Singapore: Banking on the Future

IMF News, December 14, 2017

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Publication date: December 14, 2017
Main theme: Singapore is embracing the digital economy to counter slowing growth caused by an aging population and low productivity growth.
Context: Singapore is positioning itself as a global innovation hub and preparing to chair ASEAN in 2018.

Global Innovation Index ranking: Singapore ranked as the most innovative economy in Asia, and seventh in the world.
Drivers of innovation emphasized:
- Sound infrastructure and a conducive regulatory and business environment.
- Active research and development agenda to create new ideas, growth opportunities, and jobs.
- Regulatory and business reforms to be more conducive to innovation while preserving safety and stability.

Policy stance:
- Treat advances in automation and financial technologies (fintech) as opportunities to boost growth and skills, not simply disruptions.
- Avoid rushing to regulate fintech too tightly; allow innovation to unfold while monitoring risks.
Regulatory tools and measures:
- Regulatory sandbox launched in the financial sector to let firms test new products, technology, and business models in a controlled environment where some legal and regulatory requirements are suspended.
- Sandbox constraints: firms are restricted in the number of customers they can serve while in the sandbox; successful firms must meet standard regulatory requirements upon exit.
- Right-sized regulation: identify potential risks from fintech activities and design regulation accordingly so it does not kill innovation.

Bitcoin and intermediaries:
- MAS does not regulate bitcoins per se.
- Bitcoin intermediaries and bitcoin ATM machines exist in Singapore.
- Regulatory action: place anti-money laundering and combating the financing of terrorism (AML/CFT) requirements on bitcoin intermediaries because some activities pose money laundering and terrorist-financing risks.
Crowdfunding:
- Distinction in regulatory treatment: donating money via crowdfunding is different from crowdfunding that promises a return tied to firm performance.
- If a crowdfunding arrangement promises returns tied to firm performance, the activity is effectively selling a security and is a regulated activity.

Innovation effects on inequality:
- Innovation creates demand for certain skills and disrupts other areas simultaneously.
- Government role: continually equip the workforce to prepare for disruptions.
Skills policy example:
- SkillsFuture: continuous re-skilling programs where the government provides training subsidies and professional conversion programs to prepare the labor force for evolving jobs.
Education challenge: the existing education system provides basic workforce skills but is increasingly less relevant given the rapid pace of technological change.

Policy goals while chairing ASEAN in 2018:
- Boost productivity and competitiveness in the region.
- Prepare for the digital economy and promote financial inclusion.
- Strengthen and enhance e-commerce across the region to better position ASEAN as an investment destination.
- Use financial innovation to promote financial inclusion, especially to reach rural and under-banked populations in member countries like Indonesia and the Philippines.

Existing cooperation: active collaboration through the IMF-Singapore Training Institute, which conducts programs to equip policymakers on macroeconomic and financial regulation policies.
Areas for expanded IMF support:
- Cyber security and cyber risk management: many financial regulators and policymakers in the region are nascent in building systems and capabilities to protect consumers.
- The IMF can act as a clearing house of capabilities by bringing expertise together to help countries manage cyber-related financial challenges.

Source: IMF Country Focus — "Singapore: Banking on the Future" (December 14, 2017).