Singapore's e-volution - the new economy

Business Asia, Oct, 2000 by Tony Anderton

TONY ANDERTON reports from Singapore on a conservative nation that is getting radical -- by its standards at least -- in embracing e-commerce

THE MAN on television is urging his listeners to be more creative and innovative and calls for more "revolutionaries" and "insurgents" in society.

The firebrand speaker is none other than Singapore's normally serene Prime Minister Goh Chok Tong, urging his countrymen to embrace the challenges of the new economy.

Welcome to the information age -- Singapore style.

Prime Minister Goh's recent National Day address highlights the importance attached by government to the new economy and its role in Singapore's future.

An ambitious series of government initiatives is already in place, intended to foster an innovative, net-savvy society -- and to secure Singapore's place as a global leader in e-commerce.

Driving the government's e-strategy is the grim conclusion that if Singapore does not embrace the new economy, it risks jeopardising all the achievements of the past 35 years.

In an article published in Newsweek and the Straits Times, former Prime Minister Lee Kuan Yew starkly outlined what is at stake: "Immensely powerful forces of new technology are sweeping the world. The kind of societies Asia will build depends on how effectively each country embraces this technology and maximises its value."

Lee leaves no doubt as to the enormous benefits that can accrue -- both to Singapore and the region. He also leaves no doubt as to the downside in failing to embrace the information age.

Singapore has no alternative. "We in Singapore are going to adapt to the new world. We are not going to be left out. If you want to thrive in the modern world, then you must not be afraid," he said.

Few nations have provided such an unequivocal rationale for embracing the information age. But just how much of an impact will e-commerce have on Singapore?

Dr Paul Twomey, the former head of Australia's National Office for the Information Economy (NOIE), says the impact will be significant for the entire Asia-Pacific region.

Currently working with multinational companies to develop their e-commerce strategies, Twomey argues that although Asia's on-line transactions are still in their infancy, the new economy will transform how business is done.

He sees e-commerce (or commerce delivered electronically) challenging the traditional advantages of location, existing cost structures, established distribution networks and supply chains -- the essence of the entrepot or "hub" model so successfully exploited by Singapore.

Fundamentally, it is the ability of the internet to bring suppliers and customers directly together that looms as both a threat -- and opportunity.

A sense of the "clear and present danger" posed by e-commerce to Singapore's role can be seen in the area of foreign exchange dealing.

Singapore handles about 7 per cent of the world's daily forex trades (more than S$100 billion). The advent of online trading and electronic communication networks (ECNs) now allows buyers and sellers to deal direct and create their own virtual market, bypassing traditional intermediaries such as dealers. Apply this logic to other financial products and services, manufacturing, logistics and distribution, and it is easy to understand Singapore's competitive edge in many areas could be under siege.

With so much at stake, it is little wonder that Singapore's decision-makers want to be a global leader in e-business.

Singapore's strategy is unabashedly a government defined and directed one. Several key ministers have gone out of their way to say that the Silicon Valley, or a "free market" approach, is not suitable for Singapore.

The government's role is to engineer change: to build infrastructure, to take a first mover position in the delivery adoption of on-line services, offer incentives to business and the public to go on line, and position Singapore globally to attract the capital, people and innovation needed. In other words, government will be the essential catalyst for incubating Singapore's e-commerce future.

Examples of government initiatives are plentiful. Sing One, the government-built broadband network, provides interactive broadband access to every business and home in Singapore. By 2002, more than 1000 key government services (currently 130) are slated to be on line -- everything from B2B portals for government tenders and procurement to the payment of traffic fines.

Singapore's leading transport, finance and communications businesses have been quick to join in, announcing new e-commerce initiatives almost daily. The local media is saturated with stories of the latest innovations in e-commerce and technology.

Asia's first virtual banks have been set up in Singapore: the first was a tie-up between OUB and Ireland's First-e, and the second between OCBC and Australia's ANZ. On the home front OCBC has also set up finatiQ, a virtual bank aimed purely at the domestic market. Singapore is also scouring the world for foreign talent, international capital and courting MNCs and hi-tech businesses to use Singapore as their Asian headquarters.