Focus: Industry 4.0 & leapfrogging

A Smart Strategy

Mar. 4, 2019

AI and the Internet of Things (IoT): both terms buzz around our speculative conversations on the next technological leap. Actual practitioners, meanwhile, are engaged in more than speculation. Enter Industry 4.0.

Pursuing an economic mix beyond petrochemicals, Oman is honing its exportable industrial base. 2012 printed highly telling data confirming its industrial potential, notably manufacturing, a key employer. With annual average growth of 8.5% in the 2005-2012 period, industrial growth outpaced that of the overall economy (5.1%), reaching 11% in 2012 from 8.6% in 2005. Employment, moreover, was in economically vibrant sectors such as basic and fabricated metals. And while medium- to high-tech exports—those more readily conducive to the adoption of Industry 4.0—printed growth, low-tech counterparts declined significantly. Moreover, in the 2005-2012 period, Oman's ranking in the UN Industrial Development Organization's (UNIDO) Industrial Export Quality Index soared 50%, attesting to the Sultanate's competitiveness. Interestingly, too, as of 2012, Oman's industrial estates not only hosted an impressive percentage of the Sultanate's manufacturing base, at 37.2% and employed 45.5% of the workers, but also their average firm size exceed those firms beyond the designated estates. We will shortly consider the realities of such 'leapfrogging.'

4.0 - An economic Imperative...

Sector data estimates the global value of the Industry 4.0 market to be USD214 billion by 2023 with broad-based economic ramifications. As flexible smart factories deliver customer-specific products, the advantages of which outweigh the traditional appeal of cheap labor alone.

...also for Oman

Oman harbors a vision of smart interconnected cities leveraging the commercial applications of Industry 4.0, namely AI, IoT, cloud computing, and robotics. For one, Oman's SMEs should in time become equipped to develop and market downstream services, a marked competitive advantage within the region, and arguably beyond. In April 2018, the Oman Convention and Exhibition Centre staged COMEX 2018, the leading IT, telecom, and technology exhibition and conference; a venue for the economic evaluation of potential smart cities integrating existing infrastructure.

The Challenges of 4.0

Realists acknowledge that there's no such thing as an economic panacea, and industry 4.0 is no exception. International management consultancy stalwart McKinsey & Company asserts that realistically, high-tech available today could shortly automate 30-50% of all work activities in Oman. In a classic case of the left hand giving and the right hand taking away, this spells potential discontinued wages amounting to USD16 trillion as AI and robotics, having replaced blue-collar workers, find their white-collar counterparts increasingly replaceable. Adoption of AI and machine learning spell disruptions across traditional modes of industrial activity, from manufacturing and finance to health and education, redefining production processes with customer-orientation. The sheer immediacy of the 4.0 economy promises a never-before-seen degree of transparency and instant appraisal, be it positive or negative, driving competition. Talking of driving, just consider for a moment the fact that an Uber driver, while rated by the passenger, is also rating the passenger. Extend this to the wider industrial matrix and you begin to see what Oman is taking on in terms of industrial accountability.

And as for leapfrogging…

Industry 4.0 is investment- and knowledge-intensive. The theory has it that producing complex goods and commodities embraces a "hit-the-ground-running and learning-by-doing" mindset faster than local conditions might have allowed. If systematic, a leapfrogging policy fostering expansion of sophisticated technology could stand Oman well in the smart economy era. Oman's reality, however, is that centers of advanced research are not abounding, while R&D across the public and private sectors was at 0.2% of GDP in 2015. The Sultanate is adamant about its shift to cutting-edge economic models, and Industry 4.0, the hallmark, will become the norm. What needs to follow is an equitable distribution of the dividends in light of the immediate costs.