Singapore’s small size a barrier for global innovators?

Mar 17, 2017 08.16PM |
 

by Suhaile Md

SINGAPORE is too small a base for global-minded businesses to experiment and refine innovative ideas. At least that’s the view of tech entrepreneur Mr Tan Min-Liang and venture capitalist Mr Isaac Ho, reported the Business Times (BT) on Monday (Mar 13). If entrepreneurs intend to expand beyond Singapore, they should test-bed in larger markets from the start.

Simply put, a test-bed is a space to experiment and develop innovative products before bringing to market. Last month (Feb 7), the Committee on the Future Economy (CFE) proposed in its report that the G set aside “special test-bedding zones” for Singapore based enterprises to develop products that can be exported.

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But there are three reasons why Singapore might not be the best place to test-bed.

First, you need entrepreneurs and Singaporeans are not “hungry” enough, said Mr Ho. “Most entrepreneurs know there’s always another job for them… Singaporeans are well taken care of by the government.” Which is why he proposed that the G focus on youth exposure to technology and innovation through overseas attachments for instance. That way they “will be exposed to real hunger and passion, and see how fast the other countries are racing ahead”. Mr Ho is the CEO of Venturecraft, a Hangzhou based biotech and medtech incubator.

Second, to grow the business, an entrepreneur will eventually have to enter larger markets like the United States (US) or China.”By the time you’re done with test-bedding in Singapore, somebody’s already tested” the same idea in China or the US. So “you’re better off starting in the US or China from the get-go”, said Mr Tan. In other words, being based in Singapore could make startups too slow to capture a large global market share. Mr Tan is the CEO of Razer, a San Francisco based gaming hardware company.

Third, a product catered to the Singapore market may not be suited for larger markets. “If startups test-bed here, they will need to expend effort to undo what they’ve built for use in other markets,” said Mr Ho. This raises business costs. Besides, delivering products in Singapore does little to develop a start-up’s capacity to handle “large volume transactions”. This could “result in under-building a product”.

Contrary to Mr Ho and Mr Tan, the G sees Singapore’s size as a selling point. Said Prime Minister Lee Hsien Loong at the Founders Forum Smart Nation Singapore Reception in 2015: “It’s (Singapore) compact… If you can make it work in Singapore, you can have the chance to adapt and apply to other contexts. If it doesn’t work in Singapore, it’s probably worth a rethink.”

More recently, the CFE report stated that Singapore’s small size has its advantages. Similar firms are found close to each other and so, can “attract talent, create critical mass for shared infrastructure, and generate knowledge spillovers among firms and people”. In other words, it’s easier for ideas to cross-pollinate. When new ideas arise, there’s better coordination between different firms and G bodies to make it work.

Mr Kevin Foo, head of investment at venture capitalist firm Cap Vista Singapore, agreed with the G on this, reported BT on Monday: “The level of infrastructure development within our small cityscape allows for close cooperation between different organisations, public or private, to co-develop and test technologies.”

Last October for example, Straits Times (ST) reported that the Economic Development Board together with national water agency PUB successfully completed the initial stages of its renewable-energy test-beds.

10 different floating solar panel systems, from both foreign and local companies, were installed at Tengeh reservoir. The test-bed will establish how viable the 10 systems are – both in the economic and environmental sense. If viable, then the systems can be scaled up for large-scale use.

There are other test-beds underway too, in water technology, and maritime and port services for instance. As the CFE report states, Singapore can be a “living lab for innovative urban solutions” like experimenting with new modes of transport, sustainable energy usage, and water and food resilience. Read more in the report here.

Test-beds are not to be confused with the regulatory “sandbox” the Monetary Authority of Singapore (MAS) proposed last June.

The financial world is kept in check with numerous regulations. But these can stifle the growth of innovative financial technology, or fintech, startup firms. A sandbox relaxes, for selected fintech firms, certain rules like credit ratings, minimum paid-up capital, and so on, to encourage innovation.

That is not to say however, that the sandbox is exclusive to the financial sector only. The CFE report cited this regulatory innovation by the MAS positively. It suggested that like MAS, the G “design a regulatory environment that supports innovation and risk-taking, even as it balances this against risk” such regulations are meant to reduce.

At the end of the day though, is Singapore’s small size a boon or a bane as a test-bed for global innovation?

It’s hard to answer definitively. But the fundamental issue, it seems, is market access. A mass market app based product like Uber for example, would likely do better to test-bed in a larger market like the US and not in Singapore. Here, the arguments of Mr Ho and Mr Tan would make sense.

But if the product is more complex, requires the coordination of multiple sectors, and the main customers are not mass market individuals, Singapore is likely to run ahead. Singapore helping build the new capital city of the Indian state Andhra Pradesh comes to mind.

 

Featured image from TMG file.

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