The 4th Industrial Revolution (IR4.0) is not a far away dream as it is here at our doorstep if we wish to welcome it. Let’s refer to Richard Baldwin, who explained the new revolution in terms of unbundling. To Baldwin, professor of International Economics at The Graduate Institute, Geneva, there are different stages of unbundling in globalisation.
The first unbundling arose when countries specialised in producing a selection of goods and trade with other nations for different products.
This was during the time of the Industrial Revolution when international shipping made goods from faraway lands accessible locally.
The second unbundling came in the 1990s when ICT (Information and Communications Technology) lowered costs of idea dissemination and labour mobility. International separation of factories and offshore activities took place, known as the “global value chain (GVC) revolution”.
The third unbundling is where IR4.0 will take place. Face-to-face costs will decrease tremendously due to technological developments in terms of brain services and telerobotics.
These changes will enable workers to perform service tasks in another country without being physically there. It will enable labour services to be separated or unbundled from labourers completely. It goes beyond innovative goods but will emphasise on more advanced services to be traded and made available beyond a country’s border.
Malaysia has been successful in transitioning its economy from being agriculture-based to simple manufacturing and, to a certain extent, advanced manufacturing. As attracting FDI (Foreign Direct Investment) is important for all stages of development, we succeeded in attracting “transformative GVC investments by large corporations through the successful investment promotion strategies”, as highlighted in the World Development Report 2020 launched last week in Sasana Kijang.
It mentioned that Malaysia’s backward linkages with other GVCs is stronger than its forward linkages. Backward linkages indicate the value-added content by foreign companies in Malaysia’s exports, whereas forward linkages indicate the value-added content by Malaysia’s companies in foreign countries’ exports.
This suggests that our trade in value-added products is low, considering the nature of most of our exports, which primarily concentrates on commodities and electrical and electronic goods that are low in innovation and high in labour intensity. We need to gradually move away from such production, like in the past with our agriculture-based economy.
To date, many policies have been introduced to support the new era. In 2018, the Ministry of International Trade and Industry launched the National Policy on IR4.0, paving the way for us to become a highly advanced manufacturer in the next 10 years and a primary destination for high-tech investments.
To achieve this, labour productivity needs to grow and be supported by innovation and high-skilled jobs. The enablers include funding, infrastructure, regulations and talent. While funding and regulations are available and infrastructure being quite effective, talent is a concern.
In a survey by the World Bank in collaboration with Talent Corporation, 90 per cent of firms stated that Malaysian graduates need industrial training while 80 per cent of firms highlighted that university programmes do not reflect the current realities.
With the lack of highly skilled workers in the country, the problem is compounded by migration of workers out of Malaysia. In 2011, it was recorded that 10 per cent of highly skilled Malaysian workers had migrated abroad. They cannot be replaced by foreign workers who are mostly unskilled. Creating timely and appropriate TVET (Technical and Vocational Education and Training) programmes will not be enough. We need to educate students to be critical thinkers who can be innovators. Innovators need creativity and subjects like philosophy, arts and literature fuel thinkers and scientists along with the empowerment of STEM (science, technology, engineering and mathematics) subjects. To produce ethical innovators, subjects like moral studies and history are also vital in producing thinkers.
Apart from the restructuring of our industries and liberalising our services sector to allow technology transfer to take place with the presence of FDI, it is now the time to concentrate on how we produce and train Malaysians to contribute to society, ethically and proudly.
Dr Juita is a Fellow at the economics, trade and regional integration division in the Institute of Strategic and International Studies (Isis) Malaysia, while Muhammad Zulhaziq is a research staff at Isis Malaysia
The views expressed in this article are the author’s own and do not necessarily reflect those of the New Straits Times