Writing a New Year message to the Zobel-Ayala believers in Ayala Corp., chairman and CEO Jaime Augusto Zobel de Ayala tackled five issues which he said “are the most relevant and that have had a disproportionate impact on our societies in 2017.”
These are: One, populism and economic inequity; two, globalization and technological advancement; three, retooling the work force; four, the need for infrastructure; and five, the private sector’s role in society.
On rising populism, JAZA said: “The heightened social tensions we are experiencing in various parts of the world have revealed a frustration with the status quo and a diminished faith in traditional institutions, both public and private, in providing solutions to our many needs as societies.”
He relates: “The UK’s vote to withdraw from the European Union was, in large part, attributed to migrants taking jobs away from British citizens. Similarly, the rise in US protectionism was driven by the loss of domestic jobs to cost-competitive markets. Here at home, we all know how the election of President Duterte, an unorthodox leader for the Philippines, was fueled by the frustration of many citizens over their desire for employment, for an upgrade in the many services they expect from the private and public sectors, and for their desire to participate more formally in the economic growth of the country.”
These events, JAZA points out, “represent a frustration on how the perceived benefits of a growing and expanding global economy have not been equally distributed to citizens. Lack of sufficient opportunity, uneven wealth and income gaps, and a desire for fair progressive employment seemed to be shared themes across many nation states.”
Meanwhile, unlike in the developed world where globalization is a problem, JAZA says: “Globalization has, in many ways, been a boon for the Philippines. A McKinsey study cites that with the global flows of goods, services, finance, data, and people, world GDP is over 10 percent higher, than if economies had remained closed.”
“The Philippines is an excellent success story of how the liberalization sector and the overseas Filipino service sector phenomenon that have been consistent drivers of our economic growth over the past decade.”
JAZA says “like the businesses we manage, globalization encourages the most efficient allocation of resources; including labor, capital, and land and it has created both winners and losers in the process. Skilled workers in developed economies have suffered the most from the offshoring of jobs to more cost-competitive markets like ours.”
“Winners, in turn, in this scenario have been the factory and service sector workers in countries that have benefited the most from the geographical reorientation of manufacturing and technology driven services over the past few decades; these include China, South Korea, Thailand, Vietnam, India and even the Philippines, among others. This has led to strong criticism of globalization creating stark inequalities among geographies, with high productivity and income concentrated in specific centers and regions.”
“The Philippines has been a winner in navigating some of these disruptive trends, it is also important to note that a much more critical trend driving the disruption of employment around the world is technological advancement. Robotics, mechanization, advanced telecommunications, digitalization and artificial intelligence are gaining traction in various industries not only for their ability to enable or perform routine physical tasks faster and more cost effectively, but also for their increasing cognitive competency.”
“Research conducted by MIT cites that globalization is accountable for only half of the five-million factory jobs lost in the US since it started trade with China in the 2000s. The remaining jobs disappeared as a result of automation. Strikingly enough, US manufacturing even posted an annual growth of 2 percent from 2006 to 2013. On the other hand, companies that invested in automation have doubled their productivity, implying that the manufacturing sector has increased productivity without employing more people.”
“On the positive side, analysts believe that while some jobs are threatened by redundancy, a host of new occupations will be created. The concern about labor displacement stems largely from the mismatch between prevalent skills today and the skills needed for disruptive jobs. The situation may have also been exacerbated by the accelerated pace at which technology has developed in the past decade alone.”
On the third point, retooling the work force, JAZA says: “We can navigate the employment challenges brought about by technological disruptions by retooling and reskilling our labor force, while also re-examining our existing educational curricula.”
“As upskilling begins on the level of basic, secondary, and tertiary education, there is a need for strong involvement of all stakeholders to ensure that the required proficiency in technology, science, engineering, and mathematics, as well as the emphasis on creativity and critical thinking are all embedded in our curricula.”
More later.