What the digital economy means for Singapore’s economy

What Mobile
June 21, 2020

These days, all it takes is just a few touches on your phone to grab a taxi, order meals, and make payment transactions. In the digital era, technology has developed such that most of our everyday tasks have become digitized, transforming jobs and the way businesses are run.

Banks have become one of the first places where you’ll see digitization taking place. Apps like Paylah! by DBS Bank allow you to make cashless transactions, create new bank accounts, and apply for credit cards – a strong indication of how banks have begun digitizing their products and services for tech-savvy customers. As the number of visitors to bank branches starts to
decrease, jobs like bank tellers have begun adapting to these changes.

Jumping on the digital bandwagon

Singapore has begun rigorous efforts to adapt itself to this new digital era, focusing its efforts on businesses in particular.

Digitization has become necessary for all industries, with locals being encouraged to upskill and equip themselves to handle new technologies in the economy. One estimate predicts that by 2021, the digital economy will contribute as much as S$13.5 billion to Singapore’s gross domestic product. Additionally, a study by Microsoft and International Data Corporation Asia/Pacific argues that GDP will have a potential growth rate of 0.6% each year.

Of course, multiple challenges will be faced, especially the rapid rate at which jobs and skills are becoming trivialized.

The World Economic Forum and G20 nations have jointly defined the digital economy as a line up of economic activities that primarily use data and digitized knowledge to produce goods and services. Networks of information are essential in the facilitation of activities, and various information and communications technologies are being deployed to enhance productivity.

This new economy will be coordinated, facilitated, and run by technologies like artificial intelligence and the Internet of Things (IoT). More on the digital economy asean can be found here.

The impact on people and industries in Singapore

The digital economy has rapidly expanded and left its impact on all kinds of industries.

For instance, retail outlets have been deeply affected by the emergence of e-commerce websites. To boost productivity and improve cost efficiency, banks are using technology to perform back end tasks. Software is also being used to run routine operations and processes.

As certain job functions lose their relevance in the economy, other jobs are changing and now require new skills like data analytics and user experience design.

A report by the United Nations Conference on Trade and Development (UNCTAD) also asserts that these changes are set to occur quickly, as it has become possible to accumulate, analyze, and utilize large quantities of data. Digital platforms are a key driver of this phenomenon and various sectors should brace themselves for more disruptions by data-driven platforms – where multiple parties communicate on the web. This is especially so since the majority of top companies like Alibaba and Google are platform-based.

In a press conference for the release of the Committee on the Future Economy report, Trade and Industry Minister Chan Chun Sing stated that the digital era has provided a new resource – data – that allows Singapore to overcome its limit in size and resources. In January’s Parliamentary meeting, the minister stated that digitization opens a new gateway for us to extend beyond our geographical limitations while allowing businesses to enter new markets. Singapore stands to gain an exciting opportunity in the time where global prospects remain uncertain. The digital market that encompasses Southeast Asia is predicted to bring in over US$300 billion by half a decade, giving us more potential for growth.

Professor Sumit Agarwal at the National University of Singapore (NUS) has stated that Singapore runs primarily as an open economy, and has been the leader of past economic transformations. As the digital era continues to penetrate the economy and society, Singapore must accept these changes to avoid losing out in the global network.

What Singapore has done thus far

A range of measures are underway, and the country has made the digital economy an essential component of its Smart Nation goals. S$40 million has been set aside to invest in the establishment of an inclusive 5G ecosystem.

The Research, Innovation, and Enterprise plan for 2020 also post-review announcements that another S$500 million will be set aside for the development of digital technologies.

Businesses have also been encouraged to embark on digitization, with guidelines handed out to 23 industries since 2017, as well as the provision of funds and support for small and medium-sized enterprises (SMEs).

The new Digital Industry Singapore office has also been set-up to promote public-private partnerships. These will help firms to digitize and create as many as about 10,000 new jobs in the following years.

The country is also focused on equipping Singaporeans with the skills needed for the digital era. Training programs for new technical skills are also introduced in schools, and workers can choose to upskill or attend training held at their workplace.

The Deputy Prime Minister has also stated that Budget 2020 will provide more aid for enterprises and workers.

A strive towards cashless payments is ongoing, and Singaporean banks are awaiting further changes, as the Monetary Authority of Singapore makes plans to distribute new digital banking permits.

On an international scale, Singapore is currently securing agreements with other countries to facilitate a digital economic transformation. The country is also co-leader in setting regulations for the digital economy, under the E-Commerce Initiative at the World Trade Organization.

With such measures to stay relevant and competitive in the digital economy, the Institute for Management Development in Switzerland has ranked Singapore as the second most digitally competitive nation in the world, after the US.

Challenges faced in transitioning to a digital economy

Experts worry that the workforce is yet to be prepared to ride out changes in the digital era.

Ms. Jaya Dass, the managing director of Randstad recruitment company, states that countries, even those leading the global economy, are struggling to match jobs with employees offering the required skills.

She also adds that the rate of technological development exceeds the existing abilities of the local workforce – many have yet to learn how to use new machinery like artificial intelligence.

Singapore’s Manpower Minister Josephine Teo stated last month that this issue of matching jobs with skills will last. As long as Singapore continues to reshape its economy at a sufficiently rapid pace, this issue should not be viewed as alarming, but as an opportunity for growth.

A recent survey by PricewaterhouseCoopers shows that one in five locals are worried about the effects of digitization and tech on their careers. Out of 11 countries, Singapore ranks second as the most worried about its future in the digital economy.

58% of those surveyed shared fears of becoming obsolete amidst technological advancements, and another 36% expressed fears of lacking relevant skills. More than half also felt that their career roles would lose relevance, or be significantly altered by automation during the next decade.

Selena Ling, the Head of Treasury Research and Strategy at OCBC, says that since digital transformation is happening worldwide, these rapid changes in Singapore are unstoppable.

She also mentions that education here has become more attuned with the needs and demands of industries and the global economy.

As technology continues to alter the job market, the present challenge lies in helping the workforce to keep pace with such changes – more measures must be introduced to support workers and businesses, especially SMEs, in upgrading their capabilities.

Experts state that the digital economy will bring about problems, like cybersecurity threats and tax issues. Governments are in the midst of tackling these issues – for instance, Singapore has begun to impose GST on digitally imported services since the start of 2020.

There are also concerns around the world regarding issues of inequality – those with low-income and limited access to technology might be cut off from information shared across networks.

Ms. Ling has noted that changes to policy for the digital economy are still in infancy. With time, we should expect digitization to grow and replace traditional economic activities. When this happens, policies that determine the governance and taxation of the digital economy will start to play important functions for Singapore.

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