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Firm sounds alarm on offshore manufacturing

Firm sounds alarm on offshore manufacturing

Firm sounds alarm on offshore manufacturing

New research conducted by a national law firm has called into question the logic of offshoring manufacturing to “low-cost” countries.

The research, undertaken by Corrs Chambers Westgarth in conjunction with Deacons Hong Kong and the global Employment Law Alliance (ELA), seeks to understand future work trends in the Asia-Pacific market.

According to the research, the combination of automation, machine learning, AI and the gig economy is set to change approaches to work, however another key trend highlighted is the rise and consequent effects of offshore manufacturing.

“In the month that Holden and Toyota close their last Australian production plants, the report invites a reconsideration of conventional thinking about the logic of offshoring manufacturing to ‘low-cost’ Asian countries,” said Corrs partner and co-author of the research John Tuck.

“There is clear evidence of competition within Asia-Pacific economies to attract manufacturing and other forms of investment.

“Rising labour costs in countries like China, along with the implementation of AI and robotics across Asia-Pacific, present Australian companies with a genuine opportunity to compete on the basis of advanced technological capability and a highly skilled workforce.”

Commenting further on the findings, Mr Tuck said: “I believe it was widely accepted that automation, robotics, machine learning, AI and the gig economy are all rising in prevalence in industrialised countries, where businesses are always striving for efficiencies and cost savings in the areas of high-cost labour”.

“But what is surprising, are the findings that many countries and economies with ready access to huge, relatively inexpensive and underutilised labour forces are also embracing these disruptive trends with a passion.

“In Bangladesh, for example, lightweight robots to handle fabric, select, place and sew threatens jobs in the garment manufacturing industry which represents 80 per cent of the country’s total export earnings and is a very significant employer. The same issue is confronting the textiles, clothing and footwear (TCF) sector in Sri Lanka.

“In Korea, there are already 531 robots for every 10,000 factory workers – ahead of Japan, Germany and the US. Car production in South Korea is almost fully automated but technology is now impacting employment in retail, restaurants, banking and security industries.

“In India, the World Bank has estimated that automation may threaten almost 70 per cent of existing jobs. Known as a global provider of skilled IT workers, India also faces challenges in this area with recruitment in its domestic IT sector for 2016 showing a reduction from the previous year and companies reporting the elimination - or ‘release’ - of thousands of jobs due to automation.”

The report also raises concerns about the gig economy, noting that the prevalence is being driven further by companies such as Uber, FoodPanda, Quick and Deliveroo.

Mr Tuck said while the scale of impact varies from region-to-region, these companies have created the “same concerns about employment safeguards, rights and defining the legal relationship or status of the employer and the worker as in Australia”.

“There are also larger issues that only now are governments and societies just beginning to grasp around the fragmentation of the workforce, the informal economy, the potential loss of tax income and the erosion of social safety nets – something the IMF has recently flagged,” he added.

“In its October world economic outlook the IMF said it was time to ‘re-engineer social security to cope with the global transition to less stable, more freelance-oriented work’.”

Another key issue addressed in the report is the global fight against modern slavery.

“Australia is playing a leading role in addressing modern slavery in the Asia-Pacific region,” according to Mr Tuck.

“Our government’s proposal to introduce legislation similar to the UK’s Modern Slavery Act 2015, which requires large corporations to report on initiatives to eliminate forced labour and human trafficking from their global supply chains, is being noticed in the region.

“New Zealand may also introduce legislation soon to counter modern slavery, so a positive ‘ripple effect’ can be expected throughout Asia-Pacific where two-thirds of the world’s modern slavery victims are located.”

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