What role can the government play in building technological ecosystems?
Striking the right balance of policies and politics is key — but also very hard to achieve
It was 21 July 1964, less than a year after Singapore became part of Malaysia, ending British rule. No one really knows how it all started but a scuffle broke out between the Malays and Chinese bystanders during a religious procession. That quickly escalated into major race riots and a 13-day curfew. Despite government and military attempts to quell the violence, the damage was done: 23 lives lost, 454 people injured, extensive damage to public and private property. Stalls and shophouses were looted, vandalized and burned down. Business came to a standstill. Two months later, more race riots broke out. Another curfew. Another standstill.
For a young island state that was newly autonomous and trying to build its economy, the series of riots did not help build trust amongst investors. The young government had to fix Singapore’s reputation if the country was going to survive. While it was short-lived, the lessons from that time laid the foundation for many of our current policies and institutions that provide stability in various ways.
In my first post, I wrote about stability as a key factor in creating a conducive environment for technological ecosystems to thrive. The events above reflect this stark reality. Weak macroeconomic and socio-political conditions may encourage innovations to thrive in the short term, but may not be conducive for them to survive in the long term. Businesses want continuity, longevity; money likes a safe home.
Technology also likes a safe home. In a technologically driven economy, innovations must thrive. Governments and regulators easily get cast into the role of the bad guy seeking to quash innovation in the name of bureaucracy. Yet, government and regulators do not need to be obstacles here; in fact, they can lead the way. Singapore’s central bank — the Monetary Authority of Singapore (MAS) — is often touted as a role model. Rather than stifle emerging fintech technologies over the last few years, the MAS launched a regulatory sandbox for fintech startups to experiment within a set of parameters. This helped Singapore keep abreast of the technological developments in this space, and also work hand-in-hand with leading startups and companies to shape the future of fintech. For example, through the sandbox, MAS saw how quickly payments were growing but realized that many e-wallet solutions were caught between two regulations in Singapore. To resolve this, MAS then streamlined licensing of payments solutions under one single framework.
Consultative politics is how I would best describe Singapore’s approach to innovation. Singapore recently convened its Future Economy Council and consulted with more than 9,000 stakeholders on growth and transformation strategies for its economic future. Public sector resources were reorganized towards innovation, adoption of technologies, patient growth capital, and digital skills, including the creation of an entire organization of venture catalysts — SGInnovate. Since its launch 2 years ago, SGInnovate has invested in 29 startups and created an extensive network of more than 1,000 people keen on joining early-stage ventures.
In the early days of Singapore’s economic development, we placed heavy emphasis on manufacturing industries with plenty of sunk costs like property and equipment. We believed that those investments would anchor our economy and keep the companies committed to growing in Singapore. In return, we ensured that these businesses could operate in a stable environment. Today, the emergence of the gig economy and its increasing prevalence in our daily activities flips that model on its head. How does stability and the role of government figure into the gig economy?
For the gig company, huge overheads are no longer a necessary feature on their balance sheets; it has pushed the ownership and asset risk (be it labor or object) to the gig worker. These gig companies don’t need stability in the same way that traditional manufacturing companies did. Some may argue that the lack of stability and institutions are precisely the environment that fosters the gig economy. That is true. It still remains to be seen whether gig companies can indeed thrive regardless of their environment’s stability. Perhaps the only indicator we have so far is what happens when gig companies venture into new foreign markets beyond homebase (think Uber). Moreover, we see that these gig companies start organizing themselves similarly to asset-heavy corporations, with geographic hubs across the world and real estate plays. For a non-asset owning property platform, Airbnb has expanded to multiple regional and geographic hubs to manage local affairs. Over time, they may find themselves seeking stability in the same way that traditional manufacturing industries did.
For the gig worker, stability in the form of supportive, transparent policies and regulation can help them. It is a fine line that the government treads — but if done right, the government can level the playing field for gig workers and help more of them participate in the economy, create transparency in a system that could easily abuse and be abused, and protect customers.
Singapore’s unique history, its smallness in size and the cultural nuances of its society has allowed the government to play a significant role in the building of the country’s technological ecosystem. I would be remiss not to acknowledge that I am biased towards our model because it has been successful. Political commitment is a fundamental basis for stability, and stability can have far-reaching positive effects on advancement of technology and innovation.
So stability is a pretty good thing, right? But other than protecting workers and helping companies scale, what else is it good for? In my next post, I will explore how stability can form a solid foundation for talent attraction, particularly in technology.
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Dawn Lim recently graduated as a Sloan Fellow from the Stanford Graduate School of Business and will be returning to the Singapore public service to continue her passion for economic development. She has spent more than a decade working in infrastructure, logistics and economic development for Singapore. The views expressed in this article are entirely her own. This is the second in a series of posts that Dawn is writing in collaboration with Alter Global.