February 3 — In the next 50 years, I believe Singapore will mature to become an intellectual capital economy, where intangible assets such as know-how, technology and intellectual property (IP) rights create more value than traditional factors of production.

In October last year, a low-key event took place that I believe is the harbinger of the future shape of the Singapore economy.

That event was the signing of an agreement between the Intellectual Property Office of Singapore and the State Intellectual Property of China to enhance IP cooperation between the two countries and to jointly develop the Sino-Singapore Guangzhou Knowledge City (SSGKC). The SSGKC will serve as a “model zone” for IP cooperation between Singapore and China, and as an IP model hub for the latter.

Under the agreement, both sides will cooperate in areas such as IP law and policies, IP-related financial products, and IP valuation and appraisal.

Singapore’s export of a new form of intellectual capital — encompassing development experience and IP management know-how — will be an important part of the next phase of development of the Singapore economy.

So how does intellectual capital help to generate economic growth and how can Singapore become an intellectual capital economy? Here is how it works.

As we move towards a more knowledge-based economy, we will invest more in intellectual capital creation in the form of research and development and service innovation that will produce IP rights such as patents, copyrights and design rights.

Such investments will create, for example, new patented technology and products that can and should be commercialised. When more innovative products and services are created, it generates higher-value work and higher income.

To fully understand how the IP model zone initiative between Singapore and China will have a long-term effect on the development of the Singapore economy, consider these trends to understand the strategic context and the bigger economic picture.

Data from the World Intellectual Property Organization show that China has overtaken the United States, Japan and Germany as the largest patent-filing nation in the world. In 2013, about a third of the world’s 2.6 million patent applications were filed in China.

Chinese technopreneurs have also moved onto the global arena. The New York Stock Exchange and NASDAQ have emerged as favourite destinations for Chinese enterprises to raise funds and build their international brand. Mr Jack Ma and Alibaba’s mega initial public offering last year come to mind.

China will probably overtake the US as the world’s largest economy in a few years’ time, and the flow of its investments in both developed and emerging economies has positioned the country as a sought-after risk capital provider.

What opportunities does it present for Singapore? The answer lies in our ability to find new niche areas that will allow Singapore to ride the China wave even better.

China as a digital hinterland

If China is the super-tanker economy, then Singapore is the sophisticated and nimble luxury yacht. With a tiny but open economy, our island nation does not have a hinterland, such as Hong Kong or Boston, where we can extend our economic space easily.

But the concept of hinterland is no longer defined by geography, as developments in technology and aviation have really made the world much smaller. The Association of South-east Asian Nations with a total population of more than 600 million is already our hinterland.

It is also no longer absurd to consider China as one of Singapore’s hinterland, albeit in a different form.

We are serious about pushing Singapore as a Smart Nation, where the Internet of Things, big-data analytics will allow us, among others, to create new digital estate. This new connectivity is the pathway for us to create the new digital hinterland.

I believe the next phase in the development of the Singapore economy will be increasingly shaped by intellectual capital as the new exportable value driver.

Mr Thomas Stewart in his seminal book Intellectual Capital demonstrated how knowledge — not natural resources, machinery or financial capital — has become the most important factor in economic life and a nation’s greatest competitive advantage.

Intellectual capital firm Ocean Tomo said that within the past quarter century, the market value of the S&P 500 companies has deviated greatly from their book value. In 1975, tangible assets comprised 83 per cent of the components of the S&P 500 market value. In 2010, however, intangible assets comprised 80 per cent. A significant portion of this intangible value is patented technology.

The Singapore economy in a way is the microcosm of the new S&P 500 market component. We are slowly emerging as an intellectual capital economy.

When we start sharing our IP development experiences with China, this represents a new shift in our economic relations. Singapore is becoming an intellectual capital exporter. We are now not only building the hard infrastructure in China’s cities, but also its soft infrastructure in terms of IP management capabilities.

As a small economy, we have no choice but to focus deeper on higher-value economic activities. We have to innovate even more and extend our economic space.

In the next 50 years, our next challenge will be about how to design and find the best pathways to create the next intellectual capital economy.

IP lawyers in Singapore, for instance, could form a service conglomerate to achieve scale in servicing the Asian region. Our government-linked companies could also create intellectual capital units to drive new commercial value internationally. The Singapore Government could in turn woo big as well as boutique global intellectual capital practices to service Asia out of Singapore.

The potential for Singapore to be a high-value intellectual capital economy that can add value in the emerging global techno-economic equation is enormous.

I believe the model IP zone initiative between Singapore and China points the way forward for new forms of strategic collaboration with intangible assets as the new underlying asset. — TODAY

*Zaid Hamzah is an intellectual capital lawyer and author, who lectures at RMIT University in the law of investments and financial markets.

**This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail Online