Australia: Potential renaissance for Australian manufacturing as automation impacts the Asia-Pacific

The Australian manufacturing sector could be on track to experience a renaissance as new technology – including robotics, automation, machine learning and AI – levels the playing field throughout the Asia-Pacific.

New research, undertaken by Australia's leading independent law firm Corrs Chambers Westgarth, in conjunction with Deacons Hong Kong and the global Employment Law Alliance (ELA), calls into question the established logic of offshoring manufacturing to 'low-cost' Asian countries.

According to the findings of this unique research project examining "the future of work" in the Asia-Pacific, the cumulative impact of automation, machine learning, AI and gig economy will be felt by businesses and employers of all nations throughout the region.

The research unveils a number of startling findings but the most revealing is that the disruptive effects of new technologies and the changing approaches to work will impact not only Australia and New Zealand but every country in the Asia Pacific – from Bangladesh and China, through to Sri Lanka and Thailand.

Highlighting the implications of the research report's findings for Australia, Corrs Partner and co-author of the research John Tuck noted that while a major focus of the current workplace relations debate in Australia is on the 'flat-lining' of wages growth, the broader trends which are also occurring throughout the region will impact on labour market policy development here.

"In the month that Holden and Toyota close their last Australian production plants, the report invites a reconsideration of conventional thinking about the logic of offshoring manufacturing to 'low-cost' Asian countries", Mr Tuck said.

"There is clear evidence of competition within Asia-Pacific economies to attract manufacturing and other forms of investment. Rising labour costs in countries like China, along with the implementation of AI and robotics across Asia-Pacific, present Australian companies with a genuine opportunity to compete on the basis of advanced technological capability and a highly skilled workforce."

The research contains the responses from 15 top tier law firms throughout the Asia-Pacific region which provided the information based on the views of their clients, some the region's largest and most successful corporates, governments and international companies. The ELA is a network of more than 3,000 lawyers who provide employment and labour relations expertise in more than 120 countries around with world.

"I believe it was widely accepted that automation, robotics, machine learning, AI and the gig economy are all rising in prevalence in industrialised countries, where businesses are always striving for efficiencies and cost savings in the areas of high-cost labour," said Corrs Partner and co-author of the research John Tuck.

"But what is surprising, are the findings that many countries and economies with ready access to huge, relatively inexpensive and underutilised labour forces are also embracing these disruptive trends with a passion," he said.

"In Bangladesh, for example, lightweight robots to handle fabric, select, place and sew threatens jobs in the garment manufacturing industry which represents 80% of the country's total export earnings and is a very significant employer. The same issue is confronting the textiles, clothing and footwear (TCF) sector in Sri Lanka.

"In Korea, there are already 531 robots for every 10,000 factory workers – ahead of Japan, Germany and the US. Car production in South Korea is almost fully automated but technology is now impacting employment in retail, restaurants, banking and security industries.

"In India, the World Bank has estimated that automation may threaten almost 70% of existing jobs. Known as a global provider of skilled IT workers, India also faces challenges in this area with recruitment in its domestic IT sector for 2016 showing a reduction from the previous year and companies reporting the elimination - or 'release' - of thousands of jobs due to automation."

The gig economy driven by companies such as Uber, FoodPanda, Quick and Deliveroo is prevalent in every nation in the region with the scale of impact varying but creating the same concerns about employment safeguards, rights and defining the legal relationship or status of the employer and the worker as in Australia.

"There are also larger issues that only now are governments and societies just beginning to grasp around the fragmentation of the workforce, the informal economy, the potential loss of tax income and the erosion of social safety nets – something the IMF has recently flagged. In its October world economic outlook the IMF said it was time to "re-engineer social security to cope with the global transition to less stable, more freelance-oriented work."

Another key issue addressed in the report is the global fight against modern slavery.

"Australia is playing a leading role in addressing modern slavery in the Asia-Pacific region," according to Mr Tuck.

"Our Government's proposal to introduce legislation similar to the UK's Modern Slavery Act 2015, which requires large corporations to report on initiatives to eliminate forced labour and human trafficking from their global supply chains, is being noticed in the region. New Zealand may also introduce legislation soon to counter modern slavery, so a positive 'ripple effect' can be expected throughout Asia-Pacific where two-thirds of the world's modern slavery victims are located."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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