Robot Revolution Could Have Negative Impact on Emerging-Market Growth

As the robot revolution picks up steam in U.S., Japan and Germany, there’ll be less factory work outsourced to developing nations with relatively low labor costs, according to a report by Moody’s Investors Service.

The impact of the automated conversion will be most severe in Eastern Europe and Southeast Asia.

Moody’s warns of the possibility that developing countries that depend on manufactured exports could be in for a painful reckoning.

Automation and technological development is costly and requires huge up-front investment. However, once that’s in place, operational costs of factories will be way lower than in fully staffed manufacturing sites in Vietnam, Malaysia and Thailand as well as in Hungary, Czech Republic and Slovakia.

“As manufacturing has become highly integrated across countries, the adoption of automation in one country now has implications both within and beyond its borders,” Moody’s experts including Samar Maziad wrote in a note Wednesday. Whether the adoption of robotics is “positive or negative for a particular country will be contingent on how private-sector investment strategies, government policies and labor market dynamics evolve.”

The emerging markets with the highest percentage of exports to the leading adapters of the technology and those that will most likely to be hurt by factory automation.

The U.S., China, Germany, Japan and South Korea account for 75 percent of global robot-technology purchases, according to Moody’s.

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