COUNTRY-AS-A-PLATFORM: WHY

SINGAPORE’S FUTURE NEEDS A

PLATFORM STRATEGY

How Singapore could become the Android of countries

Singapore’s strategic location has helped the island nation become a
hub for global trade. But with digital technologies changing the nature
of trade, Singapore’s locational and infrastructural advantages may no
longer be as strong a control point as they were in the past. Singapore
must reinvent itself as a hub for the age of digital trade.
And in the modern world dominated by platform companies that offer
ways for customers and companies to connect with one another,
Singapore must think like a platform nation.
It can make use of its innate advantages to develop ways for other
nations and industries to connect through it digitally.
Today, digital technologies are changing the nature of globalisation in
two important ways. First, automation of manufacturing is moving
manufacturing back west. Adidas, for example, is moving production
from China to Germany, owing to the lower cost of robotic
manufacturing in Germany. As Western companies re-shore
manufacturing, East-West physical trade flows, including the ones
moving through Singapore’s hub, are likely to go down.
Second, global SME (small and medium-sized enterprise) trade is on
the rise, driven by the rapid growth of digital platforms such as
Alibaba and Tencent, which allow much smaller enterprises to
participate in global trade without the need to invest in their own
supply chains.
As these platforms scale further, we may see control over trade
shifting from political countries to these digital platforms.
In this changing landscape, Singapore needs to re-imagine its position
as a hub, and leverage its current strength in physical trade and its
position of neutral governance to create new control points for digital
trade.
To formulate these new control points, Singapore must think like a
digital platform. To understand this better, let us consider how Google
succeeded in dominating the smartphone industry with the Android
platform.
THREE-PRONGED STRATEGY
Google used a three-pronged strategy. First, it drove the adoption of
Android among smartphone manufacturers such as Samsung by open-
sourcing the operating system. This was Google’s entry strategy.
Second, it controlled unique IP (intellectual property) in the form of
Google Maps and the Google Play app store. This IP served as
Google’s key differentiator. Every smartphone manufacturer needed
to license this IP. Google continues to invest in improving its mapping
data and growing its app store as these two sources of IP make
Android more attractive as the standard.
Third, Google leveraged its neutral position in the smartphone
industry – as a non-manufacturer – to allay competitive fears among
manufacturers who were using Android.
This three-pronged strategy – an adoption strategy with partners,
control of unique IP, and the benefits of a neutral position –
established Android as the dominant standard.
Singapore can leverage a similar three-pronged strategy to establish a
standard for digital trade. Such a standard would enable multiple
participating countries to collaborate, while enabling Singapore to
establish itself as a hub for digital trade.
Much like Google’s strategy outlined above, Singapore’s road map to
establishing a standard will involve an adoption strategy with partners,
control of unique IP differentiators, and the benefits of a neutral
position.
We elaborate further on these three initiatives below.
1. Drive adoption by licensing the SME trade platform to
emerging economies
The first part of the three-pronged strategy serves as the entry point.
One such entry point could be digital SME trade, which has been
growing with the rise of digital platforms. In the first quarter of this
year, Singapore will launch its own SME trade platform, built on the
blockchain, to allow SMEs to conduct digital commerce securely and
seek new business partners and distributors, while managing a
common audit trail between counterparties on the platform.
In the first instance, this platform allows Singapore SMEs to
participate in digital commerce and grow their businesses. However, it
can also serve as an entry point towards a larger strategy.
Once the success of the SME trade platform is demonstrated within
Singapore, the country could open its platform technology, know-how
and processes to emerging economies that are seeking growth driven
by digital SME trade. These partner countries understand the
importance of digital SME trade but do not have the capabilities to
create such a platform, nor do they want their SME sector to become
over-reliant on commercial platforms such as Amazon and Alibaba.
When multiple countries start using the same platform, they start
subscribing to the same data standards, leading to greater cooperation
and interoperability among them.
This serves as a first step towards creating a standard for collaboration
in digital trade. However, it does not yet position Singapore as the
hub. This leads us to the second part of the three-pronged strategy.

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