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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 personalised 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 monetise 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.
Sangeet’s note: This is an op-ed, co-authored with Tan Chin Hwee,
where I propose how SIngapore could gain power in future trade
flows by structuring the country as a digital platform