016, aims to automate 50% of its manufacturing jobs within 5 years.  Across the region, higher consumer demand for quality and efficiency has compelled further automaƟon, as have increases in wages, such as Indonesia’s 50% minimum wage increase among full‐Ɵme workers between 2011 and 2014. According to Fitch SoluƟons, the average minimum wage has conƟnued to climb. East and Southeast Asia’s average minimum wage was 63% of the global average in 2015, but climbed to over 80% of the global average by 2019. On the supply side, greater automaƟon also reduces job turnover due to reduced workplace accidents, as well as labor costs due to a reduced need for workers in the producƟon process.  Through “Thailand 4.0”, Thailand – already one of ASEAN’s greatest manufacturing hubs – aims to develop an advanced manufacturing sector, which includes products such as medical devices and aerospace parts. These products require a degree of precision that is difficult to achieve consistently with humans. With robots, manufacturers are able to reach a higher level of quality more efficiently. These also come with negaƟve consequences. Thailand’s Development Research InsƟtute (TDRI) predicted that 1.5 million jobs would be lost by 2020  through the country’s commitment to advanced manufacturing. Whether this is true is difficult to say, according to TDRI, Thailand has already lost Automation Challenges in Southeast Asia By William “Whit” Lloyd APB Series Founding Editor: Dr. Satu Limaye | APB Series Coordinator: Peter Valente The views expressed in this publication are those of the author and do not necessarily reflect the policy or position of the East-West Center or any organization with which the author is affiliated. The East-West Center promotes better relations and understanding among the people and nations of the United States, Asia, and the Pacific through cooperative study, research, and dialogue. Established by the US Congress in 1960, the Center serves as a resource for information and analysis on critical issues of common concern, bringing people together to exchange views, build expertise, and develop policy options. seven million jobs due to coronavirus, possibly masking job losses due to automaƟon. As ASEAN countries like Thailand shiŌ toward advanced manufacturing processes, the demand for low‐skill labor will conƟnue to decline in favor of those with the skills to oversee and maintain the robots that parƟcipate in the actual manufacture of parts. AutomaƟon will therefore replace these workers, while the jobs that are created will require skills that low‐skilled workers lack. Presently, automaƟon is not uniform across ASEAN countries or even across companies. Honda, for instance, has not automated its manufacturing processes in ASEAN because labor costs are low enough that the up‐front costs of automaƟon cannot yet be jusƟfied — both to produce and purchase — since the motorcycles produced in ASEAN are largely sold within the region. However, in Japan itself, Honda has begun the automaƟon process at its Kumamoto factory. As labor costs increase in ASEAN, and the costs of automaƟon decline, Honda may well choose to automate across its Southeast Asia plants too. Other companies in Southeast Asia see an opportunity in adopƟng automaƟon early. Electronics manufacturer OMRON has opened an automaƟon center in Singapore for $10 Million, enabling their clients to test automaƟon‐based soluƟons there. Moreover, jobs that are not lost will likely change significantly, similar to how jobs of bank tellers changed with the advent of ATMs. It is projected that employment in manufacturing will shiŌ to maintaining the machines that manufacture goods, while work at call centers will likely be replaced by digital AI. This in turn demands different skills. Workers who are more akin to electricians or soŌware engineers will replace those whose work is largely repeƟƟve.  According to the ILO, automaƟon will increase producƟvity and quality consistency across industries. AutomaƟon will keep workers safer than they were in the past, and will result in greater export capacity – further expanding the economies of ASEAN states. Nevertheless, for those who fear the disrupƟon new technology brings, one should look at AT&T and Apple. At its height, AT&T employed over 758,000 people; Apple employed over 76,000 people. Yet, according to Andres Oppenheimer’s book The Robots are Coming Apple’s creaƟon of the App Store has created 1.9 million jobs since 2007, inclusive of those employed by applicaƟon developers. The jobs and skills requirements will undoubtedly change, but there may very well be more opportuniƟes for the majority to succeed. The challenge of ASEAN governments will be to anƟcipate these changes and enable their domesƟc consƟtuents to acquire the skills necessary to flourish in a high‐tech environment.  Some states have already begun to take acƟon. Singapore’s Salesforce vocaƟonal educaƟon program and heavy investment in lifelong learning has enabled its workforce to adapt and Singaporean companies are therefore able take advantage of new technology. Meanwhile, according to The Jakarta Post, Indonesia has invested $719 million in vocaƟonal educaƟon to develop the skills of 2 million unemployed Indonesians in fields like coding, markeƟng, and hospitality. IncenƟvizing lifelong learning and greater funding for vocaƟon and technical educaƟon are excellent starƟng points for ASEAN member states, but will not be enough on their own. Today’s technological disrupƟon is different in scope and magnitude than was the advent of computers in the 20th century. The pace at which innovaƟon and adaptaƟon is much faster. While technology complements some jobs, it renders others obsolete. ASEAN cannot avoid the disrupƟon these new technologies will cause. The disrupƟon can be posiƟve, however, to the extent ASEAN’s governments and private sectors are able to interpret and adapt to them.  “Jobs that are not lost will likely change significantly, similar to how jobs of bank tellers changed with the advent of ATMs… Workers who are more akin to electricians or soŌware engineers will replace those whose work is largely repeƟƟve.” William “Whit” Lloyd is a parƟcipant in the East‐West Center in Washington’s U.S.‐Japan‐Southeast Asia Partnership in a Dynamic Asia Fellowship. He can be contacted at lloydw@eastwestcenter.org 

Automation challenges in Southeast Asia

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Automation challenges in Southeast Asia

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