As
Singapore seek new growth sources, the micro-nation is positioning
itself to become Asia’s start-up hub. By promoting outside the box
thinking in the economy, Singapore could see political spillover as
the government looses control over the new commanding heights of the
21st
century information economy.
Singapore seek new growth sources, the micro-nation is positioning
itself to become Asia’s start-up hub. By promoting outside the box
thinking in the economy, Singapore could see political spillover as
the government looses control over the new commanding heights of the
21st
century information economy.
Lee
Kuan Yew’s (LKY) passing in March signaled
both the (belated) death of Singapore’s 20th
century political and economic paradigms. The government, now run by
LKY’s son, may in the future still maintain a firm hand; however,
Singapore’s highly educated, mobile, and technologically savvy youth
are pushing for a more open society. 2015 has been an auspicious year
for the Asian micro-nation as it also celebrates its 50th
anniversary.
Kuan Yew’s (LKY) passing in March signaled
both the (belated) death of Singapore’s 20th
century political and economic paradigms. The government, now run by
LKY’s son, may in the future still maintain a firm hand; however,
Singapore’s highly educated, mobile, and technologically savvy youth
are pushing for a more open society. 2015 has been an auspicious year
for the Asian micro-nation as it also celebrates its 50th
anniversary.
With
LKY notably absent, Singaporeans are understandably nostalgic, but
also enticed by the future. While the government is “listening,
hearing criticisms, receiving feedback and improving itself”
according
to
Burhan Gafoor, high commissioner to Australia, political change will
be spurred by the changing nature of Singapore’s economy.
LKY notably absent, Singaporeans are understandably nostalgic, but
also enticed by the future. While the government is “listening,
hearing criticisms, receiving feedback and improving itself”
according
to
Burhan Gafoor, high commissioner to Australia, political change will
be spurred by the changing nature of Singapore’s economy.
Singapore
needs a new growth formula
needs a new growth formula
Singapore’s
government long
fostered growth
by controlling the commanding heights of the economy and focusing on
specific sectors such as shipping, shipbuilding and the financial
sector. Large formalized institutions and their attendant hierarchies
allowed the government to keep close tabs on the economy, while
garnering legitimacy from their sound economic stewardship. The
problem now facing Singapore is that as a mature economy it can no
longer rely on these sectors alone to ensure growth.
government long
fostered growth
by controlling the commanding heights of the economy and focusing on
specific sectors such as shipping, shipbuilding and the financial
sector. Large formalized institutions and their attendant hierarchies
allowed the government to keep close tabs on the economy, while
garnering legitimacy from their sound economic stewardship. The
problem now facing Singapore is that as a mature economy it can no
longer rely on these sectors alone to ensure growth.
From
2004 to 2014 Singapore’s annual GDP growth declined
from 9.5% to 2.9%, largely due to a maturing economy. Companies in
the aforementioned sectors have also seen their stock performance
decrease, with some being
cut
from the benchmark Strait Times Index. This is a major issue as
shipping, ship building, and commodities have long been behind the
lion’s share of Singapore’s market capitalization. Specifically, the
average
daily trading volume
for these sectors has dropped from $1.24 billion in 2010 to $816
million in 2014.
2004 to 2014 Singapore’s annual GDP growth declined
from 9.5% to 2.9%, largely due to a maturing economy. Companies in
the aforementioned sectors have also seen their stock performance
decrease, with some being
cut
from the benchmark Strait Times Index. This is a major issue as
shipping, ship building, and commodities have long been behind the
lion’s share of Singapore’s market capitalization. Specifically, the
average
daily trading volume
for these sectors has dropped from $1.24 billion in 2010 to $816
million in 2014.
Hozefa
Tapiwalla, head of research for Southeast Asia at Morgan Stanley sums
up
the paradigm shift that Singapore is undertaking.
Tapiwalla, head of research for Southeast Asia at Morgan Stanley sums
up
the paradigm shift that Singapore is undertaking.
“Historically [the Singapore government was] focused on
industries and what they wanted and what they don’t want. What they
are doing right now, as a strategy and philosophy clearly, is saying
we clearly don’t know what’s going to work,” he said. “Hence,
it’s facilitation now, rather than directing which sectors and what’s
going to work.”
industries and what they wanted and what they don’t want. What they
are doing right now, as a strategy and philosophy clearly, is saying
we clearly don’t know what’s going to work,” he said. “Hence,
it’s facilitation now, rather than directing which sectors and what’s
going to work.”
In
order to maintain economic vitality and public confidence, the
long-ruling People’s Action Party (PAP) government needs to foster
growth in emerging sectors, notably information technology,
e-commerce etc. LKY encouraged wise investments and Singapore boasts
a robust sovereign investment fund.
order to maintain economic vitality and public confidence, the
long-ruling People’s Action Party (PAP) government needs to foster
growth in emerging sectors, notably information technology,
e-commerce etc. LKY encouraged wise investments and Singapore boasts
a robust sovereign investment fund.
Singapore
pursues foreign entrepreneurs
pursues foreign entrepreneurs
Singapore
can capitalize on its ethnic and linguistic links with many parts of
Asia to help foster the creation of an Asian investment and
entrepreneur hub. This strategy is proving successful, as witnessed
by Alibaba’s decision to base
its overseas business headquarters
in Singapore. Alibaba also announced that Aliyun, its nascent cloud
computing branch will also be headquartered in Singapore. In
explaining the decision to be based in Singapore, Ethan Yu, VP at
Aliyun stated
that
“many Chinese enterprises we serve have stepped out of China and
come to Singapore.”
can capitalize on its ethnic and linguistic links with many parts of
Asia to help foster the creation of an Asian investment and
entrepreneur hub. This strategy is proving successful, as witnessed
by Alibaba’s decision to base
its overseas business headquarters
in Singapore. Alibaba also announced that Aliyun, its nascent cloud
computing branch will also be headquartered in Singapore. In
explaining the decision to be based in Singapore, Ethan Yu, VP at
Aliyun stated
that
“many Chinese enterprises we serve have stepped out of China and
come to Singapore.”
Singapore
has been proactive in attracting foreign tech firms, launching
the EntrePass program,
a streamlined visa for foreign entrepreneurs seeking to found and run
businesses in Singapore. Unlike similar programs in other countries,
EntrePass allows applicants to have raised start-up capital from any
source, not just Singaporean investors. Applicants can also apply for
permanent residency in two years – or after only one renewal of the
one year visa. Similarly, as part of its National
Framework for Research, Innovation and Enterprise
launched in 2008, Singapore touts the Global Entrepreneur Executives
initiative; an investment scheme designed to convince high growth /
high tech firms to relocate to Singapore.
has been proactive in attracting foreign tech firms, launching
the EntrePass program,
a streamlined visa for foreign entrepreneurs seeking to found and run
businesses in Singapore. Unlike similar programs in other countries,
EntrePass allows applicants to have raised start-up capital from any
source, not just Singaporean investors. Applicants can also apply for
permanent residency in two years – or after only one renewal of the
one year visa. Similarly, as part of its National
Framework for Research, Innovation and Enterprise
launched in 2008, Singapore touts the Global Entrepreneur Executives
initiative; an investment scheme designed to convince high growth /
high tech firms to relocate to Singapore.
Creating
a domestic start-up ecosystem
a domestic start-up ecosystem
Alongside
attracting foreign firms, Singapore is seeking to promote its
domestic start-up scene. Singapore’s current leaders can take
inspiration from LKY’s statement that “the quality of a nation’s
manpower resources is the single
most important factor
determining competitiveness.” To this end Singapore is harnessing
the creative energies of its population in order to drive innovation.
The aforementioned National Framework also include programs for 1:1
funding matching plans
for early-stage ventures.
attracting foreign firms, Singapore is seeking to promote its
domestic start-up scene. Singapore’s current leaders can take
inspiration from LKY’s statement that “the quality of a nation’s
manpower resources is the single
most important factor
determining competitiveness.” To this end Singapore is harnessing
the creative energies of its population in order to drive innovation.
The aforementioned National Framework also include programs for 1:1
funding matching plans
for early-stage ventures.
There
is also the Technology Incubation Scheme which comprises diverse
incentives including offering to provide 85%
of start-up capital
when investors contribute the remaining 15%. The Infocomm Development
Authority of Singapore (IDA), which was created at the turn of the
millennium, is fostering local start-ups. Through IDA’s investment
subsidiary, Infocomm Investments Pte, IDA is promoting
its accelerator program
which seeks to grow and build high-growth tech start-ups at the seed
and early-stage levels.
is also the Technology Incubation Scheme which comprises diverse
incentives including offering to provide 85%
of start-up capital
when investors contribute the remaining 15%. The Infocomm Development
Authority of Singapore (IDA), which was created at the turn of the
millennium, is fostering local start-ups. Through IDA’s investment
subsidiary, Infocomm Investments Pte, IDA is promoting
its accelerator program
which seeks to grow and build high-growth tech start-ups at the seed
and early-stage levels.
These
various programs have spurred a start-up wave in Singapore, with new
firm creation
rising from 54,000 in 2010 to 77,000 in 2014. Moreover, Temasek –
Singapore’s sovereign investment fund – has sought to diversify its
portfolio by backing various start-ups; with unlisted private
investments now comprising 30% of Temasek’s portfolio – up 10% from
2004.
various programs have spurred a start-up wave in Singapore, with new
firm creation
rising from 54,000 in 2010 to 77,000 in 2014. Moreover, Temasek –
Singapore’s sovereign investment fund – has sought to diversify its
portfolio by backing various start-ups; with unlisted private
investments now comprising 30% of Temasek’s portfolio – up 10% from
2004.
As
a result, venture capital investment in the tech sector has
risen
from less than $30 million in 2011 to more than $1 billion by 2013.
Singaporean millennials are also increasing becoming interested in
the start-up ecosystem, with investment
clubs springing up
at Singapore’s universities. These clubs accept members from all
faculties and are training the next generation of entrepreneurs, with
the National University of Singapore (NSU) Investment Society holding
a public symposium at the Singapore Stock Exchange. These programs
are disseminating into wider society, as 9%
of Singapore’s workforce are currently employed in start-ups.
a result, venture capital investment in the tech sector has
risen
from less than $30 million in 2011 to more than $1 billion by 2013.
Singaporean millennials are also increasing becoming interested in
the start-up ecosystem, with investment
clubs springing up
at Singapore’s universities. These clubs accept members from all
faculties and are training the next generation of entrepreneurs, with
the National University of Singapore (NSU) Investment Society holding
a public symposium at the Singapore Stock Exchange. These programs
are disseminating into wider society, as 9%
of Singapore’s workforce are currently employed in start-ups.
Political
spillover
spillover
As
the government encourages people to think outside the box and explore
new ideas, it risks more people questioning other elements of
Singaporean society. By fostering public input and energy in shaping
Singapore’s economic trajectory, PAP looses the monopoly on economic
leadership which has underwritten its legitimacy. Having said that,
by promoting start-up creation via state incentive and investment
schemes, the government may well seek to shape the nascent start-up
ecosystem so as to be dependent on and comfortable with a government
directed capital pool. This would allow the government – in some
sense – to continue to exercise a top-down approach. Such a plan is
however fraught with danger, and is likely unfeasible given the fluid
and fast-paced nature of venture capitalism.
the government encourages people to think outside the box and explore
new ideas, it risks more people questioning other elements of
Singaporean society. By fostering public input and energy in shaping
Singapore’s economic trajectory, PAP looses the monopoly on economic
leadership which has underwritten its legitimacy. Having said that,
by promoting start-up creation via state incentive and investment
schemes, the government may well seek to shape the nascent start-up
ecosystem so as to be dependent on and comfortable with a government
directed capital pool. This would allow the government – in some
sense – to continue to exercise a top-down approach. Such a plan is
however fraught with danger, and is likely unfeasible given the fluid
and fast-paced nature of venture capitalism.
Kenneth
Tan, vice dean of the Lee Kuan Yew School of Public Policy,
commenting
on LKY passing, made a pertinent point about Singapore’s situation in
stating that he expects
Tan, vice dean of the Lee Kuan Yew School of Public Policy,
commenting
on LKY passing, made a pertinent point about Singapore’s situation in
stating that he expects
“the opposition to make inroads now,
and in part this is to be expected in a more mature society. I hope
that they do become a stronger opposition […] so we can go back to
being the kind of place that experiments with alternative ideas.”
As Singapore
encourages experiments with alternative ideas in the economy, it may
well be sowing the seeds of diversification in the political sphere
as well.
Originally written for Global Risk Insights