Disruptive

The 51st Annual Meeting of the Asian Development Bank, hosted by the Philippines, ends today.

This meeting has been its usual whirl of conferences and seminars where delegates hear out experts and stakeholders. While this year’s conference focuses on the theme of inclusive growth, the discussions are all premised on the rapid technological changes sweeping the region.

We are in the midst of what is being described as the “4th Industrial Revolution.” Its driving force is technological change. Its principal characteristic is disruption.

Because new technologies are inherently disruptive, they defy prediction. In the previous industrial revolutions, change tended to be cumulative and therefore more predictable. Changed also happened at a much slower pace than what we see today, allowing institutions and policies more time to adapt.

Today, technological change is happening at a searing pace, causing disruptions that are very difficult to anticipate. They could swamp the institutions we rely on to keep our communities governed. They could cause displacements that will strain the social order.

At the heart of this 4th Industrial Revolution is artificial intelligence (AI). We are not just stumbling upon new machines, we are “breeding” machines that can actually learn. That is a shuddering thought: that machines could learn faster than humans could.

AI can do pretty sophisticated things, like personalizing medicine or untangling congested traffic flow. They can also perform some pretty mundane functions old technologies could not accomplish, such as detecting leaks in our water systems by measuring vibrations in the pipes or slight changes in water pressure.

As a general rule, AI should improve efficiency and productivity all around. Some economists calculate that emerging technologies could contribute as much as three pecent in additional GDP growth in the coming years. That is the upside.

The downside is that new technologies could quickly upend existing business models. A business model that seemed sound only a few months ago could suddenly become unworkable today. That throws awry all calculations of financial risks made only recently, putting banks in peril.

For instance, who would have anticipated that some of the world’s largest transport companies today would not own a single vehicle? Or for that matter, who would have anticipated that the most efficient booking networks for bed and breakfast would not have a single hotel room in its name?

In any enterprise, greater efficiency often translates into greater labor economy. How much labor dislocation will increased use of AI involve?

And what new skills might the emerging AI economy need? It takes about four years for universities to train people in a career or profession. In that same period, those careers and professions might be rendered obsolete.

It takes ages for new laws to pass the legislative mills or for government agencies to revise regulatory policies. But new businesses spawned by emerging technologies happen in an instant.

Take the case of the transport network services (TNS). For an uncomfortably long period of time, the LTFRB did not know how to regulate them. Our regulators insisted on regulating them with the same policies used to regulate old-style taxi operations. That led to much friction.

Before that, the LTFRB did not know how to regulate express ride-sharing operations. They were neither jeepneys nor taxis. Some were spontaneous outcomes of Viber-based groups seeking ride-sharing solutions to the infernal lack of adequate commuting solutions.

When neither the DPWH nor the MMDA offered any solutions to the horrible traffic congestion that now paralyzed Mega Manila, the Department of Finance stepped into the picture, inviting Jack Ma’s Alibaba to come in and provide a solution. Few doubt any AI-based solution Alibaba comes up with will bring some relief – although we still need to build more bridges over the Pasig River.

Ahead of that, most of us who need to drive around this tangled metropolis survive of Waze. We depend on this app more than we are ready to admit.

Industrial revolution

The ADB played a crucial role over the past decade in Asia’s emergence.

Today, Asia is the center of gravity of the global economy. The region is home to the two most populous economies, India and China, who also happen to be the fastest growing ones as well.

More than anywhere else, Asia’s economies have proven to be more adaptive to new technologies. This, along with the region’s demographic advantages, causes the remarkable achievement of the past generation.

Still, there is urgent need to disperse the rising prosperity. While hundreds of millions have been liberated from the grip of extreme poverty the past generation, hundreds of millions remain trapped. There is a need to redesign development efforts to bring the isolated communities into the mainstream of regional growth.

More and more, there is expectation the ADB should play a role greater than the traditional project financing institution it has been. It needs to be a nexus for sharing knowledge among its member-economies. It needs to be a channel for greater regional connectivity so that best practices and new insights are more broadly shared. 

The contingent of non-governmental delegates to the annual meeting is pushing for the ADB to assume greater accountability for whatever environmental damages its projects might cause. That is well and good.

But more important, the ADB should help the countries of the region collectively master that surge of technological changes happening. It should help keep us informed about the perils and opportunities presented, as well as the best practices each economy might adopt to ensure inclusive development.