In brief
Globally, there has been an evident structural change in capital markets, with six out of the 10 largest companies in 2022 being technology firms.1 This is a stark contrast with the early 2000s, when traditional companies in sectors such as energy, pharmaceuticals and fast-moving consumer goods dominated the world’s economy.
Singapore underwent two successful national transformations in response to digital disruptions: the National Computerisation Programme in the 1980s and growth of the information and communication industry three decades later that transformed the country into a hyper-networked, global hub for services.
The nation has made notable progress and its efforts have been recognized internationally. According to the IMD World Competitiveness Center (WCC), Singapore ranked fourth in global digital competitiveness in 2022, after Denmark, the US and Sweden.2 The Global Innovation Index (GII) 2022 — which assesses countries’ performance across seven innovation pillars — ranked Singapore as the seventh most innovative country in the world, leading the Southeast Asian region.3
Having built a strong foundation, Singapore is poised to take its digital transformation to the next level. The diagram below benchmarks the nation’s performance across the GII’s seven innovation pillars against other countries.
From the diagram above, Singapore outperformed the average scores of both the high-income as well as Southeast Asian, East Asian and Oceanian country groups in all GII pillars.4 When compared against the average scores of the top 10 economies in the GII 2022 ranking (Switzerland, the US, Sweden, the UK, the Netherlands, Republic of Korea, Singapore, Germany, Finland and Denmark) for all pillars, the country exhibited superior performance in the institutions, market sophistication, business sophistication, and human capital and research pillars.
Chapter 1
Singapore needs to improve its performance in other GII pillars: creative outputs, knowledge and technology outputs, and infrastructure.
Singapore scored below the average scores of the top 10 countries in the GII 2022 ranking for the pillars relating to creative outputs, knowledge and technology outputs, and infrastructure. There is certainly room to strengthen the nation’s performance in these three pillars.
In the IMD World Digital Competitiveness Ranking 2022 report, Singapore ranked highly in various metrics, such as the technology regulatory framework, but came in 10th in future readiness.5 This indicates that it is not sufficiently prepared to fully exploit digital transformation, including the use of disruptive technologies in organizational models to generate creative outputs.
The GII 2022 ranked Singapore 50th in software spending.6 In a 2020 study by Microsoft Singapore and the Association of Small & Medium Enterprises, only 39% of small and medium enterprises (SMEs) in Singapore perceived their digital implementation to be successful.7 However, the study also showed that Singapore SMEs remained optimistic about the potential impact of digital transformation on their bottom lines. There are already various support schemes in place and more can be done to support SMEs in digitalization to help accelerate their growth.
Singapore’s e-government service offerings have progressed significantly through the government’s focus on building and strengthening internal engineering and digital capabilities. From a regional perspective, there remains an opportunity to drive broader efforts in improving e-government service integration across Southeast Asia. This is especially so in areas such as cross-border travel, which will undoubtedly improve the quality of life of citizens moving between Singapore and neighboring countries.
The growing prevalence and sophistication of cybercrimes like ransomware and phishing attacks remain a cause for concern. In a survey report by Cisco, 52% of SMEs in Singapore that suffered a cybersecurity incident believe that the key contributor was inadequate cybersecurity solutions to detect and prevent the attack.8 WCC also highlighted that cybersecurity is a widespread issue and all surveyed locations, including Singapore, are far from being fully prepared to combat sophisticated cyber attacks.9
Given these challenges and Singapore’s strong digital foundation, the nation needs to address several key areas to be at the forefront of the digital revolution.
Chapter 2
Driving harmonization of e-government services across Southeast Asia and exporting digital solutions are key.
Governments not only play an important role in promoting knowledge-sharing nationwide, but also across borders with other governments. For instance, the Digital Nations (formerly D9 group of nations) member countries — the UK, Estonia, South Korea, Israel, New Zealand, Canada, Uruguay, Mexico, Portugal and Denmark — meet regularly to disseminate best practices and develop solutions to common stumbling blocks.
In Singapore, the government has taken a proactive role in facilitating the sharing of know-how and resources with the international community. Since 2016, the Digital Government Exchange (DGX) has brought together public-sector leaders from various nations and multilateral institutions, such as the United Nations and World Economic Forum, to engage in mutual learning while exploring future collaboration opportunities related to digitalization. The DGX also features technical working groups where countries and cities delve into specific subject matters such as cloud, digital identity, data governance and digital maturity. Simultaneously, the Singapore Government Developer Portal serves as a resource hub for digital government products and services, including publicly accessible guidelines and source codes.
While such efforts should continue, Singapore can grow its influence as a regional digitalization leader by spearheading regional interoperability of e-government services across Southeast Asia and exporting digital solutions.
For instance, the country could spearhead the facilitation of more efficient cross-border people movement with Malaysia through the sharing of citizen data and automated immigration clearance technologies. If effective, this can potentially be expanded to other Southeast Asian states.
A pioneering example in Europe is the Once-Only Principle e-government initiative expected to launch later in 2023, which seeks to allow citizens and businesses to only provide standard information to the authorities and administrations only once. With the incorporation of data protection regulations and the explicit consent of users, public administrators are permitted to reuse and exchange the information between agencies. Once-Only Principle is expected to achieve higher administrative efficiency through reduced data capture requirements as well as reduce data errors through data reuse.
Singapore can also explore the export of its digital solutions. Take for example how over 70 countries are using tried-and-tested e-government solutions from Estonia, a small and tech-savvy nation like Singapore. Finland, for instance, has implemented an Estonian-built and state-run data exchange platform named X-Road. Similarly, the state of Utah in the US has used Estonian e-voting technology for the presidential caucus. With significant international interest in the digital governance solutions developed and implemented in Estonia, the Estonian government established the Global Digital Society Fund in 2020 to export the country’s digital solutions on a global scale.
To meet the needs of its citizens, Singapore has developed numerous digital government solutions under the Smart Nation initiative, including SingPass, LifeSG and CrowdTaskSG. In the next step toward regional digitalization leadership, the nation could export these solutions to less developed nations with a desire to go digital.
Chapter 3
Government programs that help SMEs go further in their digital transformation journey to accelerate growth are crucial.
SMEs are the heart of Singapore’s economy, employing two-thirds of the labor force and accounting for nearly half the nation’s gross domestic product. It is vital that SMEs leverage the transformative potential of digital technologies to improve operations and generate new revenue streams to remain competitive.
To embark on the digital transformation journey, SMEs need to determine what digital means for them. There are three possible paths depending on the business’s urgency and risk appetite. As illustrated by the consumer goods example in the diagram below, a greater extent of digital adoption translates to improved topline performance, cost efficiencies and higher employee satisfaction.
In path A, companies seek to build their foundational digital capabilities incrementally, with a focus on systems stability, adoption and data transparency.
Having laid the foundations, companies may look toward path B where they use digital technology, such as analytics and process automation, to optimize existing operations and business models. With this, they can expect moderate revenue increase and cost reduction as well as greater employee satisfaction.
In path C, companies take bold strides in harnessing digital as a differentiator. Beyond integrating the latest technologies, these digital-first organizations have started to embrace digital channels, omnichannel experiences and data-driven decision-making, opening up new avenues of growth. Firms can expect significant improvements in the bottom line and employee satisfaction as a result.
Presently, many Singapore government programs spearheaded by Enterprise Singapore and the Infocomm Media Development Authority offer point solutions for companies with an annual turnover of less than S$100m to embark on path A. For instance, the Start Digital initiative has helped more than 37,000 SMEs since its launch in 2019 by providing foundational digital solutions offered by banks and telecommunications partners.10
In contrast, few program offerings help companies reach paths B and C. The Digital Leaders Programme is an example of an initiative that supports path B, with the aim of facilitating SMEs’ transformation process and their efforts to build a core digital team to kick-start the next chapter in their digitalization journey.
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Read moreWith numerous SMEs requiring digitalization assistance to accelerate their growth trajectory, initiatives that help firms optimize and differentiate their business with digital technologies are increasingly crucial. With that, we look at some programs that governments in other countries have funded to support local enterprises striving toward paths B and C.
Chapter 4
By focusing on Web 3.0, tech neutrality and cybersecurity, the government can accelerate development of Singapore’s digital maturity.
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Read moreThe increasing demands of digital-first consumers and the desire for businesses to remain competitive have largely driven technological transformation. Globally, governments and organizations across sectors are investing in transformative technologies, such as the metaverse, cryptocurrency, edge computing, tech-neutral intellectual property and cybersecurity.
The Singapore government can focus on three aspects of transformative technologies and further develop them to accelerate development of the nation’s digital maturity: Web 3.0, tech neutrality and cybersecurity.
This latest version of the internet focuses on decentralization and user ownership. It opens significant opportunities for Singapore’s economy from identity verification without private information sharing to holding assets digitally without the need for a custodian. The three most promising Web 3.0 initiatives are the metaverse, cryptocurrency and edge computing.
The metaverse is a universe of interoperable applications, virtual worlds and real-world connection points that make up an experiential internet where people can socialize, work, transact, play and create. Both the government and businesses have been taking note of possibilities across the four broad categories that EY-Parthenon teams have identified based on the nature of metaverse activities: lifelogging, augmented reality, virtual worlds and mirror worlds.
In Singapore, there has been a noticeable progression from the incorporation into augmented reality and virtual reality within service delivery to the establishment of presence within the virtual space. The nation can tap into this by deepening integration of the metaverse in service delivery across sectors.
At the TechLaw Fest in 2022, Mr. Edwin Tong, Second Minister for Law, raised the possibility of Singapore building a virtual dispute resolution platform in the metaverse. Well-known for its robust legal system and infrastructure, Singapore could potentially extend its world-class legal services to the metaverse to facilitate the resolution of cross-border commercial disputes led by local dispute resolution institutions and law firms.
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Read moreThe prospect of professional services being offered in the metaverse will potentially be supported by the formation of metaverse standards bodies. One such example is the recent Metaverse Standards Forum joined by tech giants as well as established standards-setting bodies.
The metaverse can enhance Singapore’s publicity and branding for hotels, resorts, tourist attractions and heritage sites, and the wider real estate sector can also benefit from the creation of a presence in the virtual space. One possibility is for buyers to view and stay in the digital twins of physical buildings purchased. Events and activities can also be held in these virtual spaces.
Singapore can aim to create a holistic platform for the metaverse by being an orchestrator to bring together ecosystem players, such as business operators, investors and the public sector. More support can be given to help develop local metaverse startups and metaverse-specific skill sets. Singapore will also need to address risks to online safety, consumer protection and privacy, given the decentralized and anonymous nature of the metaverse.
While the metaverse is still in its nascent stages, many countries have been adventurous in exploring its possibilities. The Japanese Ministry of Economy, Trade and Industry has established a dedicated taskforce, the Web 3.0 Policy Office. Its role is to bring together various government bodies to formulate policies that will strengthen the business environment and facilitate development of Web 3.0 in the country.
In South Korea, the Ministry of Science and ICT has allocated KRW223.7b (about S$228.1m) to foster a metaverse ecosystem.16 Part of the fund will be used to establish a metaverse academy to train young metaverse experts and support the operation of metaverse labs that promote the development and commercialization of metaverse-specific technologies. The Seoul municipal government also invested KRW3.9b (about S$3.9m) to create a metaverse platform, which was launched earlier this year.17 The initiative is expected to span five years and will cover seven key areas of focus: economy, education, tourism, communication, urban management, public services and infrastructure.
The cryptocurrency landscape in Singapore is still in its infancy. While the Monetary Authority of Singapore has given in-principle approvals and licenses for digital payment tokens under the Payment Service Act, strict licensing is imposed on cryptocurrency businesses in Singapore. As a result, some cryptocurrency-based companies have transferred their headquarters to locations with a more amenable regulatory landscape.
To keep pace with global developments, Singapore has been actively pursuing blockchain research and innovation by partnering with the IBM Center for Blockchain Innovation to nurture local talent and foster innovation. Other Asian countries are also investing heavily in this technology. China has approved the establishment of a blockchain research center in Beijing to develop software, hardware and fundamental theory, with a focus on use cases that benefit the national economy.18 Japan’s central bank decided to start a pilot program to test the use of a digital yen and the finance ministry is expected to form a panel of experts to discuss the feasibility of issuing the digital yen.19
The opportunities are immense for Singapore. There is potential to take the lead on developing global regulatory consistency for cryptocurrencies to preserve financial stability and protect investors, given the cross-border nature of cryptocurrency services. At the same time, Singapore can strengthen its focus on creating an innovative and responsible digital asset ecosystem. This includes attracting key players to set up in Singapore while educating potential retail investors on the pitfalls and risks involved in cryptocurrency trading. By moving quickly in this area, Singapore has the potential to gain a first-mover advantage.
Edge computing is another initiative under Web 3.0 that will create new and efficient ways for businesses to operate and process data. There are numerous use cases with significant market opportunities, including overcoming the latency gap between gamers, augmented manufacturing safety and product quality assurance via digital twins. For safety and quality assurance, manufacturers require technologies that offer a near real-time view of machine performance and are capable of collecting, analyzing and utilizing data to monitor operations and manage equipment remotely. This will lower the risk of worker injuries by optimizing machine operations with near real-time performance data and reduce product defects due to machine wear and tear.
The global edge computing market is expected to grow from US$44.7b (about S$59.4b) in 2022 to US$101.3b (about S$134.5b) by 2027 at a compound annual growth rate of 17.8%.20 Therefore, there are significant market opportunities for Singapore.
Geopolitical tensions are leading to the decoupling of high-tech ecosystems, presenting an opportunity for Singapore to be a tech intermediary between the global powers. If economies continue to impose protectionist measures, including restrictions on data sharing to maintain self-sufficiency and tech competitiveness, this would impact key industries, such as financial services, retail and transportation, and consequently disrupt trade flows and stifle business innovation.
Singapore maintains deep and long-standing bilateral relations with global powers. This inclusive foreign policy approach will allow it to position itself as a neutral venue for businesses and investments, similar to how it has positioned itself as an ideal jurisdiction to resolve cross-border commercial disputes.
The nation can also seek to bring together tech experts in areas of global interest (such as climate change) to develop new solutions and strengthen its profile as a technological hub. By building on strengths as a politically neutral, stable and technologically advanced nation, Singapore can initiate and host collaborative projects with different partners for a win-win outcome.
Cybersecurity risks have proliferated with the advent of new technologies. A Cisco survey of Asia-Pacific countries showed that Singapore had one of the highest percentages of SMEs that considered inadequate cybersecurity solutions as the top reason for cybersecurity incidents.21 It has never been more urgent for government organizations and businesses to build digital resilience.
Singapore possesses strong cybersecurity service capabilities, which have helped drive growth in its cybersecurity market and elevate the maturity of the local cybersecurity ecosystem. For example, under the latest Monetary Authority of Singapore Technology Risk Management Guidelines, financial institutions are required to perform penetration testing at least once a year. In addition, many companies in the country are accredited with CREST, an industry-recognized certification in penetration testing.
However, Singapore lacks competitive local cybersecurity products, with significantly fewer established local cybersecurity solutions players than cybersecurity service players.
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Read moreThe potential revenues of cybersecurity services players are limited by the amount of resources that can be deployed as well as time zone, language and localization considerations. In contrast, cybersecurity solutions are typically easier to scale up due to their one-size-fits-all nature.
Based on an EY-Parthenon analysis, the addressable Singapore cybersecurity solutions market is forecast to be worth approximately US$1.5b–US$1.9b (about S$2.0b–S$2.5b) — about three times that of cybersecurity services — by 2026. Therefore, Singapore needs to make bold strides in its cybersecurity solutions strategy to capture a bigger share of this growing global market and stay ahead of the curve. In view of the constantly evolving cyber threats, innovation is key to bridging existing gaps and elevating the maturity of Singapore’s cybersecurity ecosystem to the next level.
Currently, cybersecurity solutions demand is mainly driven by traditional end-users in the banking, financial services, insurance and public sectors. To enhance the demand, Singapore needs to identify and address new opportunities in industries beyond these.
As businesses undergo industry digitalization, there are growing unmet cybersecurity needs from the application of technologies such as the Internet of Things, artificial intelligence and blockchain. Singapore needs to attract cybersecurity multinational corporations (MNCs) in these domains and continue increasing the attractiveness of its proposition by expanding use cases in these areas.
While cybersecurity MNCs base their R&D centers in countries like Estonia and Israel, the majority of MNC offices in Singapore are sales-focused and do not bring in sufficient technical depth. To attract global cybersecurity players to set up R&D centers in Singapore, the nation needs to leverage its strengths. For instance, Singapore can tap into its highly digitalized economy and government data sets for cybersecurity test bed development. It can also connect its existing world-class players in emerging technologies with cybersecurity MNCs for collaboration to develop cybersecurity solutions. Another option is to bundle institute of higher learning activities with industry cybersecurity innovation activities to help achieve greater commercialization success.
Singapore also faces the challenge of insufficient local cybersecurity companies. An EY-Parthenon analysis noted that few local cybersecurity players received investments beyond Series A, with only three found in the combined portfolios of 10 major venture capitalists (VCs) in Singapore. The uptake of cybersecurity startups at the seed stage by private incubators and accelerators in Singapore is low, as shown by the lack of cybersecurity companies in programs such as Temasek’s HyperX and Y Combinator.
To groom more local cybersecurity companies, Singapore needs to attract VC-backed cybersecurity-focused accelerators to identify and grow top-tier local startups from the seed stage to Series A. As a start, Singapore has to connect top local startups with cybersecurity-specific teams and mentors from global VCs to showcase these players with high potential.
To enhance the value proposition for these global VCs, Singapore may offer a risk-sharing funding scheme. Israel already has such a scheme, where under the Seed Incentive Program, the Israel Innovation Authority will invest 40% of the total investment round for startups.22 The risk-sharing nature of such schemes will encourage experienced investors to invest in early-stage startups, potentially amplifying the success rate of local startups. Additionally, cybersecurity companies with an R&D presence in Singapore need to be connected to local industry demand so that innovation does not happen in a vacuum.
With technological disruptions fundamentally changing how citizens live and work, Singapore needs to advance its digital maturity, which will be key to the nation’s next phase of growth. By building on its strengths and reimagining what it means to be digital first, Singapore will be on track to become a digital leader.
To address technological disruptions that fundamentally change how citizens live and work, Singapore needs to develop its digital maturity to become a digital leader. This involves taking the lead in Southeast Asia’s digital ecosystem and accelerating digital transformation journeys of small and medium enterprises. The nation can also pioneer transformative technologies, with a focus on Web 3.0, tech neutrality and cybersecurity.
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