Digital investments starting to pay off for Singapore

McKINSEY Global Institute's (MGI) ranking of Singapore as the world's most connected nation in its recent study is an acknowledgement of the Republic's effort to remain relevant as a global hub for trade and commerce. The important sub-text of this ranking is that being a hub is not just about trade in goods and finance, though that is still important; it's also about people and the amount of data streaming across a country's borders.

While the global flows of trade and cross-border capital transactions have flattened or declined since 2008, the volume of data being transmitted across borders has grown 45 times since 2005; it is projected to grow another nine times over the next five years. MGI noted that cross-border flow of goods, finance and data contributed around US$7.8 trillion to the global economy in 2014. Out of this, digital flows - practically non-existent a decade ago - accounted for US$2.8 trillion. These flows exert a larger impact on gross domestic product (GDP) growth than the centuries-old trade in goods. The world has entered into a phase of globalisation, in which digital infrastructure and connectivity is as important as industrial production capability and population were in the 20th century in ensuring prosperity and jobs.

Almost every type of cross-border transaction now has a digital component. More importantly, digital platforms open the door for small businesses and start-ups to become what is called "micro-multinationals", that is, small businesses whose customers are all over the world. The need for critical mass before becoming a global player is no longer necessary. For Singaporean companies, this levels the playing field, as size has been a major constraint for global ambitions.