Automation not death knell for emerging markets


Paul Chan Poh Hoi

Published: 4:00 AM, July 17, 2017

While the rise of automation may have some adverse impact on the outsourcing of labour to developing nations, it would not preclude economic development entirely (Economic model that Asia has used for decades is now broken; June 28).

An automated factory would produce savings in nations in which the cost of labour is high. China, where manpower has become more expensive in recent years, is no exception.

We must, however, question the assumption that robots will always provide an unbeatable cost advantage over humans. In industrialising economies with low wages, the edge robots have is narrower.

The cost equation becomes even less clear-cut after factoring in the capital expenditure and infrastructure required for full automation, against the low price of shipping through international supply chains.

We should also consider demographic trends and how they relate to consumption patterns. Developed nations are ageing and shrinking, whereas residents of developing countries with growing populations will represent an ever larger slice of worldwide consumers.

In these markets, goods produced in an automated factory overseas might still be priced beyond the reach of the working classes, creating space for more affordable local products to thrive.

Even if export manufacturing were to falter, the size of these domestic markets could be sufficient to support and drive development. This path is slower, but is nonetheless an alternative.

Lastly, the transition to complete automation gives emerging economies a window of opportunity, perhaps a few decades, to progress before the export-centric model becomes obsolete.

That is not to say that developing countries can ignore the ramifications of automation and the potential loss of outsourced industry. Governments must be prepared to adopt alternative and varied strategies on the road from Third World to First.