Making the Fourth Industrial Revolution Inclusive

Keynote speech of Ms. Caitlin Wiesen, UNDP Resident Representative, at the Science, Technology & Innovation as a Pillar of Socioeconomic Development in Viet Nam

May 15, 2019

H.E. Mr. Nguyen Xuan Phuc, Prime Minister of Socialist Republic of Viet Nam

H.E. Mr. Chu Ngoc Anh, Minister, Ministry of Science and Technology

H.E. Mr. Craig Chittick, Australian Ambassador to Vietnam

Distinguished guests and participants Ladies and gentlemen

I am honored to be today at this Conference on the very important topic of “Science, Technology and Innovation as a pillar of Socio-Economic Development in Viet Nam”.

One of the most striking features of Viet Nam’s growth to date is the extent to which it has been inclusive. As the UNDP-VASS NHDR 2016 indicated: economic growth has been relatively high (from late 80s to 2015) and critically, this has been accompanied by (i) relatively low inequality and (ii) with demonstrated improvements in income distribution. The inclusive quality of Viet Nam’s growth has been key in Viet Nam’s great success in poverty reduction, which has been recognized by the international community.

Looking forward, in its next development stage as a low middle-income country, in the evolving global transition to IR 4.0, the key question is whether Viet Nam’s growth will continue to be relatively inclusive, green and sustainable, providing opportunities for Vietnamese people to participate in, contribute to and benefit from national growth.

In the transition to its new development stage, Viet Nam faces some key risks and challenges, including challenges of economic uncertainty, “re-shoring manufacturing” back towards developed economies, “trade wars” accompanying rising nationalism, climate change risks at international level, and IR4.0-induced changes in the global value chains, employment and human development.

In particular, I would like to highlight the following four key challenges:

New Growth Pathways:

First, the low-middle income trap risk and the challenge of transforming the economic growth model from its dependence on exploiting natural resources and cheap/low skill labor to a new growth pathway with enhanced productivity, value addition, innovation and environmental sustainability as the new key drivers of growth, that generates more employment with higher productivity and income for Vietnamese people.

New nature of jobs:

Secondly, accelerating IR4.0 offers both opportunities and risks in the future stream of jobs as Viet Nam embarks on the new growth pathways. It is anticipated that automation and IA will displace jobs in several sectors (such as in agriculture, forestry and fishery, food and beverage, garment, leather and footwears, electronics, whole sale, retail, hotel and banking) that have been driving Viet Nam’s growth. At the same time it can be anticipated that new jobs will be created, but with different functions.

Risks of widening inequalities:

Thirdly, the next development stage and IR4.0 also pose risks to rising inequality and weakening resilience. Higher returns to skills and innovative ideas, in addition to returns to capital and productive assets, will mean the increased risk of leaving behind those who don’t have (access to) skills, innovative capabilities and capital.

Risks of deepening environmental degradation and Climate Change:

Fourth, we know more and more about the risks associated with environmental degradation and climate change and how they can impact on long term prospects for prosperity. The successful addressing of air and water pollution and climate change, will also reduce the risks they cause to human health and cognitive functions that are important in the context of IR4.0.

Whether Viet Nam will avoid these key risks depends very much on how Viet Nam’s private enterprises, which currently consist of mainly MSMEs and operate in informal sector will be able to grow both in terms size, their productivity and competitiveness including through growth in entrepreneurship, innovative applications of IR4.0 and green technologies for creating more higher- value and greener jobs.

In addition, whether Viet Nam’s future growth will continue to be accompanied by the relatively low levels inequality that ensure no one is left behind, will depend very much on: (i) how Vietnamese children and workers will be equipped with 21st Century skills so that they can both create new drivers of growth and seize the job opportunities with new functions that emerge, and (ii) how Viet Nam’s social protection systems together with health and education services can help protect those who cannot be as easily reskilled, build resilience of vulnerable and promote them to further develop.

Ladies and gentlemen, let me now focus on key actions for making IR4.0 inclusive.

The human development concept which is fundamentally about people-centred development or development that is for the people, of the people and by the people – and is a key principle in making IR4.0 inclusive. It means humans should be treated as the source of creative value, and not simply as a unit of labor, as was the case in previous industrial revolutions (IR 1., IR2.0 and IR3.0). Furthermore, people should not be treated merely as overheads to production, which current developments in IR4.0 suggest will be the case for the near future economy.

Making IR4.0 inclusive - a transition process in which all people could actively participate in, contribute to and benefit from IR4.0 – would involve actions in following four key pillars:

First, creating new growth drivers that help create new job streams for all: (while it is important to forecast the country’s growth drivers that will be affected in IR4.0 and the jobs that are at risk of being replaced by AI and automation for formulating actions for mitigation,) it is (even more) important to anticipate opportunities the IR4.0 offers in creating new sustainable growth, and higher-value employment, drivers. Unlocking and mobilizing the innovation and creativity of all people and enterprises will be the perquisite for creating such new growth drivers.

This will also require a new governance approach that enables distributed (or I would call it “inclusive”) innovation right across diverse sectors of the economy, across Viet Nam’s diverse geography and right across its population. This requires vibrant innovation ecosystems, sound technological infrastructure, effective human development and reskilling programs, for Viet Nam to capitalize the important emerging trend of Craft Revolution, that is (i) empowered by IR4.0 and human creativity and (ii) characterized by decentralized production processes. In such trend, creativity and innovation of many small production units can be maximized for digital, smart and circular production processes, with low factory setup and production costs for making on-demand and mass-customized products, similar to the craftsmanship era but deeply connected using the digital production and organization methods that IR4.0 offers.

Second, strengthening capabilities across the population to create and seize new job opportunities: In pursuing inclusive IR4.0, providing people with 21 century skills will be essential for enhancing their capability for creating and seizing new job opportunities. Schooling, especially skill training, system need to be remade to become crucial ‘enabling infrastructure’ for the people to master of their own life and become the source of creativity and innovation in the age of automation. For Viet Nam, this requires a transition of the country’s education system to a new model that is based on open communities of practices and a hybrid of classroom, apprenticeship and online learning, aiming at facilitating (i) the growing of capabilities such as creativity and adaptability, as well as (ii) open, contextualized, networked and action-oriented learning.

Third, building a more inclusive social protection system: As crucial ‘infrastructure’ at a time of disruption and risk, new social protection system must be more inclusive, with much wider coverage and higher level of benefits, as an investment to unlock potential across society, as well as manage social risks. The new system should provide adequate protection for livelihoods of those, likely middle aged and elderly, who cannot easily adapt to the new job functions. At the same time, the system should offer support to those that face risks of falling behind, in order to prevent negative impacts such as mass sectoral/regional unemployment, as well as to those with potentials to take risks in investing in learning new skills and creating new businesses.

Fourth investing in long-term environmental conditions for human flourishing: Viet Nam, among the countries that are most affected by Climate Change, should forge a growth model that maintains and even strengthens ecological assets, reducing pollution and habitat destruction whilst mitigating and adapting to climate change. To make this happen requires the strengthening of Viet Nam’s governance capabilities, especially for long-term planning with concrete integrated efforts to achieve a set of clear long-term targets accompanied with feasible budgets.

Anticipatory, Adaptable and Agile governance is central to creating the ecosystem for undertaking such actions in dealing with complexity, interdependence between policy objectives and risks, and cross-silo working. Such new governance approach will need to engage all people and institutions in a process of active learning and generating innovation, which, when leveraged together, are the most effective means to catalyze transformation. More will be said on this topic, at the roundtable session this afternoon.

In conclusion, I would like to express my strong believe that Viet Nam can seize the unique opportunity of crafting a transition to an Inclusive Industrial Revolution 4.0 that (i) generates leaps in productivity and technological transformation, and (ii) when accompanied by anticipatory governance promoting innovations of all, leads to a resilient, prosperous Viet Nam where No One is Left Behind. As in the past 40 years, UNDP stands ready side-by-side with Viet Nam in this very important journey.

Xin Cam on and Chuc hoi nghi thanh cong.