Focus View
Grants alone may not encourage automation
FocusM team | 19 Oct 2017 20:21
The Ministry of International Trade and Industry is proposing incentives in the form of grants to small and medium businesses (SMEs) to encourage them to automate their operations. 

This will, among others, enhance the implementation of Industry 4.0, the name for the current trend of automation and data exchange in manufacturing technologies. Industry 4.0 creates what has been called a “smart factory”.

We hope that such grants will encourage SMEs and others to invest in automation and gradually reduce their dependence on foreign labour. The growing foreign labour force has brought about several undesired issues.

When their contract is up, many workers don’t go home and become illegals, causing social problems. Foreign workers also reportedly remit billions of ringgit monthly to their home countries, causing a strain on the local currency. 
 
Malaysia’s over-dependence on foreign labour is getting acute. But by giving such grants, how sure are we that businesses would automate? 

Many SMEs still prefer to employ foreigners in the short-term as they are cheaper. Also, technology changes constantly which means investing more to keep up with trends in automation. But this attitude alone is not the problem.   
  
If the awareness of this Industry 4.0 theme is any indication of the potential take-up rate of the grants, then this incentive may be doomed even before it gets off the starting line. In a Business Conditions Survey conducted by the Federation of Malaysian Manufacturers and the Malaysian Institute of Economic Research, only 12% of the respondents were aware of Industry 4.0.

Thus, the government has a challenging task to not only promote the grant incentive, but also ensure SMEs and other businesses are aware of the advantages of Industry 4.0. They must realise the way to survive is to be cost efficient and improving quality through automation and technology.   
  
The government plans to further raise the minimum wage next year. That would significantly increase the labour cost for many businesses. Will that make them invest in greater automation?  

That’s not likely to happen unless new measures are introduced compelling manufacturers to automate. For a start, the government can gradually decrease the number of workers approved for every business so as to wean them off foreign labour. The soft approach will not work. 

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