Is the Kingdom prepared for Industry 4.0?

Donald Lee

Enterprises and government need to do more to prepare people for the radical transformation in the economy because of disruptive technology in manufacturing that will displace millions of low-skilled, uneducated workers

Enterprises and government need to do more to prepare people for the radical transformation in the economy because of disruptive technology in manufacturing that will displace millions of low-skilled, uneducated workers

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While the EBA has dominated headlines, a more impactful disruption might catch the Kingdom’s economy wholly unprepared. Automation and artificial intelligence has made significant advancements in the manufacturing sector and is forecasted to take over a majority of low-skilled labour jobs in the next two decades.

In Cambodia, the manufacturing sector is primarily driven by textile, clothing and footwear production. Experts say smart robot technology can self-learn and is replacing one dimensional robot technology that once dominated the factory floor.

Technological disruption might prove to be more traumatic than losing the tax-free European Union entry privilege as it has long-term ramifications on the economy.

Automation has already taken over Asian manufacturing, most notably in South Korea and Japan. Experts have long predicted disruptive technology would make its way into Cambodia and affect the garment manufacturing sector that accounts for almost a tenth of the nation’s gross domestic product.

While enterprises and the government might seem oblivious to the onslaught of technology where some million jobs could be lost, policy-makers and the industry need to implement training skills that emphasise technical knowledge, foreign language classes and creative thinking to a youthful workforce.

“The US is already looking into automated sewing and other technologies of inserting fabric at one end of a machine and receiving a completed garment at the other end. This alters work process and creates opportunities to take investment back to the US,” says Yuttana Sipsarnvith, secretary general of Thai Garment Manufacturers Association, at International Labour Organisation’s roundtable of experts on the effects of technology on ASEAN countries.

ILO, part of United Nations, predicts that 88 percent of jobs in Cambodia’s garment manufacturing sector is at high risk of being sacrificed as a result of automation.

“This could impact almost half a million sewing machine operators who primarily perform repetitive and manual tasks,” ILO says in a report.

The ramifications of this disruption is not only limited to the economy. A vast majority of those in the garment industry are young females who send money to their families in the provinces.

“The effects of automation would be mostly felt by young female workers aged 15 to 24. In fact, women are 50 percent more likely to lose their jobs than men,” the report shows.

Once thought of as science fiction, the fully automated manufacturing facility is becoming a reality as witnessed in Cambodia’s most important trading partner China.

Taiwan-headquartered electronics manufacturer Foxconn Technology Group, the primary assembler of Apple devices in China, plans to fully automate 30 percent of its production next year.

From 2012 to 2016, the company laid off 400,000 workers from its manufacturing plants by installing sophisticated robotics technology.

The government’s reaction to the EBA withdrawal procedure was to emphasise diversity in the economy. Much of these initial policies will aid economic transition as Industrial Revolution 4.0 comes into fruition.

“Considering that Cambodia is heavily reliant on this sector, it is important to prioritise economic diversification, enable job creations and economic growth in other sectors to avoid significant setbacks in socio-economic development,” ILO writes.

Why is Cambodia lagging in terms factory automation, technology adoption?

Enterprises here rank at the bottom of the spectrum in research and development compared to its Southeast Asian counterparts. Statistics also show that education and skills level are low among ASEAN nations. But the main factor, at least for the enterprises, is the cost of new technology that does not justify its implementation.

This is compounded by increasing minimum wage and cost of operations. However, tech costs always reduce when supply meets demand while labour wages are driven higher as the economy develops.

The tipping point is close and policy-makers should institute measures to prepare an eight-million strong workforce for the realities of a transforming economy where low-skilled labour would be eliminated in the near future. The government and education sector must promote secondary degrees and skill-based training in technology.

 

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