Singapore’s digital economy has surged to account for 17.7 per cent or S$113 billion (US$85.52 billion) of the nation’s Gross Domestic Product (GDP) in 2023, according the Infocomm Media Development Authority (IMDA) last week.
With a compound annual growth rate (CAGR) of 11.2 per cent, the digital economy grew at nearly twice as fast as the overall economy’s nominal growth rate of 5.8 per cent.
The information and communications (I&C) sector makes up a key component, comprising one-third of the digital economy, with the remaining two-thirds from the digitalisation in other sectors.
This I&C sector is a key driver of digitalisation, providing digital services such as telecommunication, computer programming and IT consultancy, cloud computing, software development, and the production and distribution of content and media.
The remaining two-thirds of the digital economy are driven by digitalisation across other non-I&C sectors, where businesses use digital technologies to reach customers more effectively, optimise business processes, and product and service innovation.
Singapore’s technology sector “is not just growing in absolute size compared to 2018, but the sector is also growing at more than twice the rate of the rest of the economy at slightly more than 11 per cent,” said Lew Chuen Hong, IMDA’s chief executive.
“This underscores the critical need for all companies and especially SMEs to embrace the opportunities of digital as an enabler and a multiplier for growth,” he added.
Strong tech adoption
IMDA also emphasised the strong tech adoption by both small and medium-sized enterprises (SMEs) and larger firms.
It noted that 94.6 per cent of SMEs have adopted digital in at least one of the six key digital areas examined such as cybersecurity, cloud, e-payment, e-commerce, data analytics and AI, which is a 0.5 percentage point increase from 2022.
SMEs have also deepened their digital adoption. Eighty-two per cent of SMEs have used at least one digital solution to enhance general business functions, a growth from 69 per cent in 2021. The general business functions that are most commonly digitised are accounting, document management and digital marketing.
In terms of digital solutions that support specific sector needs, 85 per cent of SMEs adopted at least one sector-specific digital solution in 2023, up from 61 per cent in 2021.
Larger firms already have a higher level of digital adoption, and have adopted about 4.7 of the 6 digital areas examined, with e-payment and cybersecurity being adopted by almost all of the larger firms.
The larger firms have a high level of adoption of key digital utilities technologies that provide the soft digital infrastructure for digitalisation.
For example, Singapore’s major digital identity and e-payment system, Corppass and PayNow Corporate, has 90 per cent adoption rate in 2023. And 60,000 entities are using InvoiceNow, a national e-invoicing initiative in 2023, marking a 9.7 per cent growth per year from 50,000 in 2021.
Larger firms have also adopted cloud computing, data analytics and Artificial Intelligence (AI), with two in five larger firms adopting AI in 2023.
For enterprises that need bespoke digital solutions, the Open Innovation Platform (OIP) allows them to tap on more than 13,000 technology solution providers to meet their business needs. So far, over 300 challenges have been launched by enterprises.
Across the industries, sectors like finance & insurance and professional services adopted relatively more digital areas on average, as compared to sectors like construction, real estate and transportation & storage.
To help SMEs with digital transformation, IMDA has resources such as the 400 pre-approved digital solutions on the CTO-as-a-Service (CTOaaS) platform. The digital solutions are sector-specific digital solutions curated for SMEs that are relevant for businesses at each stage of their growth.
AI adoption on the rise
IMDA also reported a rise in AI adoption, led by the larger firms. In 2023, 44 per cent of larger enterprises implemented AI-enabled solutions, more than double the 16.7 per cent in 2018. SMEs also improved their adoption rate, growing from 3.5 per cent in 2018 to 4.2 per cent in 2023.
AI adoption differed significantly across sectors. Notably, the I&C and finance & insurance sectors led the way, while AI adoption remained relatively low in sectors such as transport & storage, manufacturing and accommodation & food services.
For the organisations that have yet to use AI, their reasons for not doing so differed for SMEs and non-SMEs.
For larger firms, “concerns with potential security issues” was the top reason, followed by “uncertain ROI or use case”.
In contrast, 57.5 per cent of SMEs indicated “no need to adopt AI due to the small scale of their businesses”.Other reasons include insufficient infrastructure and high investment costs.
SMEs can adopt the AI-enabled solutions on a CTOaaS platform or experiment with IMDA’s GenAI Sandbox for SMEs with pre-qualified GenAI-enabled solutions. IMDA will be enhancing the GenAI Sandbox, with plans to launch GenAI Sandbox 2.0 in December this year.
IMDA will work towards raising the AI capabilities of these pre-approved digital solution providers, so that more pre-approved solutions are AI-enabled where feasible. IMDA’s aim is to enable 15,000 more SMEs to benefit from AI-enabled solutions within the next two years.
Tech talent
While the global tech sector has a cautious hiring outlook, Singapore continues to see steady growth in technology employment. The number of tech jobs in Singapore grew to 208,300, marking a 3.4 per cent year-on-year growth and making up 5 per cent of total employment.
“Jobs in the sector have grown by more than 20 per cent over the past five years, reaching over 208,000 positions and more importantly, these are high-quality jobs,” said Lew.
He said that the monthly median salary of a tech worker is approximately S$7,000 (US$5,297), which is 1.5 times higher than the monthly median salary for workers in the rest of the economy.
The World Economic Forum highlights digitalisation as a key growth area for the Association of Southeast Asian Nations’ (ASEAN) countries, with the potential for ASEAN’s digital economy to grow from approximately US$1 trillion by 2030.
