ASEAN’s biggest challenge: Reskilling its workforce in an AI-enabled Digital Economy

For the 2018 Milken Institute Asia Summit, we asked speakers to identify the biggest opportunities and challenges facing their industry as the world’s economic center of gravity shifts toward Asia. See their insights and share your thoughts using #MIGlobal. See more coverage on the Milken Institute LinkedIn page.

The driving factor in ASEAN’s rapid growth over recent years has been the adoption of technology. The region’s relatively young population has embraced the digital economy wholeheartedly, pushing the boundaries of technology adoption. Combined with the growing ubiquity of smartphones in the workforce and customer base, this has resulted in improved productivity, opened up new markets and created jobs as people make and spend more money.

As fast as technology has evolved in recent years, we can predict that its capabilities will expand even more rapidly over the next decade. This will further the positive cycles we have seen in the past, with falling prices, greater technology adoption, and ever more complex and exciting growth opportunities.

However, it will likely have a very different impact on jobs than what we previously saw, because this technological evolution will rapidly focus on artificial intelligence.

AI-enabled technologies will render many task and job profiles redundant. With this, workers will be required to forge new career paths, or else face the prospect of unemployment. For a bloc whose greatest strength is in its population, this poses an enormous challenge.

According to a recent Cisco and Oxford Economics study, the advent of AI could see as much as 10% of the current workforce in ASEAN’s six largest economies — 28 million workers in total — displaced from the job market over the next decade. Of these workers, Singapore would face 21% of its jobs displaced, Vietnam would face 14% displacement, and Thailand 12%.

The Opportunity

With this said, what looks like a challenge for the ASEAN market at first glance could actually turn into a tremendous—if disguised—opportunity for growth in the region.

ASEAN countries, like others, will adopt AI technology to search for productivity gains through lowering production costs. Lower total input costs should allow the prices of goods and services to fall and hence drive up sales, boosting the economy. This will enable companies to invest further in new parts of the economy, which will create new jobs. In fact, over the next decade, the competing effects of job displacement and job creation by AI could actually offset one another.

However, it is important to note that jobs created by AI may not necessarily be in the same industry as the jobs that are displaced; or of the same task profile. The most vulnerable will be the lower-skilled, "elementary" workers. For example, in the Indonesian agriculture industry we expect 3.5 million jobs will be displaced while 1.8 million new jobs will be created in the same industry. This means 1.7 million workers from the agriculture industry will need to acquire new skills in order to find employment outside of agriculture.

On the other hand, many industries will experience a net increase in their demand for jobs by 2028, because the rise in spending power through increased productivity more than offsets the jobs directly displaced by technology. Our model estimates that the sectors projected to see the greatest rise in demand for new workers are wholesale/retail (1.8 million), manufacturing (0.9 million), construction (0.9 million) and transport (0.7 million).

A shift in the labour market like this can be a great opportunity for workers in ASEAN to take on more rewarding occupations. If the workers in the region can make this transition it will allow ASEAN countries to continue their macro growth trajectory.

The Challenge

However, there will be challenges along the way. Comparing the typical skillsets of workers doing jobs that will become redundant, with the skillsets of jobs that will be created in other parts of the economy under our new technology scenario, offers a window on the scale of the “reskilling challenge” that the six ASEAN economies will face.

Our analysis reveals that 6.6 million workers across the region would need to be reskilled over the next decade. Of that cohort, 41 percent are “acutely lacking” the IT skills that new jobs will be demanding. Almost 30 percent lack the “interactive skills” that will be demanded by future vacancies — such as negotiation, persuasion, and customer service skills. Just over 25 percent also lack “foundational skills” — such as active learning, reading, and writing skills that are required to a much greater extent in ASEAN’s future labour market.

Mitigating the negative impact of technological change may require massive policy changes from education systems, but there is no one size-fits-all solution. The nature of the ASEAN skills challenge means responsibility will fall to an ecosystem of government departments, businesses, educational institutions, and technology providers, which will need to work collectively to provide workers with the necessary tools and skills for the transition.

If ASEAN is to leverage this shift towards AI, every stakeholder—governments, businesses, institutions, and individuals—must work together. Governments should implement policies that make it easier for individuals to retrain and gain new skills. Businesses should reskill their staff to minimise displacement. Educational institutions need to play a critical role in helping governments, businesses, and individuals achieve the required goals.