ASEAN at the doorstep of the fourth industrial revolution

by: Mark Lee, Senior Fellow at Jeffrey Cheah In­stitute on Southeast Asia

In 1971, the renowned computer scientist Alan Kay quipped that ‘the best way to predict the future is to invent it’. Approaching half a century later, we might have wished that inventors had not taken his call to action so feverishly. Both overwhelming and inspiring at once, ours is now a world of mind-bending possibilities in robotics, Artificial Intelligence (AI), quantum computing, genome editing, autonomous vehicles, 3-D printing, energy storage, nanomaterials and neuro-technological brain enhancements. Hailed as the fourth industrial revolution, these interconnected technologies cut across physical, digital and biological boundaries, sparing no industry in its transformative wake. Transitions to new manufacturing processes of previous revolutions generally lasted 30-40 years each, from the first (steam power and mechanization) to second (electric power and mass production), and then, the third phase (digital automation) – in other words, we live in exponential times.

In the thick of this global strategic shift, ASEAN’s attractive economic storyboard is accentuated by propitious demographics and digital access. More than half of ASEAN’s 629 million population are below 30 ; 90% of 15-24 year olds are deemed as digital natives who grasp computing and the internet as second nature. Literacy rates standout at 94% while access to the web is also high at 90%, supported by established infrastructure.

According to estimates, capitalising on these opportunities would see the new digital economy create an additional USD1 trillion of GDP, making up close to one-fifth of ASEAN’s projected GDP of USD 5.25 trillion in the year 2025. Aside from businesses, governments are hot on this trail. In February 2017, Singapore’s Committee for the Future Economy outlined 7 strategies to propel its technological leap, followed by Malaysia’s launch of the world’s first digital free trade zone (partnering Alibaba) in March and the unveiling of Indonesia’s 2020 Go Digital Vision in April.

Behind these promising assertions lie a host of challenges which also present valuable openings for policy development and reform. 4 areas come to mind: jobs, education, regulation and sustainable development.

Where have all the jobs gone?

The economic dislocation to come from technological unemployment is top on the agenda of policymakers and rightly so. The International Labour Organisation (ILO) forecasts that Indonesia, Philippines, Thailand, Vietnam and Cambodia may cede 56% of its jobs to automation in the next few decades. In Malaysia, Khazanah Research Institute puts the number at 54% and crucially points out that it is not foreign workers but Malaysians (making up 90% of semi-skilled jobs) who are at risk. Another lens to view the impact of technology on jobs is by looking into the platform economy where the Upworks, AirBnBs, Ubers and other networked-based firms have eased into our daily lives. While organised sharing of resources have been around for millennia, the difference today is how the internet, mobile computing, clouds, data analytics and payment technologies have coalesced to power digital ‘winner-takes-all’ platforms for seamless buyer-seller experience.

Meanwhile, the central question on labor remains – are the freelancers and drivers self-employed or staff of platform firms? The adverse impact on worker protection (social and financial security, preventing discrimination from open, subjective ratings) and wages in certain industries (race to the bottom in a world of globalised independent contractors), are but a few of the complexities regulators grapple with.

Beyond reskilling, a major shift in education policies and investments in building cognitive and social intelligence from early to tertiary stages is the way to go. This is as much about digital ideation abilities as it is about reversing the unintended potential consequence of widening inequalities from advances in technology. In tertiary education, ASEAN needs to rebalance its profile from social sciences, business and law towards engineering, health and natural sciences (see chart), spawning novel careers in areas such as Artificial Intelligence (AI) engineering, drone designing, nanotechnology and synthetic biology.

Chart: Students in tertiary education by field of study

Intra and inter-ASEAN talent mobility and collaboration among ASEAN and in particular Chinese universities could be strengthened by forming institutes for joint-research on a digital economy cluster. China is a leading global hub for AI and an estimated 48% of its GDP in 2035 will come from technology, creating 415 million new jobs (BCG and AliResearch, 2017).

Educational approaches should remain creative and flexible, exploiting borderless Massive Online Open Courses (MOOCs) and the rise in social learning and design thinking (inter-disciplinary, collaborative and experiential methods). At the national level, a policy priority is to nurture a thriving innovation ecosystem for scientists, academia, technopreneurs, financiers and regulators within a well-coordinated whole of government approach. Here, the nascent Innovation Labs model by the Sunway Group in Malaysia is instructive.

 Of more regulatory discretion and maybes

In assessing the platform economy and labour quandaries, the ILO concludes that ‘simplistic and hastened responses aimed at deregulation and shrinking workers’ protection must be avoided if opportunities stemming from future technology-enabled developments in the economy are to be seized by everyone’. Put another way, let’s size up the situation and wait and see. To be fair, governments and regulators face unprecedented complexities in seeking win-win outcomes within technologically confounding spaces, be it for genome editing, data (as the new ‘oil’ for the digital economy) or digital currencies (ascendency of BitCoins and now, Initial Coin Offerings). Ethics, governance, competition rules and the protection and safety of workers and consumers are dominating concerns.

There are 3 possible ways to tackle this:

  • Self-regulation mechanisms in platform firms could be strengthened – after all, these entities have only grown because of the trust and confidence of users. Some focal areas include social security for ‘self-employed’ workers, crowdsourced feedback for quality control and robust complaint reporting and resolution.
  • With enormous data churned by platform firms, now more than ever governments are poised to fast track digital modernisation. Algorithmic regulation and RegTech are excellent starting points.
  • Looking for clues in industries where regulation has unleashed rather than suppressed the potential of technology. Mobile Financial Services (MFS) offers insights where technology risks are fused with commercial, regulatory and political risks, and well managed in totality for effective financial inclusion. While Kenya’s M-PESA serves as poster child to leapfrog traditional banking in under-developed markets such as Myanmar, ASEAN policymakers should take heed of failed attempts by Kenya’s neighbours to replicate MFS. Culture and history are critical inputs – the peoples of Myanmar have lived through 2 demonetisations in 1961 and 1985, and a severe banking crisis in 2003. Nevertheless, once the technological foundations for mobile money are well laid it can be upscaled via Application Programming Interfaces (APIs) to catalyse startling product and delivery innovations across the microfinance, insurance, energy, health, transportation and agriculture sectors.

Technology as backstop for further environmental degradation

Social inclusivity and environmentally sustainable economic growth – these sum up the United Nations’ (UN) 2030 Agenda for Sustainable Development. Our planet is already at the breaking point, requiring intensive care for nature’s life-support systems of climate, oceans, soil and biodiversity. What about ASEAN’s heartbeat? The region’s resource-based economies, vast coastal areas, rich biodiversity and geological hazards render it highly vulnerable to unabated climate change. For instance, 40% of lands in two-thirds of ASEAN (excluding Singapore) already suffer from ‘severe or very severe’ human-induced degradation (Food and Agriculture Organisation, 2011). Based on current development trajectories and practices, the odds are clearly stacked against ASEAN.

Here, new technologies offer solutions to significantly raise the bar of environmental protection and advancement. To name a few:

  • Automated management of irrigation and energy production using drones;
  • Effective enforcement, surveillance and global monitoring applications for fisheries and forestry activities (illegal fishing, logging and poaching) via AI systems, remote sensing and advanced satellite technology;
  • Precision farming using machine visioning to enable facial recognition of individual cows in tracking large herds; and
  • A carbon asset management platform based on blockchain (recently launched in China).

For sure, such technologies are promising, but do not come easy. Governments will need to digitally outsmart illegal markets, build systemic safeguards and stand vigilant to tackle the malfeasance of environmental data and digital threats (e.g. ransomware, dark web).

Additionally, ASEAN’s economic planners could place greater focus on how to transcend the current GDP numeric. Besides the existing ASEAN score-card on Environmental Performance Index, other proposals include accounting for natural capital based on the UN system for environmental-economic accounting and broader national well-being policies. Such new measures will be key to tracking and reinforcing the use of technology for greater environmental and societal impact.

At the doorstep to the next technological revolution, ASEAN leaders may choose to sweep what is coming under the mat of short term imperatives, put one foot in or wholly enter into an inventive world where technology and unpredictability reign supreme. The ASEAN of 2030 hangs in the balance of those very steps.

By Mark Lee | 30 May 2017 

Mark Lee is the Senior Fellow at Jeffrey Cheah In­stitute on Southeast Asia at Sunway University.