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The term Industry 4.0 was introduced in 2011, when German scientists and business advisors coined the term to label an advanced cyber-physical manufacturing process. The process constitutes smart infrastructure that employs today’s technology to digitally connect buildings, vehicles, workers, homes, plants, aircraft and even supply chain processes for enhancing management and manufacturing.

As we know, the key topics in industry nowadays concern multi-industry levels beyond construction and related enterprises.

Indeed, Industry 4.0 refers to the fourth industrial revolution. In his book The Fourth Revolution (2014), Luciano Floridi illustrates the evolutionary stages of the industrial era from the first use of water wheels and steam-powered manufacturing machines in the 18th to 19th centuries.

Today, the pace of technology adoption is speeding up, and will continue to do so in the years ahead. Sensor technology, interconnectivity and data analysis allow mass customization, integration of value chains and greater efficiency for industry. This is what Industry 4.0 is about.

Germany, one of the global pioneers of industry, has remarked that everything in and around a manufacturing operation (plants, suppliers, distributors and even the products) are essentially digitally connected and hence provide a highly integrated value chain.

In that regard, the underlying technology includes ubiquitous smart devices and analytics-based platforms, such as mobile devices, internet-of-things (IoT) platforms, cloud-computing, augmented reality/wearables, smart sensors, 3D printing, location detection technologies, advanced human-machine interfaces, multilevel customer interaction (profiling), and (un)supervised self-learning algorithms. Either fully or partially, intelligent industrial robots and machines have started to take over manufacturing operations.

In the Netherlands for example, Philips has already produced razor-blade shavers in a lightless factory. Robots, in this case, can be used to develop a new form of manufacturing operation and even alter existing processes. These robots could definitely outperform human workers.

There are laws that were created after (ex post, in lieu of ex ante laws) the occurrence of some breakthroughs, which often happens in the technology sector. Advanced technology adoptions create new realities for the industrial sector and society, and regulatory measures slowly recognize these in foresight of the consequences. Notwithstanding this belated approach, governments in the EU apparently step in to regulate such adoptions, carefully establishing policies to redress their destructive implications for society.

Regulators are often late to regulate technological disruptions; however, it does not mean we should not correct the issues. To thoroughly enjoy the benefits of new technology adoptions, laws are still needed to accommodate rising challenges. They are also necessary to balance the legitimate interests of business players, individuals and governments. In this regard, some experts have identifed the top three legal challenges as data protection, liability and trade restrictions (Henning Kagermann, 2013).

Regarding the first issue of data protection, corporate data will be generated and transmitted autonomously by and between smart machines. The data will inevitably cross company boundaries, so the risk of data disclosure to another company is obviously high. This could also happen in processing the personal data of employees. The details in personal data are very sensitive, for instance, the employee’s work record, which could pose a threat to employees’ right to personal data protection.

The second issue concerns the liability of companies. When data are exchanged between different companies, there is a risk that they may be used illicitly or that they may be hacked by third parties. This is prone to happen if the recipient fails to implement adequate information technology security measures. Last, but not least, is the challenge regarding trade restrictions. The more complex systems are deployed, the higher the likeliness of the individual components of industrial machines becoming subject to trade restrictions. Encryption technologies are both necessary and desired by customers in order to ensure the confidentiality and integrity of communication in a cyber-physical system.

Despite the need to resolve ongoing issues, we have identified new and interconnected Industry 4.0 matters, especially in Indonesia: the labor market and the low technology literacy of policymakers. Technological and industrial development insidiously affects both high- and low-skilled workers through the widespread employment of machines across various industries. This could put hordes of workers at risk of job displacement.

The lack of understanding in Industry 4.0 will affect policymakers to forecast the impacts, and thus a failure to appropriately respond to any unfavorable interference of disruptive innovations that may even daunt the innovation itself. This could prevent us from gaining optimum productivity growth in industries and in societal prosperity. Proportional regulatory measures equipped with the administrative capacity and relevant competence of government apparatuses must be put in place to make sense of the actual benefits of Industry 4.0.

Furthermore, manufacturers in Indonesia have yet to bear certain legal obligations, nor are they subject to restrictions, except for personal data protection as laid down in the Communication and Information Technology Ministerial Regulation No. 20/2016. At the end of last year, however, the ministry drafted an IoT regulation that is expected to provide underlying policy measures to at least provide recourse for job displacements that result from the rise of automation.

Looking on the brighter side, these unsolved challenges are also opportunities for Indonesia as an emerging country. Recalling that the more industrialized countries have issued guidance for Industry 4.0, it is time for Indonesia to also establish direction and guidance for technology adoption. Supervisory authorities have powers of statutory supervision that are essential for scrutinizing the challenges and outcomes of Industry 4.0. Eventually, Indonesia will not only be recognized as the fastest growing nation in digital infrastructure (at least for online marketplaces and ride-hailing platforms) and growing numbers of internet users, but also a good investment destination for Industry 4.0 among global business players.

Unboxing industry 4.0 in Indonesia Published in The Jakarta Post, 17th February 2018

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