SINGAPORE: Singapore’s recently announced Fortitude Budget envisions a bold, digitally-empowered future for the nation in the wake of COVID-19.
Ensuring this stimulus unlocks equitable opportunity for the nation’s business ecosystem will be vital in delivering sustainable economic success.
Like its peers around the world, Singapore is in the trenches of a three-phase battle against COVID-19: Flatten-Fight-Future.
The nation is deep within the Flatten stage of this crisis, with a protracted Fight phase ahead. That means Singapore cannot afford to ignore planning for the Future to come.
The S$38 billion budget announced by Deputy Prime Minister Heng Swee Keat on May 26 sets out over S$500 million in funds to kick-start a digitally-inspired rebound.
That will be supported by an additional S$285 million of matched funds for private investment into promising start-ups.
This focus on digital transformation, which offers a valuable framework to build on Singapore’s impressive foundation of innovation, is not new as the Government has been encouraging businesses to digitalise over the years with specific initiatives.
We must ensure all companies and industries are empowered to unlock the greatest possible value from this opportunity.
BUILDING ON DIGITAL FOUNDATIONS
A commitment to innovation and digital transformation has long been a hallmark of Singapore’s evolving economy as government support has seen digitalisation become a key thrust of Singapore’s economic strategy.
Early investment in university research in the 1990s paved a pathway for enhanced innovation in private sector companies.
The US$1 billion Technopreneurship Investment Fund (TIF) launched in 2000 to nurture a regional venture capital hub also marked a valuable early step.
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State investment company Temasek Holdings has played a pivotal role in this digitalisation journey as well, with a capital-driven strategy that is accelerating innovation investment.
In 2016, the Government announced S$2.8 billion planned investment in digital infrastructure as part of its Smart Nation initiative.
A year later, Finance Minister Heng Swee Keat introduced the SMEs Go Digital programme to help SMEs build their digital capabilities.
In 2018, the Government then rolled out the Services and Digital Economy Technology Roadmap as a key part of Singapore’s Digital Economy Framework for Action.
Such focus and investments on digitalisation have delivered notable dividends as Singapore is widely recognised as a leader in digital innovation, and a hotbed of global entrepreneurship.
Singapore was ranked 8th in the World Intellectual Property Organization’s 2019 Global Innovation Index, positioning it first in the Asian region.
According to data from the Singapore Department of Statistics, the number of tech start-ups in Singapore increased from 2,800 in 2003 to 4,300 by 2016.
Singapore also claimed top spot as most attractive destination to relocate to in Asia-Pacific for digital talent surveyed in Boston Consulting Group’s (BCG) Decoding Digital Talent study last year.
It may raise curiosity then that despite all the previous investments and initiatives ploughed into transforming Singapore into a digital economy that DPM Heng would yet make a digitalisation push in the Fortitude Budget, especially in a tense economic environment for businesses.
There are valid and important reasons for doing so.
DIGITALISATION MUST RUN DEEPER
Temasek predicts that Southeast Asia’s digital market will triple to reach US$300 billion by 2025. Singapore can be a leader in that evolving market opportunity.
The importance of digitalisation cannot be overstated. Cross-industry analysis by BCG reveals a clear link between the level of digital adoption and business performance. Successful digital leaders enjoy greater earnings growth and increasing enterprise value.
Since 2019, BCG has partnered with Infocomm Media Development Authority (IMDA) to deploy the Digital Acceleration Index (DAI). This index provides a common framework to identify the depth of digital capabilities across businesses.
Analysis of DAI scores shows broad-based improvements in Singapore between 2019 and 2020, with digital leaders demonstrating a 3 to 5 point improvement over this period.
That represents healthy progress which can generate significant positive business impact if sustained.
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In a 2018 study of over 1,900 companies in the Europe and US, BCG found that greater digital maturity significantly enhanced competitive advantage in time to market, cost efficiency, product quality and customer satisfaction.
Those levers will be even more vital in the post-COVID-19 reality.
The ability to differentiate and operate effectively in this environment is critical. Digital capabilities will be crucial in ensuring efficient and competitive operations in uncertain economic conditions.
Leveraging the nation’s evolving digital potential will require recognising the value of digitisation across the whole business ecosystem.
As it stands, multinational companies and large local companies are at the forefront of this transformation. That leaves an important question about where support should be targeted in future.
Singapore is home to over 270,000 small and medium-sized enterprises (SMEs), accounting for around 99 per cent of the nation’s businesses, and 72 per cent of employment.
Despite all the efforts by the Government to drive digitalisation among Singapore’s SMEs, the results have room for improvement.
A previous study by the Association of Small & Medium Enterprises (ASME) and Microsoft Singapore found that only 56 per cent of SMEs here have digital transformation strategies in place whereas only one in four saw success in their digital implementation.
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Through the impact of COVID-19, we have witnessed five years of transformation compressed into just five weeks. Cultural resistance quickly falls away when it is a question of “do or die”.
The enhancement to the SMEs Go Digital initiative introduced by IMDA and Enterprise Singapore offers one example, increasing funding support for digital adoption from 70 per cent to 80 per cent for enterprises through the whole of 2020.
In taking these first steps, the National Innovation Challenge laid out in the Fortitude Budget offers a welcome template. It aims to promote collaborative and creative digital transformation solutions to accelerate economic re-opening.
These measures will be particularly important for SMEs, who lack the comprehensive strategic planning resources of major companies.
TRUE DIGITAL TRANSFORMATION
Beyond the business reality of those endless hours shared on Zoom, a true digital transformation must penetrate deeper and deliver structural change to drive forward opportunity through innovation.
The support for eligible businesses to transition towards digital payments is an admirable inclusion. Consumer behaviour has revealed a clear uptick in e-wallet use during COVID-19. Supporting transformation to this new payment method could unlock valuable revenue for SMEs.
The Digital Resilience Bonus for F&B and retail businesses is an equally important step. These businesses have been hardest hit by the shutdown, and will require enhanced support to enable positive digital transformation.
The S$250 million set aside to help businesses digitise in partnership with digital platform solution providers and industry champions is another smart move.
Government support is essential but the true scope of realised opportunity will be reliant on the actions of businesses.
The Fortitude Budget provides a welcome addition to Singapore’s foundation of digital success. This support includes critical focus on digital transformation initiatives of particular value to the nation’s essential SMEs.
Regardless of business size however, the true scope of this opportunity will be determined by how businesses embrace this period of crisis to embed true digital adoption.
Michael Tan is a Managing Director and Partner at Boston Consulting Group, Singapore and the Leader of the Public Sector Practice in SEA.