Dr Kogila Balakrishnan
Director, Client and Business Development (East Asia) WMG, University of Warwick
As part of the ASEAN community, I was delighted to see that ASEAN celebrated 53 years of existence this year. A grouping with approximately 650 million people, ASEAN is one of the most vibrant and diverse economic caucus in the world. ASEAN’s GDP growth for 2019 was 4.5%, with GDP per capita distributed unevenly between Singapore at around $64,000 while Myanmar at the lowest with $1,450 per capita. 2 Most of these countries have had a gradual transition over the years from the agricultural sector to manufacturing, leading to greater automation. In 2019, total inward foreign direct investment into ASEAN totalled $USD 154.7 billion, with services forming ~65% and manufacturing 35%. In the past decade however, ASEAN countries were seeing signs of economic trouble, with some countries challenged by economic growth mainly due to internal political crisis, but also weaker production and trade protectionism, global economic threats and geopolitical risks. These phenomenon are now predicted to be further aggravated by COVID 19 sending many ASEAN countries into negative growth, massive unemployment and increased poverty.
The ASEAN work force has an unemployment rate of 3.8%; and the group has one of the highest youth population ratios of around 60%. The diversity of skills varies hugely across these countries. Singapore is at the top of the league followed by countries like Malaysia, Thailand, Brunei and Philippines. Indonesia and Vietnam have been rapidly catching up especially in industrial and technology based skills since the 1990s, in line with their rapid focus on automation and digitization. The Indochina countries of Laos, Myanmar and Cambodia are still lagging and plagued by internal and external political, economic and social crisis. These are a few of the initiatives in place, besides the many other ASEAN platforms actively seeking to address ASEAN’s need to move up the technological value chain, while at the same time develop a skilled work force that is able to embrace new technologies in services and manufacturing. Figure 1 describes the increasing number of people with internet usage within ASEAN countries, with a positive sign of increase for all these countries, with a few like Vietnam, Indonesia and Philippines on a faster trajectory than others.
Figure 1: Percentage of population using INTERNET within ASEAN for 2019
Source: https://www.worldbank.org/
Within ASEAN, there is strong culture to learn, to invest in education and training and to move up the value chain. Many see education as a key to moving up in social status and to free themselves from poverty. Many of these countries have strong government led policies that encourage education. Primary education is compulsory in most countries and the states invest in secondary and tertiary education. Many of the ASEAN governments promote a strong state-led policy that provides scholarships to capable students to undertake Masters and PhD in-countries abroad in STEM and other critical fields. Private sector and industry led training and R&D investments are less rigorous, though there is a strong government push for industries to invest more into innovation and skills development through greater incentivization.
Some of these countries see innovation as increasingly important as part of skills development and a pathway to economic success. Figure 2 illustrates the numbers of patents produced by ASEAN countries for 2019 with Singapore leading, but others like Indonesia, Malaysia and Vietnam show an accelerating trajectory. In a recent UK ASEAN Business Council (UKABC) webinar session, it was mentioned that there is a greater need for the work force to have an innovative and entrepreneurial mind-set. During the session it was highlighted that organisations are looking for digital-based 4 values and skills in areas such as data analytics, cyber security, but also in soft skills such as in supply chain, procurement, social media, customer relationship management, business development, sales and marketing and change management as part of their recruitment criteria.
Figure 1: Number of patent application per resident for ASEAN (1990-2018)
Source: https://www.worldbank.org/
However, there is an open question as to how far the COVID crisis will negatively impact the aspirations of the young generation. It is quite clear that ASEAN was already aspiring for a path to embracing digitization. This is reflected in the various platforms for such purposes, such as the ASEAN Digital integrated framework Action Plan (2019-2025), and the Guideline to skilled labour in response to digitization. Governments across ASEAN countries are boosting the uptake of technologies across all firms and individuals, ensuring people have the skills to make the best use of them, and putting in place the right infrastructure, macroeconomic and regulatory conditions to enable their economies to adapt to and benefit from the new digital reality. The new norm may require a rapid transformation in changing most work to be done digitally. 5 However, is the ASEAN workforce geared up for these challenges and is the rapid upskilling within a short duration of time sufficient to meet the demand?
COVID was instrumental in exposing the digital gap and how much needs to be done to upskill the ASEAN workforce. Several issues have become apparent. First, only a fraction of the population, the knowledge workers, and those who were able to have access to high speed internet with good broadband coverage and access to digital equipment and platform were able to fully work. Many others lacked the skills, access to digital infrastructure, and exposure to technology. It was apparent that schooling online from home was not possible, even in countries like Malaysia that has 80% internet subscription, as many did not own a desktop or laptop and the broadband speed was insufficient for quick or large downloads. Teachers were not trained for this purpose and many of them did not even know how to use the application and instead resorted to WhatsApp as a learning and teaching tool. Next, learning a new skill is hard and more so if it is highly technical and requires critical and analytical thinking. Next the level of investment that can be allocated for retraining and upskilling. How much can companies and governments afford to allocate for retraining? As digital usage increases, there will be other issues: such as regulations, ethical practise around the digital environment, access and handling of data, which all requires training.
What about the quality of skills, level of autonomy and trust as well as diverging cultural norms in organisations which are all important to enhance competitiveness. If the pace of digitization does not become commensurate with the pace of upskilling and training, this may severely impact productivity and cost to the overall economy. In 2016, the World Bank reported that there is typically a gap between SMEs and large firms in the use of the Internet, with a larger share of large firms operating websites, selling online and accessing broadband technologies than for small firms, regardless of a country’s level of income. Further, ASEAN countries are more susceptible to job losses due to over dependency on services rather than manufacturing. The service industry is much more volatile, creates less jobs and operates mostly in high skilled sectors. The jobs can be moved around easily and may vanish more quickly than a robust manufacturing sector which is harder to develop and takes longer to create, or relocate.
Hence, what can ASEAN countries do to ensure the future of their workforce? There are various initiatives and platforms that already exist within ASEAN represented by various stakeholders continuously debating these issues. It is important to ensure the future of the ASEAN workforce as it is predicted that the ratio of ASEAN youth being in employment is 6.5 times less than in Europe. First, ASEAN countries should learn from others and continue to have a diverse economy that encompasses manufacturing, agriculture and services. This is essential as part of embracing economic complexity that provides a wider portfolio of products and services for countries during difficult times. Second, ASEAN countries have to continue to invest in digital infrastructure, advanced manufacturing technologies, and in alternative energy sources, which are all critical components to industrialisation and job creation in high technology sectors. At the same time, it is also important to invest in cyber security capabilities for digital security and privacy that is needed to protect the digital business environment. There should be a desire to rethink the existing education and training model, where it could be more flexible, shifts in the duration of courses, quicker turnover and affordability. Perhaps, on-the-job training, apprenticeships and opportunities with multinationals and transnationals should be increased to obtain broader international and professional best practise. ASEAN countries should put more emphasis on creation of dynamic industrial and technological clusters, the likes of successful clusters such as MIT and Cambridge where industry, government, research organisations and academia can co-exist to support each other, creating a hub for a continuous learning environment, but also the source of solving hard industrial problems and delivering innovation.
These are difficult wish lists, an aspiration that requires commitment and investments from various stakeholders from government and businesses. As it is, it is hard to close the digital divide, skills gap, and pace of industrial and technological advancement between the ten ASEAN members. Further, the increasing internal political challenges and external security and economic threat facing ASEAN countries may further make achieving these goals challenging. However, if the ASEAN nation wants to continue to be a source of a highly skilled workforce, leap-frog competitors and be at the forefront of technology, it is important for the ASEAN nations to continue to invest in education, training and capacity development, which are all vital to producing a 7 workforce that remains competitive, innovative and productive leading to sustainable economic development.
References:
Eijas Ariffin, ‘What are the effects of automation on the ASEAN workforce?’ The ASEAN Post, https://theaseanpost.com/article/what-are-effects-automationasean-workforce, 23 January 2018
Digitize ASEAN 2018 to examine the impact of digitalisation on ASEAN development, NEWS, Singapore Business Federation, https://www.sbf.org.sg/digitize-asean-2018- to-examine-the-impact-of-digitalisation-on-asean-development
Sarah Box and Javier Lopez-Gonzalez, ‘The Future of Technology: Opportunities for ASEAN in the Digital Economy, Global Megatrends: Implications for the ASEAN Economic Community’ https://asean.org/storage/2017/09/Ch.2_The-Future-ofTechnology-Opportunities-for-ASEAN-in-Digital-Economy.pdf, 2017
World Economic Forum, https://www.weforum.org/reports/asean-youth-technologyskills-and-the-future-of-work