How Technology Centers can help clients meet the challenges of Industry 4.0

The Picard leather goods factory in Dhaka, Bangladesh produces bags, purses and wallets that are sold in upmarket stores throughout the developed world under various well-known brand names, and in their own chain of stores in Germany. The factory is clean, efficient and goods are produced under all the relevant international standards.

But Picard are a rarity, and most Bangladeshi manufacturing looks just like it did 50 years ago. They produce cheap goods for the local market, but are a huge distance from producing at global standards. Unfortunately, this is also the case with most manufacturers in emerging economies. And all manufacturing is being changed by a range of new technologies known as Industry 4.0, with manufacturing becoming more global, more automated, more highly skilled, more infused with technology and more integrated with services. Whole manufacturing sectors, but in particular Small and Medium Enterprises (SMEs) face real challenges if they are to adapt rather than be left behind.

Manufacturing-related SMEs in emerging markets usually lack access to specialized institutions and services like, technology advisory services, R&D providers, skilled training providers industrial service providers (e.g. testing, accreditation), specialist consultants, etc. And even if skilled workers and new technology are readily available, SMEs often have weak firm-level managerial and organizational practices that are essential for using these inputs well.

So what can help SMEs address current and future technology change? And how can we help countries build the capacity to support their SMEs through future waves of technology?

Technology Center or Common Facility Center are one tool. The basic concept is a physical center that provides a range of services:

• Production equipment used for technology demonstration and short production runs
• Short and long term technical training for a mix of industry specific services (e.g. testing, calibration, product design) that are otherwise unavailable in the market
• Management upgrading services

Two World Bank Group projects are supporting the latest generation of Technology Centers in South Asia. In India, the Technology Center Systems Project (IBRD US$200mn) is supporting the upgrading of 18 existing Technology Centers and the establishment of 15 new centers across the country. In Bangladesh, the Export Competitiveness for Jobs Project (IDA US$100mn) is supporting the development of four new Technology Centers — the first in the country — to underpin export-focused industry upgrading.

The Indian network of Technology Centers has been established for several decades, and service a range of industries, from specialist agri-processing, low-tech manufacturing (e.g. leather goods and footwear) through to automotive and high-tech aerospace engineering. They provide a mix of services, including mass short term training and more specialized longer term multi-year technical training, industrial services like processing or tool and die making, innovation services (e.g. design, incubation, intellectual property advice, incubation for entrepreneurs), testing and conformance, and some produce components for industry clients.

The Bangladesh Centers are being established with strong support of local industry who have identified a wide range of services whose absence is impeding their current competitiveness. Bangladesh is drawing on the experience of the Indian network, and from other successful Centers in Thailand, Malaysia and Pakistan.

Technology Centers are not a magic bullet, they are not simple or cheap interventions, and they can go wrong. But as countries are looking for help with policies and interventions that position their industry to respond, the role of good Technology Centers in meeting these needs is potentially an important one.

Read more World Bank blogs.