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digital economy singapore

Written by Muhammad Karam 7:40 pm Articles, Current Affairs, International Relations, Published Content

Singapore’s Giant Digital Economy

Despite the global economic hiccup, a tiny island nation often termed the “Lion City,” Singapore remains one of the world’s strongest economies. Its robust “smart nation” initiative, which mobilizes advancements in digital technologies to create smooth, tech-driven actions, has firmly put Singapore in a good position to develop a strong digital economy and a force to reckon with in the tech-oriented society.
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About the Author(s)
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Muhammad Karam is a final-year Civil Engineering student who also serves as the Editorial Head of the NEDian newspaper.

Introduction

The Chief of Infocom Media Development Authority (IMDA), Lew Chuen Hong, when speaking to the reporters, emphasised how vital a digital economy is for Singapore, and noted that the country could transcend all kinds of physical constraints to bring access to consumers and markets across the world through digitalisation.  

The term digital economy applies to the economy that unwaveringly relies on digital technology, online transactions, and its transformative effect on traditional industries. Digital modernizations such as the Internet of Things (IoT), artificial intelligence (AI), virtual reality, blockchain, and autonomous vehicles are pivotal in establishing a digital economy. However, estimates of the size of the digital economy are not easily comparable across formats.

To understand the international comparison of estimates of the digital economy of Singapore, the primary purpose should be to understand its economic contribution and pace of change. In simpler terms, Singapore’s digital economy can be broken down into two main components:

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  1. Information & Communications sector (I&C)
  2. Digitalisation in the rest of the economy (excluding I&C)

The total contribution of the digital economy in Singapore amounted to S$106 billion in 2022, equivalent to 17.3% of Singapore’s nominal GDP, up from 13% of GDP in 2017. It has expanded at a compound annual growth rate (CAGR) of about 12.9% per annum since 2017. The I&C sector accounted for around 1/3rd of Singapore’s digital economy, with the remaining 2/3rd attributable to digitalisation in the rest of the economy.

Information & Communications Sector (I&C)

The Information and Communications sector (I&C) deals with both different types of communications networks and their technologies. The I&C sector combines manufacturing and services industries whose products primarily fulfill or facilitate the function of information processing and communication by electronic means, including transmission and display.

Between 2017 and 2022, the I&C sector was the fastest growing sector with a value-added CAGR of 10.3% per annum over the 2017 to 2022 period as compared to the real GDP CAGR of 2.6% per annum over the same period. Moreover, this sector alone was responsible for 5.4% of the GDP, an increase from 4.3% in 2017.

The key sub-sectors responsible for such a massive boost were online services, games, and e-commerce, with S$ 6.4bn, S$ 5.2bn and S$2.1 bn value-add from 2017-2022. Such sub-sectors also showed a nominal growth of 70% value-add CAGR from 2017-22

Digitalisation

Apart from the I&C sector, the sectors that immensely contributed to their digitisation were finance and insurance, wholesale trade, manufacturing, professional services, transportation and storage, real estate, retail trade, construction and accommodation, and food services. Most of the contributions were by finance, insurance, wholesale trade, and manufacturing, sharing a 45.6% collective value-add CAGR from 2017-2022. The value-add from this part of the economy showed a flavoursome spike, increasing from S$38.6 billion in 2017 to S$72.8 billion in 2022, equivalent to a CAGR of 13.5% per annum.

Small and Medium Enterprises (SMEs) and Non-Small & Medium Enterprises (non-SMEs) led to an increase in the technology adoption rate from 74% in 2018 to 94% in 2022. However, there is a significant gap between SMEs and the non-SMEs. For example, the technology adoption intensity of SMEs boosted to 2.1 in 2022, but this is considerably lower than non-SME’s 5.7.

Navigating the Digital Workforce Landscape

With the ever-growing market of digital infrastructure and surging digital economy, the role of the workforce in the sectors affecting the digital economy becomes inevitable. With perpetuating digitalisation, tech professionals across Singapore are sought-after. As per the report of IMDA, the number of tech-oriented jobs has grown at a rate of 5.3% (of total employment) per annum from 2017 to 2022; both I&C and non-I&C sectors compel the increase in demand.

However, the non-I&C held the largest share of 57% of the total jobs in 2022. The tech jobs that showed significant demand included cloud, network and infrastructure, management, and product management. However, job roles related to software and applications surpassed the rest with a 33% share of total tech jobs from 2017-2022.

With that said, one cannot suppress the role of the foreign workforce in Singapore as it plays a crucial role in the economy and digitalisation. According to the data shared by the Ministry of Manpower, the total foreign workforce in 2023 is 1,488,000, which is 7.35% greater than the numbers in 2018. With its booming economy, the trend of foreign workforce contribution is constantly inflating, as mentioned in the report of IMDA.

Conclusion 

The Singapore model should be a case study for other developing countries. Its digital economy has almost doubled in the past five years and is still on the trend to become even more gigantic than it is today. The IMDA report emphasised that the tech space in the world is fast-moving yet saturated. With Singapore’s projection to invest a further S$200 million over the next few years into digitally focused projects, one could only imagine how strong it will become in the digital space.


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The views and opinions expressed in this article/paper are the author’s own and do not necessarily reflect the editorial position of Paradigm Shift.

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