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Coping with technology for manufacturing

FE Team | Published: May 08, 2017 20:38:57 | Updated: October 24, 2017 04:30:10

Coping with technology for manufacturing

In our everyday discourse on development in Bangladesh, many drivers of growth are discussed. But the role of two 'R's -- Remittances and Readymade Garments (RMG) -- seems to steal the show. These two sectors have grown very fast in recent decades in the wake of abundant labour supply lowering its price. But the 'comparative advantage' that Bangladesh is believed to enjoy may soon cease. 
There are many reasons. Few, however, need mention.  First, technological advancement sweeping the world could produce devices as a cheaper substitute of labour.  Second, an increased demand for skilled labour might spring from change in income and consumption pattern; the middle-income syndrome may ask for quality product. Third, Donald Trump's restricted trade and migration policies could also cast a cloud on the horizon of the 'R's.  Again, the next generation growing up with significantly more educational opportunity and connectivity than their parents, may not want the same jobs that their parents were willing to do.
There has been an interesting and insightful presentation on these issues by Dr Muhamamad Musa (Executive Director, BRAC). The main purpose of his arguments, drawn upon anecdotal evidences, is to provide a wake-up call to those who are not apprehending the causes and the consequences of the very fast moving world. Muhammad Musa referred to the remarkable observation of Stephen Hawking regarding technological transformation and its ramifications thereupon: "The automation of factories has already decimated jobs in traditional manufacturing, and the rise of artificial intelligence is likely to extend this job destruction deep into the middle classes, with only the most caring, creative or supervisory roles remaining." The speed of change in Bangladesh will also be great. In 1990, none of us knew that we'd one day carry in our pocket a device that served as a phone, camera, TV, credit card and much more.  Yet here we are.  What changes will come in the coming years that we cannot yet predict. What skills will be required to survive in the coming world? The World Economic Forum recently forecast that about two-thirds of children entering primary schools now will work in jobs that currently don't exist. Meantime, many business leaders and governments have been talking about "the jobless economy," possibly with an oblique reference to Alibaba's fast growing empire of trade and business without boundary.
The author strongly feels that these changes are happening fast, and will come to Bangladesh when the prices will fall enough to justify the initial investments.  The Changing Precision Technology Company manufactures parts for mobile phones. It has 60 robot arms that work on 10 production lines that run 24 hours a day, 7 days a week. Each production line has 3 human workers who monitor the robots. Before these new robots arrived, the factory needed 650 human workers. Now it just needs 30. Since the factory laid off 95 per cent of its workers, and handed over the task of manufacturing to the machines, its defect rate has dropped by 400 per cent, and its overall output has nearly tripled. More production, fewer people….And keep in mind - we're not talking about the US, where the human manufacturing workers earn an average of $20 per hour. We're talking about China, where the average factory worker makes close to $2.0 per hour.
A recent market research report by Boston Consulting Group concluded that although Bangladesh remains synonymous with poverty, it is time to take a new look at this land of 160 million poised to become one of the world's next great growth markets for discretionary consumption. The report says, "Although the number of middle-class and affluent consumers in Bangladesh remains small compared with those of other big emerging markets in Asia, Bangladesh is one of the fastest-growing markets worldwide. We project that, each year for the next decade, the annual income of around 2.0 million additional Bangladeshis will reach $5,000 or more. That means that they will be earning enough to afford goods that offer convenience and luxury, such as air conditioners, imported shampoos, and cosmetics. And although half of Bangladeshis still live at the so-called bottom of the pyramid, economists estimate that another 30 million to 40 million will make the leap from poverty to the entry rungs of the middle class by 2025."
According to Musa, these trends mean that there are huge opportunities for entrepreneurs right now.  Designing innovative, targeted products, particularly those with locally sourced materials, not only benefits entrepreneurs, but also fosters new value chains that benefit many more along the way.  Because so many of the new consumers will be emerging at the bottom of the pyramid, the real opportunities are in pro-poor products, and hopefully inclusive in value chains.  These markets could be self-reinforcing, mutually beneficial systems too-if the poor are participating in the value chains and benefiting financially, their spending increases, spurring greater economic opportunity for entrepreneurs.  There are social spillovers of these trends too-potentially greater societal cohesion, tolerance and appreciation for diversity and so forth.
Bangladesh may not embrace an entrepreneurial culture, and foreign companies will of course compete fiercely for a growing market share.  But there is an opportunity to build up entrepreneurship-cultivating the right skill set, instilling passion, promoting the social value-to create an inclusive local market to be reckoned with.
-- The writer, a former Professor of Economics at Jahangirnagar University, is 
 Chair, Department of Economics and Social Science (ESS), BRAC University. 
abdul.bayes@brac.net
 

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