Countries with workforce that can quickly adapt to changes have an edge: Kearney

SINGAPORE – Countries that can quickly reskill their workforce in response to changing market demands and technological disruptions will have a competitive edge, according to the regional head of global management consulting firm Kearney.

Mr Arjun Sethi, chief of Kearney’s Asia-Pacific region and vice-chairman of its digital transformation practice, said geopolitical, economic and technological forces have spurred significant changes in the global labour market.

“A major shift is afoot and staying competitive means the winners will be those where the labour pools can be everything, everywhere, all at once,” said the co-author of Kearney’s 2023 Global Services Location Index (GSLI) report.

The biennial GSLI ranks 78 countries based on 52 metrics that cover four dimensions – financial attractiveness, people skill and availability, business environment, and digital resonance (the digital skills of the labour force and digital outputs of business activity).

When mulling over relocating, firms consider a variety of factors, including labour and infrastructure costs, available skills and quality of services rendered, infrastructure, business environment, and political and social risks.

Increasingly, they also look at how ready a place is to address every technological or digital disruption, how digitally connected it is and how resilient its workforce is.

The global market for business services grew to US$681 billion (S$919 billion) in 2023 from US$624 billion in 2022, and is expected to rise at a compound annual growth rate of 8 per cent until 2027, Kearney said.

According to the study, Asia-Pacific markets shine as potential offshore service destinations. India, China and Malaysia continued to lead the top 10 in global ranking due to their cost advantage, abundant talent pool and strong skills. Indonesia, Vietnam, Thailand, the Philippines, and Singapore ranked among the top 15.

Mr Sethi said: “Singapore shines as the Asia-Pacific and South-east Asia’s premier emerging technology destination and innovation hub.”

The Republic jumped 24 ranks to 14th in 2023, from 38th in the last ranking in 2021. It made the highest leap by any country because of its digital connectivity and capabilities to foster innovation, as reflected in a thriving technology start-up ecosystem. 

It is estimated that Singapore’s tech economy would need another 1.2 million digitally skilled workers by 2025. To meet this demand, the Government announced in 2020 that it would invest $25 billion over a five-year period on research and development projects.

To date, training programmes and initiatives to help Singapore workers develop their skills and stay relevant include SkillsFuture Singapore, TechSkills Accelerator and Industry Transformation Maps.

Other countries such as Japan, the United States, Britain, Germany and Canada are also well positioned to future-proof their workforce to become top locations for global services as the focus shifts to people skills and digital connectivity.

Traditional lower-cost countries such as Malaysia, Indonesia, Vietnam, Thailand and Mexico are at the highest risk of losing their competitive edge. They will need to invest heavily in talent regeneration as the labour cost advantage becomes less relevant given technological disruptions and socio-economic factors.

Mr Sethi said: “Countries that want to attract foreign investments in their workforce will need to step up in terms of their general talent capabilities for the present as well as the future. The ability to bake in talent regeneration through education and training is a must, and governments and the private sector both have a role to play.”