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Sunday, 16 June 2019

'There is no going back': Investing in technology and knowledge

Niveen Wahish , Friday 22 Mar 2019
Investing in knowledge
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Self-service check-in machines are becoming a familiar scene in airports around the world and a sign of modernity. Passengers use the machines to pay for tickets, reserve seats and label luggage. However, what many of them may not realise is that these machines could also be destroying jobs.

Lant Pritchett, director of research on improving systems of education at the Blavatnik School of Government at Oxford University in the UK, said that “enormously scarce talent” in the developed world has invested in creating technology to overcome the problems of costly labour, adding that policies that close off borders have limited the supply of labour and rendered it more expensive.

“Technology does not have to happen; it is happening because of price distortions,” he told participants at the 25th annual conference of the Economic Research Forum, a regional think tank, under the title “Knowledge, Research Networks, and Development Policy”. The conference was held at the Arab Fund in Kuwait, March 10-12.

There is no denying the difference technology has made to all aspects of life, often changing the way business is conducted.

Albert Zeufack, World Bank chief economist for Africa, spoke at the conference on how technology has become all-pervasive and showing that a typical day in the life of the Internet in 2015 included 803 million purchases on Amazon, 186 million Instagram messages, and 207 billion e-mails. He showed data from the 2019 World Bank’s “World Development Report” that showed that business nowadays is done differently.

Whereas it took Ikea, a Swedish furniture retailer, 40 years to open around 400 shops around the world, it took Taobao, a Chinese online-shopping platform, only 15 years to find nine million online merchants covering 220 countries, Zeufack showed. In 2018, people on Airbnb booked more than double the number of rooms booked through the Marriott and Hilton Hotel chains put together, he said.

Zeufack showed how knowledge is being leveraged to benefit people, adding that 11 million Rwandans now have access to healthcare in digital form through a mobile-based healthcare scheme that includes artificial intelligence symptom-checking and live telephone consultations with trained nurses and doctors. Prescriptions can also be sent to patients’ phones.

In Nigeria, farmers have better access to tractors thanks to an application similar to that used for ride-hailing apps, he said.

Global economic growth could accelerate by one to two percent per year as a result of the adaptation of new technologies, according to Shahrokh Fardoust, a research professor at the Global Research Institute at the College of William and Mary in Williamsburg, Virginia. New technologies, such as cloud computing, automation, robotics, blockchain, and 3D printing are as game changing as the steam engine was back in the 18th century and the electricity in the latter half of the 19th century, he told the participants at the conference.

Despite the potential for economic gains over the longer-term, the implied major reallocation of economic activity between sectors and countries could be painful and costly during the transition period, he said. The labor-saving and skill bias aspects of the new technologies, Fardoust added, are bound to have a negative impact on the jobs and wages of the relatively less educated and unskilled workers in both developed and developing countries.

He argued that according to recent research, digitalization, robotics and automation are already altering the demand for skills as increasing number of tasks and jobs are automated and new jobs are created in new activities with low labor intensity and bias for high-end labor skills. 

He added that these new technologies and their rapid advances increasingly require skills, such as abilities to interpret, analyze and communicate complex information and problem-solving.  At the same, digitalization and automation are reducing demand for basic manual labor skills in manufacturing and some services.   Recent estimates by McKinsey, a private consulting firm, and the World Bank indicate that the proportion of employment that is automatable in emerging economies is large and could range between 41 to 85 percent.

However, the new technologies coupled with a huge youth population could translate into a new growth model for the MENA region according to Hassan Ali, dean of the School of Business at Nile University in Cairo. The youth in the MENA region, deployed through proper public policies, could be “the new oil of the region”, he told the conference.

Around 30 per cent of the population of the Middle East is aged between 15 and 29, and they are ready for change, Ali said, pointing out that the MENA region is ranked second in the world by number of daily Youtube video views at more than 310 million.

By 2020, projections suggest that there will be around two zettabytes of data in the Middle East, greater than the estimated number of grains of sand covering the entire Arabian desert, he said.

Already, Ali told the Weekly, many young people are working in what he called “the cloud labour market”. They may be physically located in Egypt, but they may be producing software for companies anywhere around the globe, he explained. “Technology has enabled young people to go beyond physical boundaries,” he pointed out.

“Just as exploration, extraction, and building refineries are essential primary costs to produce and sell oil, a holistic change in the education system is essential to use and improve human capital productivity,” Ali said.

The new growth model, he said, should be one that turns the surplus of unemployed and misemployed people into productive human capital through innovation, technology and entrepreneurship. This could happen if there was proper planning and coordination between the government, the private sector and civil society, Ali added.

Other conference speakers highlighted the importance of training and innovation. RohintonMedhora, president of the Centre for International Governance Innovation in Waterloo, Canada, showed how countries in the MENA region perform poorly on the Global Innovation Index of the World Intellectual Property Organisation (WIPO) that ranks 126 countries. Except for the United Arab Emirates, which ranks 38, most of the countries in the region are not doing well, he showed.

Innovation was important to compete in a world that is increasingly dominated by what Medhora called “the intangible economy”. These intangibles include software development, patents, copyrights and research and development and design.

Over the last two decades, tangibles and intangibles have traded places, he told the conference. The share of intangibles’ investment in GDP is larger than investment in tangibles in the developed countries, Medhora said. Meanwhile, poorer countries still invest in tangibles, he added.

The divide today is between the digitally rich and the digitally poor, not the developing and the developed countries, he argued. According to Medhora, that needs to change, and countries need to create, protect and valorise their intellectual property.

The big challenge facing public policy makers in the Middle East and North Africa (MENA) region is how to harness the technologies for the public benefit by accelerating growth and job creation, Fardoust said. First, he said, governments must invest in infrastructure making broadband accessible to all segments of the population. What is also important, according to Fardoust, is for governments to broaden the access and enable the usage of broadband by everyone regardless of their income level by providing them with some sort of subsidy, particularly for the poorest segment of the population, because broadband usage tends to be quite costly in most developing countries, including the MENA region. 

Governments must reform and upgrade the current educational systems given the high skill needs of the new technologies, he told the Weekly. And they must also substantially strengthen the existing social safety nets so that those that fall behind can survive.

With technology changing by the minute, it is very difficult to predict what will happen in the next few years, Fardoust said.  He added that even by the early 1990s no one knew that the Internet was coming, and when it came very few people knew how big the impact would be.

“There is no going back, we cannot throw away what is liberating us; new technologies are part and parcel of our lives today,” according to Fardoust. Governments in the MENA region, however, must be on top of these developments and design and implement appropriate policy responses, in order to maximize the benefits and minimize the costs of the new technologies to society, he added. 

*A version of this article appears in print in the 21 March, 2019 edition of Al-Ahram Weekly under the headline: Investing in knowledge

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