In a joint report by the WEF and Asian Development Bank based on the International Labor Organization’s estimates, 56 percent of jobs in five Southeast Asian countries, including the Philippines, are at high risk of automation in the next few decades. Legacy countries need to avoid getting squeezed between more advanced leading countries, which can offer more advanced manufacturing, and nascent countries that can offer lower cost labor.
BANGKOK: The realization that hit with a sting while attending a conference in Thailand is that despite the political issues they have (“we only have one-person government today, the Prime Minister since his cabinet and the parliament will open July still”), Thailand is serious about catching up. In fact, it has turned into an obsession. What with the US-China trade war, Thailand hopes to secure a place to benefit from it by being the chosen locator of US industries quitting China and to supply what the China market needs domestically. This obsession to catch up is via Industry 4.0 (I 4.0).
Industry 4.0, or the Fourth Industrial Revolution, “is a name given to the idea of smart factories where machines are augmented with web connectivity and connected to a system that can visualize the entire production chain and make decisions on its own. The trend is towards automation and data exchange in manufacturing technologies which include cyber physical systems (CPS), the Internet of Things (IoT), the Industrial Internet of Things (IIoT), cloud computing and cognitive computing.”
Thailand 4.0 (TH 4.0) is all about innovation and data connectivity. The key components are smart factory (automated at factory floor); cyber system; enterprise automation system; data and connectivity (IOT); cloud computing (enterprise info system to cloud). It is physical, cyber, cloud and cognitive computing (AI). As Supachai Panitshpakdi, the decision point on TH 4.0 is simple — if Thailand does not embrace I4.0, “we will be crushed by it.” He likewise referred to two global trends: financial and the Middle East, both of which are not favorable. For the financial, an inverted yield curve is a precursor of a recession. In relation to the Middle East, the two important straits in the world — the Malacca and Hormuz straits — are the key to global financial health because they could determine the price of oil.
Then there is the “Made in China 2025” strategy. It is a strategic plan announced by Chinese Premier Li Keqiang in May 2015 where “China aims to move away from being the world’s ‘factory’ (producing cheap, low-quality goods due to lower labor costs) and move to producing higher value products and services. It is in essence a blueprint to upgrade the manufacturing capabilities of Chinese industries.” The goals of Made in China 2025 include increasing the Chinese-domestic content of core materials to 40 percent by 2020 and 70 percent by 2025. The plan focuses on high-tech fields, including the pharmaceutical, automotive, aerospace industries; semiconductors, IT and robotics, which are presently the purview of foreign companies.
It is a hit with a sting because that would mean the Philippines getting its act together fast, changing our mindset and embracing Industry 4.0 in one act. When we are just at the ease-of-doing-business level and the same has not taken root locally, we will again be laggards if PRRD does not create an Action Team for I 4.0.
According to the World Economic Forum 2018 report, “Readiness for the Future of Production,” the Philippines belongs to the “legacy” countries category, or “those with strong production base today that are at risk for the future due to weaker performance in three areas: improving institutional framework, investing in human capital and boosting technology platforms.” In a joint report by the WEF and Asian Development Bank based on the International Labor Organization’s estimates, “56 percent of jobs in five Southeast Asian countries, including the Philippines, are at high risk of automation in the next few decades. Legacy countries need to avoid getting squeezed between more advanced leading countries, which can offer more advanced manufacturing, and nascent countries that can offer lower cost labor. Legacy countries, in particular, can accelerate readiness and transformation by utilizing the private sector more actively in tackling macro level challenges.” But the Philippines is not I 4.0-ready simply because the educational system is not producing graduates who can be trained for it. It is not ready because connectivity is at a paltry 60 percent capacity.
Thailand is moving to reposition itself as the hub for the Greater Mekong Sub-region (GMS) and the latter plus Thailand as the “mainland” of Asean. This repositioning strategy is essential to the development of its so-called Eastern Seaboard. “Thailand’s economic heartland on its southeastern coast is the new frontier. It is composed of the following provinces: Chonburi, Rayong and Chachoengsao. These provinces have been designated to become the country’s economic growth engine and — through their development as high-tech industry clusters — a hub for industrial, infrastructure and urban development in the entire region of the Association of Southeast Asian Nations. The Philippines as an archipelago has a vast eastern and western seaboards, but nothing has come out of it.
It was on June 28, 2016 that the then Cabinet of Prime Minister Prayuth Chan-o-cha formally approved the Eastern Economic Corridor (EEC) development in a bid to make Thailand’s Eastern Seaboard the next major economic zone of Asean. The three provinces in the southeastern coast have long been considered key industrial bases for the automotive, petrochemical and energy sectors, and represent over 20 percent of Thailand’s overall GDP. The initial cost of the project is set to be around THB300 billion ($8.5 billion), although the figure could rise to a whopping THB1.5 trillion over the next five years as infrastructure developments begin to take shape.
I 4.0 is not technology only but it is a concept of how automation can align with business strategies. I 4.0 is increased efficiency; lower cost; increased production; and increased innovation. The catalysts are clear-cut: find a good automation integration system and that requires technology (CORE); think long term and integrate innovations in the road map and have a human resource plan focusing on upskill, re-skill and multi-skill activities.
In the midst of all these developments, June 30 ushered in new administrations at the local level as well as the 18th Congress in the Philippines. A lot of eyes are focusing on the new blood and what they can offer viz “legacy political names.” Four young leaders are being watched more closely: Domagoso of Manila; Belmonte of Quezon City; Sotto of Pasig and Zamora of San Juan. Then there is Magalong of Baguio, Labella of Cebu City, to name a few. Would they lead the path to embracing I 4.0?
If in the 21st century, customer is king, in 22nd, information is king. Imagine if frontline services in
these local governments are all under a cloud computing protocol and citizen feedback is made in social media platforms and action taken is in real time? We just need a proof of concept, a model to go by and add value to it as it is adjusted to the needs of the locality.