Veteran attendees of Westminster policy forums on the digital world know that one word crops up more and more frequently in discussions - Singapore.
For example, at a Westminster Business Forum on international opportunities for UK digital trade last week, it was mentioned over 20 times, far more than any other nation. Industry body techUK often cites Singapore as well, and last year invited Dr Janil Puthucheary, that country’s Senior Minister of State for Communication & Information, to speak at a conference on digital ethics.
The mood music is that the British Government sees the island republic and city-state as a model to emulate, post-Brexit, and the melody seems to grow louder with every conference on policy.
It's a fascinating turnaround for a country that, 200 years ago, became a distant trading post of the British Empire, coming under its direct control in 1867. So, why might the British Government be so keen to let Singapore’s ideas on trade influence policy in 2023?
Since Singapore gained independence in 1965 – after brief membership of the federation of Malaysia – its economy has gone from strength to strength. This century, Singapore is placed consistently in the top three nations in terms of GDP, calculated via purchasing power parity (PPP). By the same measure, the UK languishes at number 28. In terms of GDP per capita, Britain is 23rd and Singapore tenth, with 2022 being a record year for the latter: a GDP of nearly $467 billion.
Singapore is also regarded by three of the West’s major credit ratings agencies – Moody’s, S&P, and Fitch – as the least risky economy on Earth, with a sovereign AAA rating that overshadows the UK’s AA (downgraded from triple-A in 2013).
Why Brexit Britain might want to emulate such economic achievements is clear, particularly as Singapore is fast becoming a Services economy - over 70% of GDP and nearly three-quarters of jobs.. A key focus for that economy is Fintech and finance, not to mention continuous education for a highly skilled workforce, all backed by strong manufacturing and IT sectors.
The UK would do well to emulate Singapore on skills, and on modernizing its factory processes.
In recent years Singapore has grown – in part – by removing the barriers to digital trade, with its progress helped by having one of the fastest average fixed-line broadband speeds on Earth: over 200 Mbps, placing it in the world top three.
By contrast, the UK scrapes into the top 50 at number 47, with just 92 Mbps, held back by a creaking 20th Century infrastructure, plus years of dominant-supplier intransigence. That’s a long way behind competitors such as France (192Mbps), the US (ditto), China (178Mbps), Japan (167Mbps), and Germany (121Mbps), all economies with similarly deep histories – and, in most cases, much bigger geographic obstacles. In other words, there’s no excuse for the UK’s lamentable performance.
(Despite this, the government persists in using the term “superfast” to describe Britain’s broadband, when it has among the slowest average download speeds in the developed world. That should be a focus for urgent remedial action, not rhetorical posturing.)
That perennial gripe aside, what of the political and trading ties between the UK and Singapore? Britain’s trade with Singapore is currently worth £21 billion, accounting for 40% of business with Southeast Asia. At the same time, Singaporean entities have a total of £226 billion invested in Britain, according to government figures.
The aim is to grow that relationship. In September 2023, the UK signed the bi-lateral UK-Singapore Strategic Partnership for trade and investment. Last year, the two countries signed a new Digital Economy Agreement (DEA), to help businesses seize new trade opportunities, plus a Memorandum of Understanding to boost Fintech trade and investment.
But the relationship could go further and deeper – or rather, DEPA. That’s according to Professor David Collins, Professor of International Economic Law, City, at the University of London.
Giving the keynote address at a Westminster Business Forum on priorities for UK digital services in international markets, he portrayed Singapore as critical to Britain’s success:
The first thing I would do is deepen the Digital Economy Partnership Agreement [DEPA], which is between Singapore, New Zealand and Chile [signed in June 2020]. Singapore is similar to the UK, and I would advise the UK to jump onto that [deal originated by Singapore]. It was designed to bring in other countries, and to become, eventually, a pluri-lateral agreement.
It's a fantastic agreement. It has material for SME digital co-operation. It has the standard digital trade stuff, like eliminating customs duties and denying the localization requirements, and cooperation in emerging technologies, such as AI. That would be a great forum to jump onboard.
DEPA also includes facilities for digital identities, Fintech, paperless trade, e-invoicing, e-payments, trusted data flows, open government data, regulatory sandboxes, and policies for improving digital inclusivity and trust. Potentially, a model agreement for others to emulate. Collins added:
Watch what Singapore does. For example, we in the UK have recently signed the Electronic Trade Documents Act. There was a Singapore delegation here last week that I was fortunate to meet at the Law Society, and it was their legislation that was the prototype for that. Now we can exchange goods using technologies that speak to each other. So, DEPA is my quick answer to where the UK should go next. That would be my priority.
In a puzzling response, perhaps, conference Chair the Rt Hon Alun Cairns MP (Conservative), also Chair of the All-Party Parliamentary Group for Trade and Investment, said:
I'll definitely look into that, and raise questions in Parliament about it. So, are you aware at this early stage if the Government has made moves to participate as part of DEPA? And if they haven't, why not? And if they have, what progress has been made?
Collins answered that he didn’t know – and tactfully avoided asking one of the government’s own MPs, whose remit is international trade and investment, why he didn’t either...
Not so positive
The Singapore theme was picked up by Adam Gagen, Global Head of Government Affairs for British Fintech Unicorn Revolut, though not in such positive terms. He said:
We have a local licence in Singapore, and we're able to provide a number of payment services, and investment services there, and it's really a booming market. But we face a really big barrier there, in that the kind of licence we were operating under – versus, let's say, a local bank – had a cap every year on how much business our customers could do with us. Once people had transferred S$30,000 through our system, that was it.
“That was a big barrier, because when people are trying to pay their school fees overseas, or for medical treatment, to support their families, or run their businesses, that S$30,000 can run out pretty fast. And 4.9% of all of our customers in Singapore would run up against that cap every year. So, that was a big restriction on our ability [to trade], because it meant they had to sign up with a competitor – with a local bank, somebody who wasn't under this kind of restriction.
However, government pressure and engagement have, according to Gagen, removed that barrier this year. He noted:
That’s one example of how a technical barrier in the Services industry can be addressed and removed when there is focus and engagement from government and industry.
That engagement from government was certainly in evidence from Rupert Daniels, Director of Services and Skills at the Department for Business and Trade. In a lengthy speech, he mentioned Singapore seven times, with barely an aside on other nations. Among his comments, he said:
We are doing a lot of work on Fintech, particularly with the Singapore Digital Economy Agreement. Not just Singapore, but that's obviously the template for many deals. There's also a deal with Ukraine on a similar basis. The UK is an amazing place to grow and scale Fintechs – we've got 24 unicorns. […] The UK is viewed as a global centre of excellence. So, there's a fantastic opportunity given that we're the largest net exporter of financial services.
“We're going out to Singapore next month and we're taking a number of UK Fintechs to talk to the global community about how we might export our expertise in the sector. Talking about the [Fintech data] bridge with Singapore. Very important to this is that free flow of information, making sure that we've got financial information able to transfer and exchange without the kind of localization, the kind of protectionism, that we see elsewhere.
So, that's facilitated much greater transparency on electronic payments and safeguards. And we've joined forces with the Singapore Government to create this thing. We're taking the trade mission out there in November to really take that opportunity by the horns.
But for Sam Lowe, Partner at business policy consultancy Flint Global, the UK should be wary of simply copying other nations, or rushing into binding agreements without reading the small print. He told the Forum:
This is not to disparage the UK’s digital trade officials, but our most recent approach on digital trade has been to find the best provisions and other agreements and just copy and paste them! The UK has a Digital Economy Agreement with Singapore and the provisions in there are pretty much at the far edge of what's been achieved. But the thing to be more cautious of now is not committing ourselves to something bad in a Free Trade Agreement [FTA].
To give an example from India's negotiations in the India/Australia Free Trade Agreement, there is a provision relating to payments data, which reaffirms India's right to require payments firms to store copies of the data within India itself. That's the sort of provision that goes completely against everything Australia has been trying to achieve on digital trade in the last 10 years or so. It also sets a precedent, because Australia has acknowledged India's right to do that. So, India is probably never going to change that.
He went on:
[That kind of thing] really shuts down that avenue in multi-lateral contracts, but in a bi-lateral context. So, I think a lot of the pressure now is to ensure that we have got good provisions. On paper, on data localization, on duties, on cross-border data flows, on source code, and the like. But all of those are going to come under pressure.
Take source code, for example. In the context of AI, governments are going to start trying to force companies to hand over training data – that's just going to happen. So, do our trade provisions prevent that? We need to be focused on making sure that exemptions are tighter, that we don't start including things that are actually bad.”
A fascinating event, given that much of the debate – in a conference about international opportunities – centered on just one nation, Singapore, which is fast becoming a totem for British negotiators.
While agreements with Singapore may be forward-looking and, potentially, a model for others in an increasingly digitized economy, a hard dose of reality is needed. Total UK exports to Singapore this year stand at just £14 billion ($17 billion), which is just four percent of the £340 billion ($413.5 billion) of UK exports to the EU.
However, the balance of trade figures are revealing too - the UK has a trade surplus of roughly £7 billion ($8.5 billion) with Singapore, and a deficit of £34.3 billion ($41.5 billion) with the EU.
This tells us something. The UK has made it easier for enterprises to do business with its twentieth largest trading partner, but far more difficult with its biggest. Meanwhile, overall exports to non-EU countries have been falling this year, according to the government, so the UK is not exactly thriving outside Europe.
No wonder the Government feels compelled to talk up these isolated deals and success stories. But the core question must now be to ask how on top of the small print are the UK’s trade negotiators? On that point, the parlous state of Brexit – seven years on from that divisive referendum – is surely a cause for concern.