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Manufacturing Transformation Set to Create a Two-Speed World

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A new report launched today by the World Economic Forum reveals that only 25 countries are in the best position to gain as production systems stand on the brink of exponential change. Recognizing the impact of the Fourth Industrial Revolution and emerging technologies on new production systems and business models, the Readiness for the Future of Production Report 2018, developed in collaboration with A.T. Kearney, provides a snapshot of today’s global production landscape along with potential responses.

The new framework is made up of two main components: Structure of Production, which measures a country’s scale and complexity of production; and Drivers of Production – the key enablers that position a country to capitalize on the Fourth Industrial Revolution to transform production systems. Recognizing that each country has its own unique goals and strategy for production and development, participants are assigned to one of four archetypes: Leading (strong current base, high level of readiness for the future); High Potential (limited current base, high level of readiness for the future); Legacy (strong current base, at risk for the future); or Nascent (limited current base, at risk for the future).

Helena Leurent, Head of the Future of Production System Initiative of the World Economic Forum, said: “Our work seeks to shape a future where new technologies in production systems help unlock human potential, tackle and solve challenges that have previously been insurmountable, and where all benefit. This report is intended to catalyse discussion between public and private sectors on the factors and conditions required, inform the development of modern industrial strategies, and define areas of collaborative action.”

Along with further qualitative analysis, the initial assessment reveals eight main findings:

Global transformation of production systems will be a challenge, and the future of production could become increasingly polarized in a two-speed world. The 25 countries in the Leading archetype account for over 75% of global manufacturing value added (MVA), while 90% of the countries from Latin America, Middle East, Africa and Eurasia included in the assessment have a low level of readiness.

Different pathways will emerge as countries navigate the transformation of production systems. Advanced manufacturing will not be the chosen path for all: some may seek to capture traditional manufacturing opportunities in the near term, while others will pursue a dual approach, or prioritize other sectors altogether.

All countries have room for improvement. No country has reached the frontier of readiness, let alone harnessed the full potential of the Fourth Industrial Revolution in production. While there are early leaders to learn from, these countries are also still navigating the early stages of transformation.

Common challenges within each archetype indicate potential future pathways for Leading, Legacy, High Potential and Nascent countries. Countries can learn from each other, while pursuing their own unique strategy.

Technological advancement brings the potential for leapfrogging, but only a handful of countries are positioned to capitalize. Lagging countries can potentially enter emerging industries at a later stage without the legacy costs of earlier investment, but only if they have the right set of capabilities and develop effective strategies for capturing leapfrogging opportunities most relevant to them.

The Fourth Industrial Revolution will trigger selective reshoring, nearshoring and other structural changes to global value chains. Emerging technologies will change the cost-benefit equation for shifting production activities and, ultimately, impact location attractiveness. All countries must develop unique capabilities to make them attractive production destinations and capitalize on these shifts.

Readiness for the future of production requires global, not just national, solutions. Globally connected production systems need not only sophisticated technology but also standards, norms and regulations that cross technical, geographical and political boundaries, to release efficiencies and make it easier to do business across global value chains.

New and innovative approaches to public-private collaboration are needed to accelerate transformation. Every country faces challenges that cannot be solved by the private sector or public sector alone. New approaches to public-private collaboration that complement traditional models are needed to help governments quickly and effectively form partnerships that unlock new value.

Johan Aurik, Managing Partner and Chairman of A.T. Kearney, said: “In a changing production landscape, each country will need to differentiate itself, capitalize on competitive advantages and make wise trade-offs in forming its own unique strategy for the future of production. Given the speed and scale of changes occurring in the environment, the new diagnostic and benchmarking tool can help raise awareness and sharpen a country’s response.”

Shaping the Future of Production System Initiative

This report is a key contribution to the World Economic Forum System Initiative on Shaping the Future of Production. The initiative brings together global leaders and decision-makers in seeking to address how the transformation of production systems, from R&D to the consumer, can drive innovation, sustainability and employment, to benefit all people.

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Economy

Radiation Processing Enables Small Businesses to Enter Global Value Chains in Malaysia

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Photo: M. Gaspar/IAEA

In today’s globalized world, becoming part of an international supply chain is key to the prospering of small businesses and their ability to create jobs. Meeting the quality requirements set by the multinationals that head these value chains is often tough for small and medium sized businesses (SMEs) operating on shoestring budgets. The country’s nuclear agency, Nuklear Malaysia, is doing its bit to help.

Thanks to the support of the Nuklear Malaysia, Wonderful Ebeam Cable has become the first SME in the country to supply cables to Malaysia’s booming automotive sector. “By using radiation technology, we have been able to improve our product line and meet the requirements of the car manufacturers,” said Managing Director Ir Chan Chang Choy. “This has allowed me to grow my business and increase the workforce.”

Due to the high temperature in engines, cables used in the engine compartment of vehicles need to be heat and flame resistant to make sure they, and the car, do not catch on fire. To improve the heat resistance and flame retardance of the insulation of copper wires, their polymers need to be crosslinked, forming an extremely tightly packed network of interconnected polymer chains. Crosslinked insulation material increases the service temperature of cable for instance from 75⁰C in the case of normal PVC to 100⁰C for crosslinked PVC.

Crosslinking can be achieved using chemicals, but the process requires higher temperatures. The alternative, the irradiation of polymers, leads to the formation of permanent bonds between the polymer chains at room temperature – which requires lower operating costs.

No SME in Malaysia has the technology in place to carry out such irradiation, and banks are reluctant to provide loans for the purchase of irradiation equipment, Chang Choy said. “These machines are expensive, and the banks do not accept the equipment itself as collateral, because there is no second hand market for irradiation equipment, so the banks cannot sell it if my company were to go bankrupt.” Also, their safe use requires extensive shielding, which can make up half the installation cost. And shielding cannot be removed and sold.

Enter Nuklear Malaysia, which irradiates the products of small businesses like Chang Choy’s for a small fee.

“The automotive industry has long been recognised as one of the key contributing factors towards the realisation of Malaysia’s aspiration to become an industrialised nation by 2020,” said Zulkafli Ghazali, Director of Radiation Processing Technology at Nuklear Malaysia. “This requires domestic capacity in cable manufacturing.” Through this support, the agency is doing its part to support the Government’s SME Masterplan to accelerate the growth of SMEs and increase their contribution to the economy from 32% of GDP to 41% by 2020.

Wonderful Ebeam Cable ships its products to Nuklear Malaysia’s irradiation facility in the centre of the country, some 300 kilometres to the north, three times a week. After a few days, the cables are returned, ready for the car companies.

Nuklear Malaysia is working with several SMEs in different areas of radiation processing – using ionizing radiation such as gamma radiation and  electron beam to change the physical, chemical or biological characteristics of materials to increase their usefulness and value or to reduce their impact on the environment. It is most widely used in the modification of plastic and rubber materials, the sterilization of medical devices and consumer items, the preservation of food and the reduction of environmental pollution. Nuklear Malaysia’s scientists have benefitted from a number of IAEA Technical Cooperation and Collaborative Research Projects, through which they were able to perfect the technologies used in radiation processing by working with experts from around the world. “The IAEA helps turn global expertise into local expertise,” Ghazali said.

The IAEA helps Member States strengthen capacities in adopting radiation-based techniques that support cleaner and safer industrial processes. Nuklear Malaysia has participated in several such projects and has been recognized, since 2006, as an IAEA Collaborating Centre for radiation processing of natural polymers and nano-materials.

This could come particularly handy in a few years’ time, he added. “If the country decides to build a nuclear power plant, we would need a lot more of cross-linked cables and other products manufactured using radiation processing technology.”

First published in International Atomic Energy Agency

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55 New Financial Inclusion Metrics For World’s 2 Billion Unbanked

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Today the World Economic Forum and 15 of its partners launched a new financial inclusion measurement framework. It defines the metrics that are crucial to understanding and improving how hundreds of millions of people access and use financial products like digital payments, savings accounts, and loans in the developing world.

The report complements ongoing efforts to quantify how financial services are being used, and their impact on people’s lives. “More nuanced metrics provide businesses and governments with the necessary inputs to offer customer-centric strategies that increase access and usage of financial services in a sustainable manner,” said Cheryl Martin, Managing Director, Head of Industries, World Economic Forum.

The findings, summarized in Advancing Financial Inclusion Metrics: Shifting from access to economic empowerment, proposes specific metrics to analyze the maturity of payments, credit, savings services and the overall regulatory environment. Greater visibility into these inputs is vital to financially include those left out of the formal economy whether in India or Mexico, Tunisia or Zimbabwe.

The initiative’s 15 core partners include financial providers, consulting companies, foundations, and consumer goods companies who together reach the majority of the world’s population, including the estimated 2 billion who currently don’t have bank accounts, debit or credit cards, or access to loans. They are Alliance for Financial Inclusion, BBVA, Bill and Melinda Gates Foundation, Credit Suisse, International Finance Corporation, Mastercard, Mercy Corps, MTN Group, PayPal, SWIFT, Tata Consultancy Services, Telenor Group, Unilever, UNSGSA, and the World Bank.

Paul Polman, Chief Executive Officer, Unilever said: “Data is critical to better understand the relationship between financial inclusion and greater wellbeing. By digitizing the processes of buying supplies and selling goods, small and micro businesses in emerging markets can gain access to appropriate low-interest credit, further boosting business growth.”

The report highlights that much of the required consumer data is already available. However, expanded data collection is needed in certain cases. In India, for instance, a country with 251 million people without access to financial services, only 11% of consumers used debit cards for payments over the course of a twelve month period 1.

This statistic is interesting, but fails to tell the whole story. Going several levels deeper, the application of more granular metrics would provide insights into the actual percentage of registered and unregistered businesses accepting digital payments; the barriers preventing both men and women from using digital financial services , alternative payment methods used (e.g., account direct transfer, card top-up), and the types of purchases made (e.g., groceries, utilities, healthcare, etc.). Understanding the customer at this level of detail would allow for more targeted solutions for increasing debit card acceptance.

As emphasized by H.M. Queen Máxima of the Netherlands, United Nations Secretary-General’s Special Advocate for Inclusive Finance for Development, “I always emphasize the importance of data. Without good data, we cannot map potential demand for financial services, track progress, and develop customer-centric products and services for the excluded, including women. The knowledge data provides, in turn, will help shape effective policies and generate the strong political will needed to achieve full financial inclusion.”

The report was launched ahead of the Annual Meeting of the World Economic Forum, which takes place January 22-26 in Davos, Switzerland, and brings together governments, international organizations, business, civil society, cultural leaders, media, foremost experts and the young generation from all over the world.

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Economics Students Unite in Bangladesh to Explore Paths Toward One South Asia

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The 14th  South Asia Economic Students’ Meet (SAESM) commences in Chittagong, Bangladesh today, embracing the arrival of over 110 top economics undergraduates and faculties from seven countries in South Asia towards the realization of a more integrated South Asia.

Rising economists from Afghanistan, Bangladesh, Bhutan, India, Nepal, Pakistan, and Sri Lanka will engage in vigorous academic competitions and research presentations on South Asia’s development opportunities under the theme of regional integration in South Asia. The meet will also include discussions by professors and World Bank experts on how greater regional integration in South Asia can help countries achieve the Sustainable Development Goals (SDGs).

“South Asia is a region with immense potential and youthful energy waiting to thrive,” said Selim Raihan, SAESM Organizer for Bangladesh and Executive Director for the South Asia Network on Economic Modeling (SANEM). “Building trust among neighbors through students can help lay the foundation for lasting relationships that will benefit growth, poverty reduction and prosperity in the future.”

SAESM Chittagong will include essay presentations and defense by students on their essays submitted for SAESM, a quiz on economic knowledge, as well as a ‘budding economist competition’’ that selects the brightest young economist through the best written and oral defense. Hosted this year by SANEM, participants come from a variety of South Asian universities including Dhaka University (Bangladesh), Delhi University (India), Lahore University of Management Sciences (Pakistan), University of Kabul (Afghanistan), Royal Thimphu College (Bhutan), and Tribhuvan University (Nepal).

Recognizing its unparalleled efforts in facilitating regional academic and cultural exchange, the World Bank Group has supported SAESM for many years in the forms of financing, logistical support, external communications as well as speeches and competitions.

“Regional Integration in South Asia is a work in progress, but there are many grounds for optimism, including the growing realization that most of the gains from regional integration remain under-exploited.  To help realize some of these gains, the WBG is supporting country governments in South Asia to deepen cooperation with their neighbors in several areas including energy, trade and investment, and connectivity,” said Sanjay Kathuria, Lead Economist for the World Bank. “Gains are likely to be incremental because this is a complex and long-term agenda. Youth can bring a business-like, uncluttered approach to provide greater momentum to the process of creating One South Asia.”

Since SAESM was piloted in New Delhi, India in 2004 by a group of university professors, it has been hosted rotationally by organizers in India, Bangladesh, Nepal, Pakistan, Sri Lanka, and Bhutan. Afghanistan sent its first batch of delegates in 2014.

“When we started SAESM, our objective was to bring together brilliant young economists from across South Asia and engage them in intensive academic exchange. Over the years SAESM has itself ‘graduated’ numerous dazzling talents and sent them worldwide,” said Raihan.

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