In this episode of KPMG’s SG Budget 2024 Insights, Thurain Tun, Partner, Financial Services Advisory, KPMG in Singapore, Lyon Poh, Partner, Technology Consulting, KPMG in Singapore and Catherine Light, Partner, Tax Reimagined, KPMG in Singapore discuss how Singapore businesses can be equipped to leverage technology effectively and be encouraged to take on innovative projects.
Read video transcript below.
Thurain Tun: Generative artificial intelligence (AI) is truly transforming the business landscape. According to KPMG's 2023 Global CEO Outlook, CEOs globally are also making it one of their top investment priorities in the medium term. But where does Singapore actually stand among other global tech hubs? Lyon, do you think we have the right infrastructure and expertise to help businesses in their digital and technology transformation?
Lyon Poh: Overall, I think Singapore has been quite successful in establishing ourselves as a technology hub and it's evident in the various start-up activities and innovation hubs that we've seen growing in the last decade or so. COVID has also further accelerated those activities in the process of transforming their businesses, with the new norm for working becoming more hybrid and more virtual.
But there are still a lot of businesses that are lagging behind in terms of their digitalisation efforts, not purely because of skillset issues that are very short in the marketplace, but mainly a mindset issue, in terms of whether they are adapting to the right kind of market conditions or they are being competitive in the market.
So, it's important that we recognise that that is one of the constraints or the mindset that we need to change, and businesses need some support, such as grants from the Government, that can allow them to do a "trial and error” in their research and development efforts (R&D). This is so they can defray some of the costs involved in investing in those technologies to help them transform their businesses.
Thurain Tun: Yes, the high cost of investing and digitalisation is certainly a barrier for many businesses. It can be even more significant when it comes to adopting or exploring new technologies like AI or machine learning. Catherine, what more do you think needs to be done to support businesses in adopting AI and machine learning? Are there any gaps that you see?
Catherine Light: When we look at it, beyond investing in the right technologies, businesses also need to invest a significant amount of time and effort in training their AI and machine learning models to get them to where they need to get to. This is an incredibly time-consuming process with multiple steps involved.
What we've seen is that it's a challenge to get good quality data that can drive the outcomes. Currently, the AI and the data analytics grants that are available are very focused on the small end-of-town financial services sector organisations and not broad-based. As a result, this is giving limited benefit to the global organisation.
Governments should be considering how they can change this and there are two potential opportunities. The first is where they have grant schemes that are based on all enterprises. How do they help the organisations get to where they need to be, right from the beginning with training all the way to the end of the process when they are maintaining those models in the long term?
The second one is the provision of a platform that can help specifically the small and medium enterprises (SMEs) market. What we find is that these platforms are incredibly costly to develop, and SMEs are shying away from implementing and going on this journey. So, where governments can create platforms that these enterprises can go on to, it'll mean that they can invest in these technologies, similar to what we're seeing on the Government on Commercial Cloud platform.
Thurain Tun: Digitalisation should be more than just about increasing productivity. Why is it so important for Singapore to ensure that technology and innovation are ingrained in our business culture?
Lyon Poh: For Singapore to be a leader in digitalisation, our businesses must fully embrace digital transformation and put innovation at the front and centre of their strategy. This is not about productivity; it is about survival. As a nation, we must aspire to be at the forefront of technology and make sure that technology is part of the roadmap in businesses here.
This is evident in the recent National AI Strategy 2.0, as we set out AI being one of the key technologies to embrace. There is also a limitation our businesses face in that they have constraints in getting the resources or the people to do technology transformation work.
This is where the Government can help in expanding the grant schemes today to support digital projects. We can also leverage the resources within the region, in ASEAN, for example, to help drive the delivery of these digital projects and solutions, so that we can unlock the business opportunities that our economy presents.
Thurain Tun: Often, we see smaller enterprises struggling, more when it comes to smart technology adoption and R&D activities. Why is that the case? And should they be getting more targeted support at the upcoming Budget?
Catherine Light: Surveys have found that 63 percent of the businesses find that the high costs result in them not investing in AI. Now that is significant. They are unable to commit to the hefty upfront costs and the licensing that they need to incur in order to have access to these types of technologies. The larger enterprises have access to global technologies and global teams, but for the small businesses, they largely depend on local capabilities, which in certain markets may be limited due to the increase in the demand for those potential resources.
Currently, we see that the existing government grants that are available are deployed on a reimbursement basis. Now, the challenge with the reimbursement basis is that they still need to make those hefty upfront payments. So, one of the suggestions that we want to put forward is how we can change that from a reimbursement model to something more like a co-investment approach? Can the SMEs only pay the top-up payment that is over and above the grant and for that grant to go directly to the service provider that is providing the technology to support these developments? That will allow the SMEs to take on and adopt these technologies seamlessly without incurring those upfront costs that are debilitating for the business.
Thurain Tun: As we round off this episode, I'd like to find out, what do you think Singapore and Singapore businesses can do to take on the call to action to be digitally ready.
Lyon Poh: Singapore has been very successful, and the country can further strengthen its lead position in the area of technology. But to be realistic, in innovation, scalability is important. Most businesses in Singapore probably do not have the appetite and the resources to create from nothing to something. I call it, “one to ten”, for example, or “zero to one”.
We should perhaps focus the resources on scaling this innovation from maybe “ten to a hundred”. This is where we can rely on some of these cross-government arrangements and industry collaboration frameworks to help accelerate and strengthen our position as a technology hub, where we can enable developments of scalable digital solutions and assets in Singapore.
Catherine Light: So I liked what Lyon said. “Zero to ten” is a difficult goal to achieve. But we see through a vibrant ecosystem and partnerships that we'll be able to encourage that growth. How do we have access to diverse teams that have experience in different areas? How do we ensure that we bring collaborations together so that we have decent data sets that we can work with to be able to get us to the end objectives that we’re trying to achieve?
This does not require only a single country view. It definitely requires a global and regional view to how do we get to where we need to go using all of the resources at our disposal.
Thurain Tun: While Singapore has done considerably well in establishing itself as a technology hub, the journey of expanding its leadership position in this area is definitely far from over.
As we have seen, businesses of all sizes continue to face challenges in adopting new technologies and we certainly hope that Budget 2024 will give them a leg up as they adapt to a digitally driven world. After all, by empowering Singapore's businesses to transform and innovate, we can raise Singapore's global competitiveness and economic resilience too.
