How digitisation means thinking in terms of door-to door rather than port-to-port service in the very near future
 One of the few certainties left in this lingering Covid crisis is a need to upgrade digital technology from the primitive 1912 Model T era we have today to at least a 1950s level that delivered easy-to-operate dependability.
Anyone who has been working with the likes of Zoom and Skype know how difficult it is to figure out how to make it work, much less how to make it work well. These struggles recall a time more than a century ago when an afternoon's automotive outing was often punctuated with unscheduled breakdowns and tyre changes.
In "Reimagining Emerging ASEAN in the Wake of Covid-19", McKinsey & Company consultants Eoin Daly of Kuala Lumpur and Rebecca Yeoh of Singapore stress this point.
In the wake of the pandemic, digital technologies have moved from a priority to an imperative. This became necessary to accommodate remote workers, and to serve consumers as they flocked to e-commerce channels.
"Lockdowns caused sharp increases in the adoption of digital channels across the world and within Asia, especially for spending on essential items," said the McKinsey analysts.
According to McKinsey's Covid consumer pulse surveys, users of the online grocery channel grew by as much as 60 per cent in the United States.
This development points to a reconfiguration of world shipping from its traditional port-to-port focus to reliable, quick and easy door-to-door. All the elements are there - vast factories produce low-cost items, automated mega ships with smaller crews and shrinking slot costs doing the long haul. To be greeted by equally automated terminals with ondock rail to move cargo off to value-adding automated distribution centres, and finally express delivery to get the cargo where it wants to go.
It is in the latter two - last mile - stages where new jobs are likely to come, being financed by cost savings made in shrinking long haul and terminal handling expenses.
And this, the McKinsey authors remind us, is worldwide phenomenon. "Some 20 to 40 per cent of customers in India, Japan, South Korea, the United Kingdom, and the United States also tried ordering food online for pick-up at grocery stores for the first time, and 50 to 80 per cent of new customers in these countries have indicated they will continue using these channels once lockdowns lift," the McKinsey authors said.
In the wake of this, come a number of unanticipated consequences. If people no longer arrive and depart from urban centres like Genghis Khan's hordes every day, there would be less need for buses, trains, planes and automobiles.
Thus, the vision of the late Marshal McLuhan, the University of Toronto's communications guru of the 1960s and '70s, has now materialised to a very substantial degree. McLuhan, who died in 1980, imagined a world in which those who prepare, transmit and receive written and verbal information could do so from work stations wherever a telephone connection exists. Each work station would have its own computer access to the global network. All this was predicted in an age of typewriters and filing cabinets. Today, this is a technical reality, but it not quite an institutional reality.
Of course, there was a downside McLuhan had not appreciated, for which the McKinsey authors had a fix though some would question whether it necessitates the high level of state involvement they recommend. "The risk that these developments could leave small- and medium-sized enterprises (SMEs) behind could be managed through government support and programmes," they said.
According to a McKinsey survey in 2018, some 60 to 95 per cent of digital revenue accrues to the largest 10 per cent of companies in a sector.
"Yet SMEs account for a significant share of the region's economic activity, meaning that enhanced digital capabilities could translate to additional revenue," they said. Increasing digital adoption to levels seen in developed markets could boost GDP growth by one per cent in Malaysia; and technology transformations could add US$2.8 trillion to Indonesia's economy by 2040."
According to a McKinsey survey in 2018, 60 to 95 per cent of digital revenue accrues to the largest 10 per cent of companies in a sector. Yet SMEs account for a significant share of the region's economic activity, meaning that enhanced digital capabilities could translate to additional revenue.
Increasing digital adoption to levels seen in developed markets could boost GDP growth by one per cent in Malaysia; and technology transformations could add $2.8 trillion to Indonesia's economy by 2040, they said.
But capturing this opportunity requires three actions beyond building internet infrastructure, they said.
"While SMEs are often aware of the imperative to go digital, many are challenged to do so in practice. Southeast Asian countries could consider redirecting SME support toward digital capability-building programmes. For example, Singapore offers the Industry 4.0 Human Capability Programme, which helps 300 SMEs implement digital use cases and redesigns jobs to support them. In addition, the government's Scale-Up programme supports local champions on a two-year growth journey with modules such as digital transformation and new business building," the McKinsey team said.
"But much of government procurement and invoicing in the region is still done by paper, offering the possibility of a shift to digitisation of business processes and channels. For example, the Indonesian government has partnered with Bukalapak, an Indonesian e-commerce company, to facilitate e-government services such as tax and utilities payments.
The McKinsey team advises introducing tax incentives, grants, and loans could encourage the adoption of digital tools. For example, in the aftermath of the pandemic, Singapore provided $350 million in digital transformation grants for businesses to support e-payments and advanced digital-solution adoption.
For several years, business leaders have been preparing for the impact of automation and digital technologies on their workforce. The economic downturn is accelerating job displacement. In one scenario when lockdowns are renewed, jobs at risk could increase by up to 878,000 in Malaysia, 4.5 million in the Philippines, 9.2 million in Indonesia, and 2.4 million in Thailand.
Some 40 to 70 per cent of jobs at risk from Covid-19 in Europe and the United States are already automatable under current technology, suggesting the possibility of long-term displacement even after the economy recovers.
With job displacement may come opportunity. For example, Covid has moved society in the direction of contactless commerce, a development that could spur demand in the region for more skilled workers in digital fields. Increased demand for healthcare and related services may also lead to job.
One might fault the McKinsey team's view for being too state-dependent, and thus reliant on the tax dollars and a tax-and-spend economic model at the very moment the tax base is at its most anaemic. One might be right in saying there might be more health care jobs following a pandemic, but such jobs cost more money than they produce. What appears to be more desirable in the aftermath of a lockdown-induced recession, if one hopes for a V-shaped recovery, are money-making jobs and not money-losing jobs. One possible solution is expanding jobs in last mile delivery as e-commerce takes the lion's share of the retail space.
Talk of "reskilling" is largely wishful thinking. One cannot wave a magic wand, even with unlimited resources to skill the unskilled because one would like to think it's doable. When the US Army subjected all recruits to IQ tests, they found 10 per cent were unable to meet the demands made on a humble a private soldier.
A post-Covid period may produce a situation where there is a shortage of skilled digital workers, which will soon be remedied by some segment of the upper 90 per cent. Harder to accommodate are those in the lowest percentile with little aptitude for learning much of anything beyond the simplest repetitive functions.
This group, the lowest wrung on the skills ladder, are more unemployable more numerous among the unemployed. This issue, rather than more soluble problems, must be addressed if anything like a comprehensive solution is to be achieved. |
