SINGAPORE (Feb 3): According to a recent study by Oxford Economics, robot adoption could spur a 20% growth in Singapore’s gross domestic product (GDP) by 2030, equivalent to some $0.1 trillion at today’s prices.
While an improvement in what is largely considered the most important measure to evaluate the city-state’s economic performance might be highly sought after, economist Sung Eun Jung is quick to highlight how the rise of robots carries with it the risk of job displacement.
In a report on Feb 3, Sung notes that the automation of services is “the new frontier” for countries such as Singapore.
“In the high scenario, we assumed that the robot stock will grow 44% above our baseline projection, continuing to accelerate at the rate achieved since the global financial crisis. In the low scenario, we assumed it will slow 33% below the baseline projection, returning to a historical trend in keeping with the decade before the global financial crisis,” observes Sung.
“This will present a challenge to policymakers, as greater automation delivers productivity gains but makes the large low- and mid-skilled service-sector workforce vulnerable to displacement,” adds Sung.
High demand for robots in Singapore
Although Singapore’s global market share may pale in comparison to economic heavyweights such as the US or China, robots are featured prominently across numerous sectors.
The report notes that following the global financial crisis in 2008, Singapore’s stock of robots had increased rapidly, growing at an average rate of 20% per year from 2010 to 2016.
According to a 2019 report by the International Federation of Robotics (IFR), Singapore had the highest robot density in the world, or the number of robots per 10,000 workers, for the first time in 2018.
“This is largely because the structure of Singapore’s manufacturing sector lends itself to robotic innovation,” says Sung.
For instance, the electrical industry — comprising electronic components manufacturing, as well as medical equipment, precision, and optical instruments — constitutes more than 60% of Singaporean industrial production. According to the 2018 IFR report, some 84% of robots in Singapore were installed in the electrical industry alone.
“This sector has seen the most accelerated rise in robotic applications globally in recent years,” says Sung. “Robotic installations in Singapore are skewed towards the manufacturing of semiconductors and computer peripherals, but recent innovations mean they are increasingly diversifying into sectors such as warehousing and logistics.”
A double-edged sword
Over the years, there has been a widespread shift to automation and robotics, which has resulted in the new applications being introduced into the service economy one after the other. These include baggage handling in airports, inventory management in warehouses and room services in hotels.
Although these make cumbersome processes more efficient, some 85% of Singaporean workers today are employed in service roles – which technology is threatening to take over.
“Technology is already beginning to compete with an ever-larger share of jobs,” says Sung. “The number of Singapore’s resident workers employed in low- to medium-skilled service sector jobs hasn’t diminished over the years and they’re increasingly vulnerable to automation as robotic capabilities expand.”
To be sure, the report notes that small and medium enterprises (SMEs) could be particularly vulnerable to automation and robotisation. This would require workers to retrain and learn new skills in order to take advantage of new opportunities that a more automated service economy will present.
In fact, the report stresses that the burdens of job displacement fall disproportionately on poorer populations, with each additional robot displacing twice as many workers in lower-skilled regions than in higher skilled regions of the same country.
“This has important social and political implications for many major economies in times of growing economic inequality and political polarisation,” says Sung.
“If automation is to be pursued at pace, this cohort will need continued government support to ease the transition,” opines Sung.
Poised to benefit from the rise of robots
Even as Singapore risks losing part of its workforce to robotisation, Sung attests that the country is well-placed to thrive from the “robotics dividend” – or how the rise of robots could boost the state’s overall productivity.
Firstly, the report notes that Singaporean workers are more shielded from robotisation’s costs, indicating that its performing functions are not only tougher to automate, but are also more likely to be complemented by new technology rather than displaced by it.
“More than 60% of workers in Singapore’s manufacturing sector are classified as highly skilled, a share that continues to grow,” notes Sung.
Conversely, the report notes it is the large, non-permanent foreign workforce which is heavily employed in occupations that are vulnerable to future automation. The report notes that some 70% of Singapore’s 1.4 million foreign workers hold a work permit visa, which suggests labour-intensive occupations with lower wages.
“Should the government face pressure to further tighten foreign worker quotas, robots could fill the void in several applications,” says Sung.
In addition, the report highlights how Singapore’s drive to transform through technology also bodes well for the future healthy growth of the robot stock.
“The government set an ambitious target in 2010 to expand productivity by 2%-3% per year for the next 10 years. While falling short of the target, Singapore has shown an increase in total factor productivity in recent years. This productivity trend tracks closely to the growth in its robot installations,” observes Sung.
For instance, the $450 million National Robotics Programme was launched in 2016 with the goal of developing robotics technologies in health care, construction, manufacturing, and logistics.
Other ongoing incentive programmes include the Automation Support Package that provides incentives for firms to adopt off-the-shelf technologies.
“Indeed, the government’s prioritisation of innovation and technology has propelled robot investment,” says Sung. “This has led to Singapore ranking high in various measures of innovation and global competitiveness.”
