Asean needs to think again

09 September 2017
Originally published in The Star Online

AFTER the deserved 50th anniversary celebrations, Asean needs to take a long, hard look into the future, and to be ready for it.

The trouble is the future is here. And Asean might just fall short.

In my contribution to the book “Asean FutureForward: Anticipating the Next Fifty Years”, published by the Institute for Strategic and International Studies, I highlighted two developments that threaten to tear up the script on Asean’s future shape.

Leaving aside the definite rise of China which will, planned or otherwise, rewrite and disrupt assumed intra-Asean relationships, I would like in today’s column to draw attention to the other deterministic development – Digitisation.

Not too many months ago, studies and surveys were being done – including by the private sector – on foreign investments planned in such countries, predicated also on the large, integrated Asean market of 630 million people.

Yet even now, intelligent robotics, particularly robotic manufacturing, is readily available to displace human labour. What happens then to the expectant millions waiting to attain employment from the huge investments that would, if they did come, be looking to more efficient, perhaps even cheaper, means of production afforded by robots and artificial intelligent manufacturing?

What would happen also to existent MSME (micro, small and medium) manufacturing employment, that would be displaced by digital means of production, and to the competitiveness of that sector – bearing in mind it is hobbling along looking for access to finance – against products whose quality and cost could sweep them out of business?

The level of underemployment in economies such as Indonesia is high. Without new jobs with new investment, expectations of growing populations are going to be dashed. Employment in the MSME sector in Asean as a whole is overwhelming, reaching over 90% in some member states.

Asean is sitting on a socio-economic time bomb which could blow apart its economic integration assumptions and, indeed, its much vaunted political stability. Already there are so many social and political forces threatening Asean together and separately. If there are no jobs as well and there is economic deprivation, the situation becomes explosive.

All this is just in relation to the challenge of the digital economy to manufacturing employment. The challenge actually cuts across all sectors, including services. A study in Malaysia across all sectors puts the probability factor of “computerisable jobs” at 0.8 for unskilled and semi-skilled jobs. Where the extant of such jobs is greater in less developed Asean economies, the threat obviously will be more extensive.

Of course new technologies can also facilitate growth through greater efficiency and productivity, but the main risk I am emphasising is to employment. Even if MSMEs get on to e-commerce platforms or are able to link up with the supply chains of large and globally connected companies – which remains a huge struggle for them across the region – the competition among them demands better quality and lower cost products and services which imply greater application of labour-displacing processes.

It is also true new jobs will be created in the digital economy. When motor cars, for instance, replaced horse coaches in the 1920s, new jobs in automobile manufacturing, car repair, mass tourism, road building and the petrol business were created. The same will follow the advent of new technologies in the digital economy.

However, investment in data and digital infrastructure is first essential to support innovation, growth and jobs in the new economy. Such investment is limited everywhere in the region, with Singapore being the striking exception, and the less developed economies of Myanmar, Indonesia, Laos, Cambodia and the Philippines way behind.

Entrepreneurship is an important part of the digital economy, but what is essential is not present – a regulatory environment in which businesses can thrive and fail, with easier access to finance for small innovative firms and lighter procedures for start-ups and lower failure costs.

The new jobs – by no means in numbers represented in conventional economy activity today – that will be available too require skills not delivered by current education systems across Asean.

Overhaul of education systems takes time. The least expressed change that must take place, because of political correctness, is the disposition across Asean among the political establishment against argument and questioning. But cognitive skills are the most needed in the digital economy.

Apart from this, other specific abilities are also essential.

The Web Analyst has to have digital and marketing knowledge apart from the skills of an analyst. The Business Intelligence Manager has to have a background in computer engineering, economics or mathematics. Other demanding sets of skills are required for the Digital Analyst, Virtual Reality Architect or Virtual Data Scientist.

And we are just talking about high level, new job categories. Lower down the scale, the upskilling requirements are a struggle to meet among those doing less skillful jobs. Serious retraining is required. In Asean today, only Singapore has an effective upskilling retraining system to meet the needs of the digital economy.

In America, it has been found, actually three quarters of the jobs lost among the middle and working classes are due to inability to move up the new skills ladder. (Only a quarter is due to imports which President Trump so likes to blame).

The magnitude of the challenge posed to Asean by the digital economy is huge. It is a game changer which present Asean integration planning fails to even begin to address. It is a sweeping revolution which the lackadaisical Asean way of doing things will not be able to contend with.

It requires new thinking in Asean if Asean is going to be the way forward. There needs to be a regional social and education policy direction, if it is not going to be left to individual Asean countries to face up to the challenge with different levels of adequacy, or rather inadequacies.

The disparities in Asean will otherwise widen. The centre will then not hold.

After 50 years, Asean cannot live in the past when the future is upon it. Many cynics have often said Asean is only an option to its members – when everything else fails. The more optimistic have always contended that Asean to its members is the first, if not exclusive, choice.

In the already current future if Asean does not plan to face the challenge of the digital economy together, it is likely to become just an addendum.

Tan Sri Dr Munir Majid, chairman of Bank Muamalat and visiting senior fellow at LSE Ideas (Centre for International Affairs, Diplomacy and Strategy), is also chairman of CIMB Asean Research Institute.

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