Regulations essential to support innovation, say analysts

The Committee on the Future Economy called on the Government to "create a regulatory environment to support innovation and risk-taking". This means placing safeguards against the risks inherent in new industries while still enhancing the ease of doin
The Committee on the Future Economy called on the Government to "create a regulatory environment to support innovation and risk-taking". This means placing safeguards against the risks inherent in new industries while still enhancing the ease of doing business.PHOTO: REUTERS

It may not have been the sexiest line in the report, but a recommendation by the Committee on the Future Economy (CFE) for more "forward- looking" regulations could be a game changer for the Singapore economy, experts said.

The committee called on the Government to "create a regulatory environment to support innovation and risk-taking".

This, it added, means placing safeguards against the risks inherent in new industries while still enhancing the ease of doing business.

This may sound contradictory, but Professor Wong Poh Kam of the Department of Strategy and Policy at the National University of Singapore Business School said regulations are essential for innovation.

"You need regulations to ensure a level playing field for new innovators versus incumbents that are large and powerful organisations, or you may have big companies abusing their power to squeeze start-ups out of the field," he noted.

"Also, regulations provide innovators with the certainty of parameters. Without regulations, companies sometimes don't feel confident to innovate, for fear that there will be a sudden implementation of rules that could land them in trouble."

The trick is to have balanced regulations, noted Maybank Kim Eng economist Chua Hak Bin. He said: "Various governments have arrived at different outcomes on how to regulate Airbnb, for example. Barcelona, for example, has an outright ban. The CFE is recommending a more balanced and pragmatic approach, especially since we are encouraging businesses to use Singapore as a test-bed for new ideas."

PwC Singapore's digital business leader Greg Unsworth said that if this fine balance is struck, it would really set Singapore apart from other leading economies and position the Republic as a global hub for innovation.

He noted, however, that this will be no small task.

"It is extremely difficult to regulate for the future. Governments around the world have found it challenging to keep up with the speed of the impact of industry disruption in the digital economy," he said.

"This is about ensuring smart regulation that meets both objectives and keeps pace with change and even anticipates the future."

However, experts are also confident that the Singapore Government is in a good position to embark on such a challenge.

After all, some of its agencies have already begun regulating new and disruptive industries, such as the Monetary Authority of Singapore (MAS) for financial technology or fintech, and the Land Transport Authority for autonomous vehicles - a point that the CFE noted in its report.

For MAS, a major component of its regulatory system towards fintech has been the "regulatory sandbox". It provides a safe space where Singapore's banks can experiment with and test new technology, without potentially affecting their main operations or customers, even if the project fails.

However, Mr Matt Pollins, a partner of technology law firm Olswang, said that there is no reason why sandboxes cannot be used across all industries.

"Sandboxes are just the start," he said. "Over time, we will see many more technology-friendly regulations, and not just in limited sandbox scenarios, that empower organisations to innovate - provided, of course, that appropriate measures are in place on matters such as privacy and security."

After all, he added, regulators around the world are recognising that the definition of risk has changed.

Mr Pollins said: "Risk used to be doing something new, or adopting a new technology. In this era of digital transformation, risk is now standing still and not adopting new technologies, because companies will very quickly be overtaken."

 

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A version of this article appeared in the print edition of The Straits Times on February 11, 2017, with the headline 'Regulations essential to support innovation, say analysts'. Print Edition | Subscribe