Competitiveness and the 4th Industrial Revolution

In the latest Global Competitiveness Report (GCR) of the World Economic Forum (WEF), the Philippines overtook four ASEAN members to push for higher ranking, largely made possible by the WEF’s adoption of a new methodology taking into consideration the purported coming of the Fourth Industrial Revolution (4IR).

The shift in assessment tools is the first change after four decades of running the competitiveness report. The WEF is giving significant recognition to what it perceives to be a new industrial revolution marked by the “exponential acceleration of computing technology.”

The WEF defines the first three industrial revolutions to be the early 19th century era of rail, mechanization and steam; the electricity and mass production revolution in the late 19th and early 20th centuries; and the emergence of semiconductors, computers and networks since the 1960s.

“Month after month, new systems, applications and business models surface and then explode into the market, offering radical new solutions in domains such as health and transport, even while disrupting long-established businesses and throwing countless people out of work,” according to the WEF.

In particular, the WEF acknowledges technologies such as big data, machine learning, blockchain, the Internet of Things, advanced materials, quantum computing, and 3D printing to be driving all the changes that are happening around us.

Inevitable shift

There is still so much uncertainty about how this future will be, and how this change will impact the lives of people, nations and the world.

One thing for sure, though, an inevitable shift is happening at this very moment and the winds of change are undeniable, whether we talk about a return to protectionism and “nationalism” because of a trade war resurgence, or increasingly devastating typhoons and other natural occurrences, or internet hacks that have altered politics and democratic elections.

The WEF sites a McKinsey & Company study that says the technical feasibility of automation in predictable jobs like welding and soldering in a production line, or food preparation, or packaging of objects is at a high of 78 percent considering the currently available technologies today.

In other words, companies can easily replace human labor in the above jobs with intelligent equipment, and what is keeping them from doing so would just be the financial feasibility. We’re seeing this now in the automotive industry where some factories are already claiming 98 percent automation.

Even traditional automakers are fearful for their future as technology continues to evolve in favor of new kinds of mobility carriers, like those that don’t have a set of four tires and can fly. Technically perceptive start-ups are indeed revolutionizing many aspects of manufacturing.

Future of work

The University of Oxford’s Carl Benedikt Frey and Michael A. Osborne and Morgan Stanley Research have a list of jobs that are most threatened by automation. Those in the high probabilities (81 percent and up) include loan officers, receptionists and clerks, paralegal and legal assistants, retail salespersons, taxi drivers and chauffeurs, security guards, and cooks in fast food chains.

While there is still disagreement on what exact jobs or countries will be most affected, governments and the private sector are being urged to invest in better data gathering to be able to respond more thoroughly.

For sure, these changes will disrupt not just lives, but even society. And for this, it will be the responsibility of governments and companies to find ways of mitigating the dislocation of livelihood, and as others predict, training people in new jobs that may be needed.

For the WEF, knowing how agile a country is in coping with the coming 4IR is now part of how competitiveness is being rated. And giving the Philippines credit for its market size, labor market, financial system, and business dynamism is flattering.

Improving governance

The WEF’s warning on the Philippines’ biggest weaknesses regarding institutional quality, particularly public sector inefficiency and predominance of corruption, needs to be seriously considered, if future competitive rankings are to improve.

The passage of the Anti-Red Tape Act and the Ease of Doing Business (EODB) Act of 2018 are steps in the right direction, but these must be accompanied by implementing rules that brook no dilly-dallying or procrastination. We have too many laws, but too many loopholes make them ineffective.

These two laws, for example, are still waiting for the appointment of an Anti-Red Tape Authority (ARTA) director general, which would then pave the way for the implementation of the law.

The EODB law sets a time frame for processing government transactions, but without a functioning ARTA, it would be difficult to expect compliance. The EODB Act prescribes simple transactions to be completed within three days, complex transactions within seven days, and those that are highly technical within 20 days.

ARTA will need to issue guidelines classifying government transactions, as well as other initiatives like a uniform business registration and license renewal form, one-stop shops at the local government level, but with all data in one central business portal, limitation of signatories in getting permits, and stiffer penalties for non-compliance.

ARTA would initiate investigations and file cases against agencies or individuals that impede the implementation of both the anti-red tape and EODB laws. It would also implement a rewards system for those that do well.

Should an ARTA director general be named within the year, the earliest time that the EODB law can be implemented is second quarter of next year. The law was signed in May this year. We’ve wasted about a year already. Need I say more?

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