Connecting CommerceBusiness confidence in Singapore’s digital environment A report from The Economist Intelligence Unit

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Singapore

Singapore’s authorities are known for leaving no stone unturned when it comes to devising and implementing strategic plans to boost its economy. Digital development is no exception. For the past two decades, the government has invested substantial sums in modernising the city-state’s telecommunications networks and other elements of its information and communications (ICT) infrastructure. In recent years, the Singapore government has embarked on a set of highly co-ordinated efforts to expand the ecosystem which supports digital innovation and entrepreneurship.

It is a view that is broadly supported by Singapore-based respondents in The EIU survey. Executive confidence in the city’s digital transformation environment is the 14th highest among the 45 cities in the study. At 6.89 out of a maximum possible 10, the overall barometer reading is relatively strong, although it suggests there is considerable room for improvement, particularly in areas such as support for innovation and entrepreneurship as well as talent and skills development. (Singapore’s position in the Digital Cities Barometer is broadly mirrored in a study of tech start-up ecosystems produced by Startup Genome, a US think-tank, in which the city-state ranks 12th1.)

“ The digital ecosystem here has strengthened year by year over the last decade. This is a very positive environment for innovative companies looking to build their digital capabilities.”

- Markus Gnirck, co-founder of tryb

Score (out of 10) Rank (out of 45)

0 5 10 15 20 25 30 35

Overall

Innovation andentrepreneurship

Financialenvironment

Supply of peopleand skills

Development ofnew technologies

ICT infrastructure

14th

21st

16th

18th

13th

14th

6.89

6.85

6.74

6.81

6.89

7.04

Those undertakings, and the many related initiatives they have spawned, have borne fruit, according to Markus Gnirck, co-founder and chief executive officer of tryb, a Singapore-based financial technology infrastructure company (and also the former chief operating officer of accelerator Startupbootcamp Fintech Singapore). “The digital ecosystem here has strengthened year by year over the last decade,” he says. “This is a very positive environment for innovative companies looking to build their digital capabilities.”

1 Startup Genome, Global Startup Ecosystem Report 2017. Singapore also ranked first of 11 Asian nations in The Asian Connecting Capabilities Index, produced by The Economist Intelligence and Telstra in 2016, part of the series of annual studies of which Connecting commerce is a part.).

Figure 1: Barometer readings – Singapore

2 Telstra — Connecting Commerce © The Economist Intelligence Unit Limited 2017 3

Pushing the skills agendaPeople with advanced digital skills, who have expertise in areas such as analytics, user experience (UX), cyber security, or fast-emerging technology fields such as the Internet of Things (IoT) and artificial intelligence (AI), are in short supply virtually everywhere. Businesses in Singapore are experiencing the same difficulties. Talent and skills shortages are top of the surveyed firms’ list of the toughest challenges they face in pushing through their digital transformation initiatives. This is not a complaint directed at the education system. More than two-thirds (67%) of executives credit universities and other institutions with doing an effective job (20% say “very effective”) of equipping students with the needed digital skills.

Skills development is closely co-ordinated between the government and academia, and also to some extent with businesses. Three-quarters (75%) of firms in the survey state that they are consulted about their digital skill needs by academic institutions, and more (77%) say the same about government authorities.

Mr Gnirck believes Singapore universities are building the key digital disciplines into their curricula, and that there is a good “cross-pollination” of skills training within the ecosystem between universities, corporates and start-ups. In his field it’s common, he says, that big banks as well as start-ups are involved in university programmes so that students have exchanges with the right stakeholders, including through corporate internships. “I haven’t seen this before in London or in other parts of the world where I’ve worked.”

There are nonetheless imbalances in the types of expertise prevalent in the talent pool. Analytics, security and IoT are the skill needs cited most frequently by survey respondents. “There’s probably an oversupply of sales and asset managers,” says Mr Gnirck of the financial field. “But we’re looking more for software engineers as well as legal and compliance experts, which are a very important aspect of running fintech companies. So there’s a bit of a mismatch.”

“ Their role is increasingly to bridge the gab between corporates and start-ups. The former need to find innovation and R&D and the latter need to find strategic investors and partners.”

- Markus Gnirck, co-founder of tryb

Networks of supportFor its land mass and population size, Singapore may well have the densest network of accelerators and incubators in the world. One source lists 52 of these currently operating on the island4. There are numerous home-grown ones amongst them, such as Startup Nation, The Co-Foundry, and SPH Plug and Play. Singapore has also become a magnet for overseas accelerators, such as Startupbootcamp Fintech of the US (launched locally by Mr Gnirck) and the Netherland’s Rockstart, as well as accelerators run by corporates such as MasterCard, PayPal, Telstra and Wells Fargo.

By their nature, such structures are of direct help to a limited number of businesses. Just under 20% of survey respondents say accelerators and incubators have proven valuable sources of assistance in terms of their own digital efforts. (Government programmes and innovation labs are mentioned much more frequently.) Judging by their recent growth, however, particularly in the fintech sector, they are likely to become more prominent in the wider ecosystem.

Mr Gnirck has seen big companies become more involved in these structures in recent years. Whereas accelerators’ main function has been to help founders raise capital, they’ve now become more of a “corporate education platform”, he says. “Their role is increasingly to bridge the gap between corporates and start-ups. The former need to find innovation and R&D, and the latter need to find strategic investors and partners.”

More than half of the surveyed executives (57%) say their firms use such structures to obtain advice on specific technology challenges they are facing. Another one-third (33%) are on the lookout for new ideas about products and services. The potential to find new talent and referrals to sources of data and funding are the other main benefits Singapore firms obtain from these elements of the ecosystem.

4 Fintech Singapore, “List of startup accelerators and incubators for Singapore”, fintechnews.sg.

Another aims to establish deeper data science expertise within Singapore3. They are, however, long-term initiatives and are unlikely to ease the talent shortages in these areas in the near term.”

“The government is aware of the talent shortages in several skill areas and is taking efforts to address them. One example is the establishment of a new academy to train cyber security specialists to work in both government and the private sector2.

2 “Singapore to have new academy to train cybersecurity professionals”, Channel News Asia, September 19, 2017. 3 “Singapore forms new Data Science Consortium”, eGov Innovation, May 5, 2017.

Figure 2: Digital skills most needed by organisations to support their digital transformation initiatives

0

5

10

15

20

25

30

35

22%

32%

38%

Digital security skills

Internet of things skills

Business change m

anagement skills

Business netw

ork skills

Custom

er/user experience skills

Cloud com

puting skills

Arti�

cial intelligence skills

Mobile technologies skills

General coding/program

ming skills

Big data analytics skills

18%17%

13% 13%12% 12%

8%

Figure 3: The most helpful external groups in assisting firms’ digital transformation efforts

33%

42%

43%

Innovation labs and centres

Business associations and events

Industry conferences

Incubators/accelerators

Government programmes and events

17%

22%

4 Telstra — Connecting Commerce © The Economist Intelligence Unit Limited 2017 5

Singapore research institutes, universities, companies and individual inventors are prolific generators of patents. According to Bloomberg, Singapore ranks third in the world behind South Korea and Japan in patents approved per capita, and the number of patent applications by residents has climbed steadily in the past decade5. The government, however, appears concerned that not enough of this intellectual property (IP) has been commercialised by companies. It is now launching a concerted effort to attract innovative start-ups from overseas to develop their ideas in the city-state. This is the purpose of the Makara Innovation Fund, a joint undertaking of the Intellectual Property Office of Singapore (IPOS) and a local private equity firm, Makara Capital, announced in April 2017. The US$700m fund will be used to invest in 10 to 15 companies (which can also be local) with “globally competitive technologies”.

Markus Gnirck explains that the local

digital ecosystem has produced a few commercially successful firms, such as gaming company Sea (formerly Garena), online retailer Lazada and ride-hailing platform Grab, but their number is limited. (It may also be no accident that “lack of access to a strong technology ecosystem” is third on the list of digital transformation challenges amongst surveyed businesses.)

The government, Mr Gnirck says, is looking to kickstart another stage of ecosystem growth and, with the Makara Fund, is borrowing from an old strategy that worked well in the past. “Singapore became an innovative business space a few decades ago when the government first attracted big Western technology companies, and later life science firms, to establish their Asian headquarters as well as some R&D activities here. Now it is looking to do something similar, this time by attracting growth and later-stage companies from overseas to develop their ideas here. The old

strategy is coming full circle, this time focusing on start-ups.”

The fund is part of an “IP Hub Master Plan”, to be spearheaded by IPOS. Its mission: to “build an innovation and IP ecosystem in Singapore where good ideas from over the world can be transformed into assets, revenue and enterprise growth”. To achieve this, the government is planning to double the office’s capacity to over 1,000 employees over the next five years6.

“In a separate government effort to facilitate greater IP commercialisation, the government is giving public agencies and research institutes the right to grant companies licences to use their scientific discoveries, and in some cases to transfer IP directly to them7.”

Importing innovation

5 “Singapore Creates S$1 Billion Innovation Fund to Drive Growth”, April 26, 2017. Patent application and approval data can be found in the Singapore Statistical Country Profile on the website of the World Intellectual Property Organization (http://www.wipo.int/ipstats/en/statistics/country_profile/profile.jsp?code=SG).6 “One-billion dollar innovation fund launched in Singapore to drive enterprise growth for our future economy”, IPOS press release, April 26, 2017.7 “Singapore government launching an enhanced IP framework to connect publicly-funded R&D to enterprises”, Open Gov, September 18, 2017.

Future-ready infrastructure?Business views on Singapore’s ICT infrastructure deserve mention.Reliable and secure access to high-speed broadband networks, as well as to cloud infrastructure with the massive computing power needed to crunch and store data, are a prerequisite to any firm’s efforts to digitise its operations. Few tech start-ups can get off the ground without such access. Government smart city and open data initiatives are also valuable to many types of firms, as evidenced in the survey results (Figure 4).

The barometer reading relating to the city’s ICT infrastructure suggests business confidence in it is relatively solid. However, the same executives do not seem to give much credit to the government for this, with only a minority saying the city has been effective at providing infrastructure to meet their digital transformation needs. In another indicator with some disagreement, 45% think the government makes poor use of the data that it collects (though another 45% disagree with this).

These nuanced views suggest that the existing technology infrastructure has served businesses well for the digital ambitions they have had up to this point. There is recognition, however, that more needs to be done to make the city’s ICT foundations fit for purpose for the data-intensive economy that is taking shape.

Figure 4: Share of respondents saying the government’s smart city and open data initiatives are important to their business

63%

80%

Sm

art city initiatives

Open data initiatives

© The Economist Intelligence Unit Limited 2017 7

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