First of 2 parts
WITH physical trade possibly declining, Singapore can expand and license its digital trade platform to global users. It can become a free data port as well.
Singapore’s strategic location has helped the island nation become a hub for global trade. But with digital technologies changing the nature of trade, Singapore’s locational and infrastructural advantages may no longer be as strong a control point as they were in the past. Singapore must reinvent itself as a hub for the age of digital trade.
And in the modern world dominated by platform companies that offer ways for customers and companies to connect with one another, Singapore must think like a platform nation.
It can make use of its innate advantages to develop ways for other nations and industries to connect through it digitally.
Today, digital technologies are changing the nature of globalization in two important ways. First, automation of manufacturing is moving manufacturing back West. Adidas, for example, is moving production from China to Germany, owing to the lower cost of robotic manufacturing in Germany. As Western companies re-shore manufacturing, East-West physical trade flows, including the ones moving through Singapore’s hub, are likely to go down.
Second, global SME (small- and medium-sized enterprise) trade is on the rise, driven by the rapid growth of digital platforms such as Alibaba and Tencent, which allow much smaller enterprises to participate in global trade without the need to invest in their own supply chains.
As these platforms scale further, we may see control over trade shifting from political countries to these digital platforms.
In this changing landscape, Singapore needs to re-imagine its position as a hub, and leverage its current strength in physical trade and its position of neutral governance to create new control points for digital trade.
To formulate these new control points, Singapore must think like a digital platform. To understand this better, let us consider how Google succeeded in dominating the smartphone industry with the Android platform.
Google’s 3-pronged strategy
Google used a three-pronged strategy. First, it drove the adoption of Android among smartphone manufacturers such as Samsung by open-sourcing the operating system. This was Google’s entry strategy.
Second, it controlled unique IP (intellectual property) in the form of Google Maps and the Google Play app store. This IP served as Google’s key differentiator. Every smartphone manufacturer needed to license this IP. Google continues to invest in improving its mapping data and growing its app store as these two sources of IP make Android more attractive as the standard.
Third, Google leveraged its neutral position in the smartphone industry—as a non-manufacturer—to allay competitive fears among manufacturers who were using Android.
This three-pronged strategy—an adoption strategy with partners, control of unique IP, and the benefits of a neutral position—established Android as the dominant standard.
Singapore can leverage a similar three-pronged strategy to establish a standard for digital trade. Such a standard would enable multiple participating countries to collaborate, while enabling Singapore to establish itself as a hub for digital trade.
Singapore’s road map
Much like Google’s strategy outlined above, Singapore’s road map to establishing a standard will involve an adoption strategy with partners, control of unique IP differentiators, and the benefits of a neutral position.
We elaborate further on these three initiatives below.
1. Drive adoption by licensing the SME trade platform to emerging economies
The first part of the three-pronged strategy serves as the entry point.
One such entry point could be digital SME trade, which has been growing with the rise of digital platforms. In the first quarter of this year, Singapore will launch its own SME trade platform, built on the blockchain, to allow SMEs to conduct digital commerce securely and seek new business partners and distributors, while managing a common audit trail between counterparties on the platform.
In the first instance, this platform allows Singapore SMEs to participate in digital commerce and grow their businesses. However, it can also serve as an entry point towards a larger strategy.
Once the success of the SME trade platform is demonstrated within Singapore, the country could open its platform technology, knowhow and processes to emerging economies that are seeking growth driven by digital SME trade. These partner countries understand the importance of digital SME trade but do not have the capabilities to create such a platform, nor do they want their SME sector to become over-reliant on commercial platforms such as Amazon and Alibaba. When multiple countries start using the same platform, they start subscribing to the same data standards, leading to greater cooperation and interoperability among them.
This serves as a first step towards creating a standard for collaboration in digital trade. However, it does not yet position Singapore as the hub. This leads us to the second part of the three-pronged strategy.
(To be continued tomorrow)
Tan Chin Hwee works with a Singapore-based multinational logistics company and has a family office that has been investing in technology for many years. Sangeet Paul Choudary is founder of Platformation Labs in Singapore, co-author of Platform Revolution and author of Platform Scale.
A version of this article appeared in the print edition of The Straits Times on February 14, 2018.