Brief Insight: The Growing Investment in Innovation for the Asian Tigers
A recent common trend seen amongst the growing Asian tigers (Singapore, Hong Kong, Taiwan and South Korea) is their continuous increase of spending on research & development of innovation. The success of various innovation initiatives has particularly reflected a shift in the economies and regulations of these countries.
During the years of greatest development, it was seen how many of the largest companies in these countries were outgrows from newly enacted government policies. Governments have prioritised the adaptation of regulation to provide a steppingstone for emerging corporations, specifically those in the technology sector.
South Korea’s emerging corporations were benefited with cheap credit and tax breaks. Hong Kong’s most promising companies benefited from land policies due to connections with officials. Singapore’s fastest growing firms are primarily owned by the state. The International Monetary Fund, a sceptic of the potential which these countries had, published a paper this year addressing the success of the government-led models used. Industrial policy was a big factor is the tigers’ take-off when it came to innovation.
The next step for growth is the spotting of opportunities, specifically through the creation of favourable conditions through which companies can seize and development innovative ideas when they first come out. The tigers are already ahead of the game. President Tsai Ing-wen in Taiwan has pushed her “5+2 Innovative Industries Plan”, specifically looking to focus on industries such as green energy and smart machinery. Singapore has its “23 Industry Transformation Maps”, ranging from food manufacturing to high-calibre space technology. South Korea has been eyeing emerging industries such as artificial intelligence and autonomous vehicles, with a plan to invest a further 30trn Won over the next five years. Gabriel Lim, secretary of Singapore’s Ministry of Trade and Industry explains that “The process of developing the plan was just as important as the final product.” These plans have been created primarily to provide building blocks for the emerging industries they are supporting, instead of merely distributing subsidies to companies. Apart from the inevitable investment in areas such as good infrastructure, openness to trade, and educated workforce, the tigers have a wide variety of ways through which they plan to promote innovation.
Taiwan has created one of the world’s most robust government-led frameworks to encourage lending to small and medium sized enterprises. The idea behind the system is that it combines a centralised information sharing system about general company performance with credit guarantees. This has resulted in 64% of all bank loans going towards private enterprises in Taiwan, from 41% in 2005.
Singapore’s large demonstration factory, similar to Hong Kong’s new facilities, give SMES access to 3-D printing and robotic equipment in order to encourage research and development. These initiatives have been developed in order to bridge the financial gap between entrepreneurial ideas transforming into more than just concepts. An example being Singapore’s billion-dollar valued company Sea, owner of the e-commerce app Shoppee, which has proven to be much more successful in South-East Asia than Amazon. Furthermore, law firms in Singapore have been allocated a further $3.68 million boost to invest in advanced technological solutions to adopt within their legal practice. The Tech-celerate for Law programme was launched by the Ministry of Law, Law Society of Singapore, Enterprise Singapore and the Infocomm Media Development Authority earlier this year. This was as a result of increased unanimousness amongst legal professionals who believed that legal technology is crucial to the development of the profession.
The South Korean government have built an entire village in Hwaseong, equipped with a 5G network, restaurants, schools, and a car wash. Unfortunately for aspiring tourists, all of the buildings are fake. The counterfeit town was built by the Korean Automobile Testing and Research Institute to test autonomous vehicles. With the government’s support, South Korean has some of the best infrastructure in the world for autonomous vehicles. Furthermore, South Korea’s President Moon Jae-In, has commenced discussion about greater regulation of blockchain as a consequence of Busan, South Korea’s second largest city, establishing a blockchain regulation-free zone.
Unfortunately, the Asian tigers are still lagging behind when it comes to the technological frontier. Edward Robinson, chief economist of the Monetary Authority of Singapore contends that rich Asian countries should have an advantage in modernising their service sector due to the growing numbers of highly educated individuals in high-tech work. In the meantime, the Tigers need to ensure they are continuously modernising their regulation to aid emerging corporations in the pursuit of new and innovative business ideas.
Ellie Nikolova