ADB Ranks Singapore as the Best Digital Entrepreneur Ecosystemby Fintech News Singapore October 13, 2022
In Asia, the ongoing digitalization of economic activity has helped keep economies afloat during COVID-19 by enabling business continuity, reducing the cost of starting a business and opening up a world of entrepreneurial opportunities.
Moving forward, digital entrepreneurship has the potential to become a major engine of growth in these markets. In this context, policy makers will have a critical role to play in creating a conducive environment for them to flourish, a new report by the Asian Development Bank (ADB) says.
During COVID-19, the Internet and digital tools significantly cushioned the adverse impact of the pandemic on entrepreneurial activity, enabling business owners to go online to sell their products, communicate with their workers, and meet their business partners. For many, the Internet served as a lifeline, allowing for business continuity and preventing them from shutting down entirely.
Not only has information and communications technology (ICT) allowed most small businesses to stay afloat, it also brought about new opportunities and have significantly contributed to economic dynamism.
New analysis by ADB that looked at 13,000+ businesses younger than three and a half years old in 17 Asian countries found that innovative entrepreneurs have had a disproportionately positive impact on their respective economies, with a handful of them accounting for the lion’s share of entrepreneurial innovation, output, and job creation.
According to ADB, a mere 0.4% of these so-called “baby businesses” now account for 46% of the aggregate employment created by these new businesses, employing more than 60,000 people.
The growth and success of these small and young businesses can be in part explained by their ability to leverage digital technologies and online channels to reach new markets and be more efficient, the report says.
In fact, in-depth interviews with 685 entrepreneurs in six Southeast Asian countries found that digital entrepreneurs are outperforming their non-digital peers in terms of business performance, profitability, and contribution to sustainability.
Singapore emerges as best ecosystem for digital entrepreneurs
Looking at Southeast Asia, the report notes some discrepancies between countries in the region and their respective entrepreneurial ecosystems, with specializations emerging in various countries.
In Indonesia, for example, digital entrepreneurs have been particularly active in food delivery, while in Malaysia, it is drone technology. Singapore, meanwhile, excels in finance technology, being home to 1,000+ fintech firms, the report notes.
The city-state was also found to be the “world’s best digital entrepreneurship system” in 2021, ranking first in ADB’s new Global Index of Digital Entrepreneurship Systems (GIDES).
The index, which measures the quality of an economy’s environment for digital entrepreneurs, ranked Singapore at the top of the list, recognizing human capital, financing, culture, and informal institutions as the nation’s strongest pillars.
Singapore is the only Asian country to make it into the “leaders” group and is followed by the US, Sweden, Denmark, and Switzerland.
Moving forward, digital entrepreneurship could be an engine of sustained growth in Asia, the report says, but that will require institutions and policymakers to establish a conducive environment.
Though the report notes that policymakers have little direct influence on entrepreneurship, they can have an impact on how individuals weigh entrepreneurship against other pursuits.
This can be done by stressing the positive role of entrepreneurship in general education curricula, or through specific policies such as incentivizing universities to encourage entrepreneurship among students, the report says.
Good hardware and software are also critical to catalyse dynamic entrepreneurship. These challenges should be addressed by investing in telecommunications and Internet infrastructure, as well as by strengthening the legal and institutional infrastructure to adapt to the fast-evolving digital economy, the report says.
According to ADB, digitally underdeveloped economies tend to have legal frameworks that adapt too slowly to rapidly evolving digital business models. Singapore, Malaysia, and South Korea, which ranked high in terms of regulatory adaptability in 2019, were also found to be Asia’s top three digital entrepreneurship ecosystems in 2021, showcasing the connection between the regulatory framework and entrepreneurship.
Supporting digital entrepreneurship is particularly critical at a time when rapid economic growth is transforming Asia into a predominantly middle-income region. From this stage forward, sustaining growth will become harder, making innovation a critical growth driver, the report says.
Featured image credit: Edited from Pexels