Empowered lives. Resilient nations. Written by: Development 4.0 Opportunities and Challenges for Accelerating Progress towards the Sustainable Development Goals in Asia and the PacificDevelopment 4.0 Opportunities and Challenges for Accelerating Progress towards the Sustainable Development Goals in Asia and the PacificAbout this report This document builds on a research programme undertaken by The Economist Intelligence Unit between January and May 2018 and supported financially by the United Nations Development Programme (UNDP). The views and opinions expressed in this publication are those of The Economist Intelligence Unit and do not necessarily reflect the official position of the UNDP. The foreword and policy recommendations sections were written by the UNDP. About The Economist Intelligence Unit The Economist Intelligence Unit (The EIU) is the research arm of The Economist Group, publisher of The Economist. 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About the United Nations Development Programme (UNDP) UNDP partners with people at all levels of society to help build nations that can withstand crisis, and drive and sustain growth that improves the quality of life for everyone. On the ground in nearly 170 countries and territories, we offer global perspective and local insight to help empower lives and build resilient nations. Please use the following when citing this report: The United Nations Development Programme 2018. Development 4.0: Opportunities and Challenges for Accelerating Progress towards the Sustainable Development Goals in Asia and the Pacific. The Economist Intelligence Unit Stefano Scuratti, Project Director: stefanoscurattieconomist Jennifer Wells, Senior Marketing Executive: jenniferwellseiu The United Nations Development Programme (UNDP) Jaco Cilliers, Chief Regional Policy and Programme for Asia and the Pacific: jaco.cilliersundp Scott Stanley, Regional Economics Specialist, Asia and the Pacific: scott.stanleyundp T aimur Khilji, Regional Economics Specialist, Asia and the Pacific: taimur.khiljiundp Mahtab Haider, Communications Specialist, Asia and the Pacific: mahtab.haiderundp Cedric Monteiro, Regional Communications Advisor for Asia and the Pacific: cedric.monteiroundp 2Contents 2 About this report 4 Foreword by the United Nations Development Programme 14 Automation and the future of work: Contested narratives 20 Impacts of automation and AI in Asia24 Impact on manufacturing27 Impact on services29 Impact on individuals: An SDG perspective35 Mitigating factors 44 Responding to the opportunities and challenges of automation and AI47 Economic58 Social67 Environmental 72 Conclusion: Technological change and the openness of the future 76 Policy directives by the United Nations Development Programme 80 List of abbreviations 81 References 3Rapid advances in technology will profoundly affect societies in Asia-Pacific. The Fourth Industrial Revolutioncharacterised by innovations such as artificial intelligence, automation, and bio-technologyis likely to transform existing systems of production, management, and governance. How countries embrace and adapt to the coming technological changes will determine whether they meet the promise of the 2030 Agenda for Sustainable Development and achieve the Sustainable Development Goals (SDGs). Foreword by the United Nations Development Programme 4Development 4.0: Opportunities and Challenges for Accelerating Progress towards the Sustainable Development Goals in Asia and the Pacific UNDP partnered with the Economist Intelligence Unit (EIU) to review the likely implications of this technological revolution on progress towards the SDGs in the Asia-Pacific region. The resulting analysis identifies the regions risk flashpoints, the channels through which risks might constrain SDG progress, and, critically, the ways that new technologies might be harnessed to advance rather than hinder sustainable development. The Fourth Industrial Revolution is also converging with other mega-trends, including rapid demographic transition and growing consequences of climate change. This convergence is pushing countries to fundamentally reconsider and adapt existing arrangements between governments and citizens. This includes assessing the suitability of current approaches to, among other things, democratic governance, the definition of work, privacy, basic citizen rights, and the obligations of the state to its people. Governments have an opportunity to pro-actively embrace this moment and the call for transformative change. Reactive policies and institutions will be increasingly ill-suited to manage the impact of technological innovation or to capture its potential to help strengthen approaches to sustainable development. In the coming era, those governments more likely to accelerate progress towards the SDGs will be those that actively design policies and institutions that are more predictive, adaptable, and responsive to citizen needs. Designing new social and economic approaches is daunting and will not happen overnight. This report points to several key policy areas where governments can begin assessing and adapting their current approaches, institutions, and policies for the coming era. Building on the reports analysis, UNDP has specifically identified five critical themes that can help form the basis for transformation: 1) Embrace predictive and adaptive decision-making; 2) Capture emerging sources of growth and employment; 3) Reimagine citizen engagement and personalised service delivery; 4) Enhance protection to leave no one behind; and 5) Mobilise and allocate finance for a better future. These represent critical domains where governmentstogether with civil society, the private sector, and development partnerscan evaluate current approaches, consider future scenarios, and create and test new systems and models. This does not represent a comprehensive set of recommendations covering all the ways technology is likely to affect societies. A regional overview also cannot develop a policy roadmap for any specific country. The Asia-Pacific region is diverse and the Fourth Industrial Revolution will affect countries in different ways. But this report and the accompanying UNDP policy recommendations highlight critical areas where action now can boost a countrys ability to capitalise on opportunities arising from the inevitable technological change underway. It is up to each government to develop solutions appropriate to their own economic and social context. This report and recommendations aim to support this process, principally by identifying themes for further analysis and by guiding policy and institutional design that can help societies embrace the opportunities afforded by technological change and manage the possible negative consequences of it. 5The Asia-Pacific region is in the throes of a digital transformation, accelerated by technological change, including intelligent robots, autonomous drones, sensors, and 3-D printing. Countries must adapt or be left behind if they are to achieve the Sustainable Development Goals. Executive summaryOver 60% of salaried workers in Indonesia, the Philippines, Thailand and Vietnam occupy positions at high risk of automation. Progress on at least nine Sustainable Development Goals could be directly affected by the Fourth Industrial Revolution, and millions in Asias emergent middle class could slide back into poverty. Possible responses include strengthening social protection policies, leveraging AI and automation to optimise public services, promoting the use of technology to solve ecological challenges, and supporting new growth sectors. 7Automation, artificial intelligence (AI) and the innovations of the “Fourth Industrial Revolution” are penetrating everything from automotive, garment and electronics manufacturing to business processes, logistics and healthcare. The benefits, in terms of efficiency, productivity, speed and agility, are undoubted. These innovations could make products safer, increase industrial productivity, shorten global supply chains and make public services more personalised, predictive, and participatory, as citizens both provide and benefit from increasing data flows around public services. However, as with all technological change, their impact will be shaped by choices and the ends to which they are put. Just like nuclear fission could create civilian energy or military weapons, these innovations could have a wide range of applications and impacts both positive and negative. Unemployment is the most commonly discussed threat. Labour organisations, governments and economists are concerned that human workers are vulnerable to replacement at an unprecedented scale and speed, which could worsen inequality, undermine social cohesion, and increase poverty. Machine learning (ML) and automation, through which physical and digital robots acquire abilities once considered uniquely human like strategic thought, self-corrective learning and context-responsiveness could replace many lower- and middle-class jobs that have been engines of social mobility in times past. This is not just a threat to jobs but also to the tax base in nations where formal employment in at-risk sectors like manufacturing and business service outsourcing is threatened. UNEMPLOYMENT IS THE MOST COMMONLY DISCUSSED THREAT. LABOUR ORGANISATIONS, GOVERNMENTS AND ECONOMISTS ARE CONCERNED THAT HUMAN WORKERS ARE VULNERABLE TO REPLACEMENT AT AN UNPRECEDENTED SCALE AND SPEED. 8 Executive summaryDevelopment 4.0: Opportunities and Challenges for Accelerating Progress towards the Sustainable Development Goals in Asia and the Pacific T o date, the debate about the impacts of automation and AI on society has largely focused on the developed world and China, where most of said innovations are clustered. But the development community is taking an increased interest in the opportunities and threats posed by innovation. What contribution can these tools make to the achievement of the Sustainable Development Goals (SDGs), and in what ways do they threaten progress? How, when and by whom will these impacts be felt? What can be done to avert negative outcomes and ensure that automation, AI and the new digital economy make a net positive contribution to the SDGs? This report presents a structured, developing Asia-focused assessment of these questions. It outlines the positive and negative channels through which AI and automation will impact the achievement of the SDGs and then lays out the policy instruments available to governments to steer outcomes in developmentally constructive directions. This assessment evaluates policy instruments across three domains economic, social and environmental to ensure these technologies help, rather than hinder, progress to the 2030 goals. Negative scenarios and impacts on progress towards the Sustainable Development Goals The report first presents the current literature on potential socio-economic downsides of automation and AI, examines current and near-term risks in Asia, and assesses what these mean across the manufacturing and services sectors. It then identifies the impacts these risks would have on progress towards securing the SDGs. While pan-Asian, the report also identifies country-specific risk factors and flashpoints, and differentiates between countries facing threats to existing industries and those whose vulnerability is their potential future loss of entry into sectors they might otherwise have hoped to access. WHAT CONTRIBUTION CAN THESE TOOLS MAKE TO THE ACHIEVEMENT OF THE SDGs, AND IN WHAT WAYS DO THEY THREATEN PROGRESS? HOW, WHEN AND BY WHOM WILL THESE IMPACTS BE FELT? 9 Executive summaryThe report finds that at least nine SDGs could be negatively impacted in clear ways, primarily through the direct and indirect consequence of increased unemployment, but also through other channels such as dangers and threats in emergent sectors like the “gig” and “on-demand” economies. Throughout, the report pays particular attention to the impact of technological change on gender, particularly in terms of the economic empowerment of women. How these new technologies are developed could make a positive contribution to gender equity, or deepen inequality. Positive scenarios and impacts on sustainable development Negative forecasts and predictions are informed by already existing, or conceivable, trends. But such an analysis alone would be one-sided. Human choices, policies, and institutional evolution will also shape the societal outcomes of technological change. Previous periods of rapid technological change led to the rise of new sectors and employment opportunities and contributions to the increased efficiency of public services. Automation and AI can also support the SDGs where stakeholders collaborate to find socially advantageous applications. For instance, drones and satellites are delivering health and humanitarian supplies in rural areas, and data analytics have guided disaster relief efforts. Precision agriculture is increasing agricultural yields and reducing the use of harmful inputs, while AI is helping scientists track and predict the impact of climate change. In short, similar tools can be used in vastly different ways. Algorithms can help predict disease outbreaks, or help disseminate hate speech. Automation can mark student essays so teachers can focus on lesson planning and instruction, or replace customer service operatives. Acknowledging the dual uses of all these innovations, the second dimension of the report articulates the ways in which automation and AI could support progress toward the SDGs and the channels through which those relationships could evolve. DRONES AND SATELLITES ARE DELIVERING HEALTH AND HUMANITARIAN SUPPLIES IN RURAL AREAS, AND DATA ANALYTICS HAVE GUIDED DISASTER RELIEF EFFORTS. 10 Executive summaryDevelopment 4.0: Opportunities