Fourth Industrial Revolution May Hit Emerging Economies: UBS

Davos: Emerging economies are less likely to benefit from extreme levels of automation and connectivity achieved through the Fourth Industrial Revolution, which has the potential to dramatically change the course of economic development, says a report.

While emerging economies are likely to suffer, the developed nations might benefit from the Fourth Industrial Revolution, according to a white paper released by financial services major UBS at the WEF annual meet here.

Low and middle-skilled jobs are increasingly under threat of replacement, a scenario that would further polarise labour force and increase income inequality, it noted.

"Extreme levels of automation and connectivity achieved through the Fourth Industrial Revolution have the potential to dramatically change the course of economic development and the distribution of wealth," the white paper said.

This could have significant implications for global economies, the relative competitiveness of developed and emerging nations and investors, it added.

Citing current assessments of relative competitiveness, the white paper said emerging markets "may be less well placed to profit from the Revolution benefits", relative to developed markets.

The paper said increased connectivity poses many potential advantages, but also elevates risks related to cyber warfare and geopolitics.

"Connectivity increases the risks posed by cyber threats and the magnitude of these threats rises further as a result of networks becoming more connected. Extreme connectivity also fosters geopolitical tensions, as it increases the ability of diverse groups to organise and protest," report noted.

A unique feature of the Revolution would be the implementation of artificial intelligence, it said.

Further, UBS said that developed economies are likely to be relative winners at this stage, whereas developing economies face greater challenges as their abundance of low-skill labour ceases to be an advantage and becomes more of a headwind.

"Economies with the most flexible labour markets, educational systems, infrastructure and legal systems are likely to be relative beneficiaries as they are well positioned to adapt their workforces and business models to a highly automated and connected world," the white paper said.

Many developing markets have relied on importing low and middle-skilled jobs to drive economic growth, but do not have the infrastructure, educational or regulatory systems to quickly adapt to a world that would demand more high-skilled labour and investment in high-tech manufacturing or
knowledge-based businesses, it noted.

'Mastering the Fourth Industrial Revolution' is the theme of this year's WEF meet.