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2. Invest in IP
In order to create the right control points and be a hub for digital trade, Singapore must invest in creating unique IP that other countries using the SME trade platform find valuable. It needs to create and control unique IP that adds value to users of the SME trade platform.
Singapore already has a head start here with its financial technology (fintech) strategy. By creating a regulatory sandbox, the country is already encouraging innovation in fintech.
The fintech innovations emerging from Singapore can be used as value-add plug-ins to the SME trade platform.
For example, a data-driven credit scoring system could be used to extend trade financing to SMEs based on their trade activity data gathered on the platform. Similarly, insurance premiums for trade shipments could be personalized based on proprietary data from the platform. Other countries using the platform may not possess the technology or financial infrastructure to build these capabilities themselves, making the platform even more attractive for them to adopt.
As more countries use the platform, other IP creators could find it more attractive to create IP for this platform, owing to the higher demand. This growing IP, in turn, leads to greater usage of the platform. This creates a virtuous circle.
This would position Singapore as the central and most powerful point for processing digital trade data from participating countries, making it a hub for digital trade.
Other countries using the platform would send their digital trade data to Singapore using the platform’s secure APIs (application programming interfaces), in order to benefit from Singapore’s fintech innovation that plugs in to the platform.
This IP creates a unique and inimitable differentiator. It also allows Singapore to monetize digital trade activity in other countries, positioning it as a virtual hub over trade flows.
3. Become a free data port and set a standard for digital trade
As Singapore becomes the hub for digital trade, it can also leverage its neutral position to allay fears among partner countries.
In the past, Singapore’s creation of a free trade port attracted physical trade flows to the country. We believe that Singapore would be well served by establishing a similar free data port that positions it as a neutral country for processing global trade data.
A free data port—an idea also proposed by former civil service head Peter Ho at the IPS-Nathan Lectures last May—would allow data from other countries to be stored and processed in Singapore, but in accordance with their individual country-specific data jurisdictions.
A free data port and neutral governance further position Singapore’s SME trade platform as a superior alternative to other commercial platforms that facilitate SME trade.
We believe this three-pronged strategy will help Singapore to establish a standard for digital trade. As locational advantages become less relevant in a digital world, Singapore can re-position itself as a hub by constantly investing in and controlling unique IP that other trading countries value, while maintaining a neutral stance through a free data port.
There are a few specific nuances to consider here. First, digital trade allows Singapore to be location-agnostic. In physical trade, Singapore benefited only from trade flows towards Asean. But in digital trade, the SME platform could be licensed to small nations in Africa, Central America and Eastern Europe.
We believe that Singapore’s head start with fintech IP, coupled with its neutral stance as a free data port, will make the SME platform attractive.
Second, in addition to providing a free data port, Singapore could also act as the neutral convener and facilitator for driving digital and data policies across participating countries. To the extent that many of these countries are emerging economies and have still not fully evolved their data policies, this proactive facilitation further strengthens Singapore’s position as a neutral hub.
Third, to be a strong hub for digital trade, Singapore must continue to invest heavily in machine learning and data-analytic capabilities to gain intelligence from global trade data flows.
On a final note, physical trade will continue to be important as well. In addition to preparing for digital trade, the country should strengthen its hub position in physical flows by capturing and controlling important data.
For example, one way to exert greater control over supply chains may involve digitising warehouses and other supply-chain assets across South-east Asia.
Much as platforms like Airbnb create a market by digitising spare accommodation, Singapore could create new digital markets around the trade taking place through its port by digitising spare assets that lie further upstream and/or downstream from its port.
While others try to compete with the port only at a physical level, this could enable the country to combine flows through the port with these new data points to exert more control over the supply chain and make itself a preferred port.
We are entering a new phase of globalisation, where digital technologies rapidly change the nature of trade. With the starting points of this strategy in place, Singapore is well positioned to create a hub for trade in this new world across physical and digital trade. But to succeed in this new phase, the country needs to think like a digital platform.
Tan Chin Hwee works in 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.