Singapore at the helm of digital trade

SINGAPORE has built its success as a global trading hub through innovative approaches. While the country's strategic location gives it a natural advantage when it comes to trading, Singapore's meteoric rise to become one of the most competitive economies in the world did not happen by chance, but by dint of foresight and strategic policymaking.

The republic's journey towards becoming the lynchpin of global trade should be instructive for governments looking to reimagine and rebuild their economic foundations in a post-pandemic world, in a future that is indubitably digital.

Covid-19 has shown just how quickly industries can pivot towards digital transformation when needed.

Global trade systems are on the cusp of such a change; however the technology facilitating this transformation is very much still in its infancy, with legal and technical constraints becoming one of the biggest impediments to progress.

With blockchain technology, all of these will change - but only when supported by the right policies.

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Bills of Lading (B/L) are one of the most important parts of the trading process and used worldwide to certify ownership of cargo. This form of documentation is the backbone of global trade, but B/Ls exemplify how global trade lags other industries in terms of digital adoption.

Currently, only 0.1 per cent of B/Ls are issued electronically, with the remaining paper-based B/Ls physically couriered between countries, resulting in inefficiencies and delay.

In addition, paper-based B/Ls suffer from a host of potential security threats as they can be lost, forged, mislaid, damaged or destroyed.

Over the past 20 years, there have been moves to digitalise the process, yet uptake for electronic Bills of Ladings (eB/Ls) has been slow. In 2007, the groundwork was already laid for industry change when the Distributed Ledger Technology (DLT) that powers blockchains was incorporated into the eB/L framework to deliver enhanced security and transparency. Yet, DLT-powered eB/Ls existed only in closed networks, preventing the interoperability needed to foster wide-scale industry adoption.

BLOCKCHAIN AND INTEROPERABILITY - BLUEPRINT FOR SUCCESS

Interoperability, the 'special sauce' needed for the success of eB/Ls, requires legislation that recognises and supports digital versions of trade documents. Singapore's TradeTrust project, launched in 2018, aims to leverage blockchain technology to develop the interoperability framework needed to digitalise international commerce.

And earlier this year, Singapore became one of the few countries to provide legal backing to electronic transferable records, by amending the Electronic Transactions Act (ETA) to recognise eB/Ls. These moves are laying the foundation for the next generation of global trade, something that forward-looking governments should focus their attention on. Adoption of interoperable eB/Ls will make trade flows and trade financing smoother, faster and cheaper, as countries and businesses will finally be able to link their systems.

This development will also highlight the value of DLT within these systems, encouraging its integration into other areas that require the sharing of trade data within the ecosystem.

Crucially, the blockchain technology that underpins the documentation will provide an unprecedented level of security to cross- border transactions. Security and transparency build trust between businesses and governments, and Singapore's success as a trading nation has always been tied to the trust it has cultivated on the global stage.

GOVERNMENT - THE KEY TO DIGITAL TRADE SUCCESS

True industry change needs international support backed by rigorous testing, and Singapore has been rallying the international community to this cause - piloting various initiatives to make concrete digital trade corridors.

The country has entered into digital economy agreements (DEA) with Australia, New Zealand and Chile to align digital rules and standards to strengthen cooperation.

Following on from the DEA, the Infocomm Media Development Authority and the Australian Border Force have begun a Proof of Concept trial to test paperless blockchain trade.

Digital trade is at an inflection point. Having withstood the blows of uncertainty from the Covid-19 pandemic, governments must now band together once again, to establish a common blueprint for the future of trade.

Singapore is showing how this can be done, but other governments need to come on board to ensure its success.

All eyes are on Asia now, and this represents a golden opportunity for policymakers in Singapore and the rest of Asean to throw their weight behind electronic documents to shape new digital trade corridors.

Governments must take the lead in galvanising an ecosystem-led approach in developing digital trade. Through collaborations, governments will be able to harness the cutting-edge capabilities of technology providers to build test environments that will serve as precursors to innovative new digital trade corridors.

Government funding can also be channelled to catalyse industry developments to drive the next wave of digital innovations that will support and enhance the future of digital trade.

Over the course of 200 years, Singapore has successfully positioned itself as the nexus of global trade and innovative commerce.

It is now cementing its role at the helm of the global trade systems of the future - fast, safe and interoperable processes powered by DLT.

Singapore is just one example of how advocacy and smart policymaking has paid dividends to the nation's economy. With the full support of governments and business leaders, digital trade is set to break the silos hindering international commerce to support a new century of growth and prosperity.

The writer is government relations lead (APAC) at R3

Singapore's TradeTrust project, launched in 2018, aims to leverage blockchain technology to develop the interoperability framework needed to digitalise international commerce. Earlier this year, Singapore became one of the few countries to provide legal backing to electronic transferable records, by amending the Electronic Transactions Act (ETA)

to recognise eB/Ls.