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Summary:
Despite many similarities in demographic trends, Singapore and Japan make for a polarizing case study of two powerhouse countries in Asia.
Both countries have stagnating GDP growth, a rapidly aging population, and relatively technologically-savvy people.
However, Singapore’s strong progress with digital transformation and openness to foreign digital talent is a stark contrast to Japan’s lacking digital infrastructure and historically anti-immigration stance.
The result: wildly differing prosperity levels. Singapore’s GDP per capita sat at $65,650 while Japan’s was $40,113 (2019).
The use of digital talent is a key differentiator between the two countries, particularly during the COVID-19 pandemic.
Under Covid-19, both countries showed clear difference to digital transformation policies in their societies.
One example is that Japan’s contact tracing app failed to notify at-risk users and had crashes to its online vaccine booking system due to poor development practices. On the other hands, Singapore’s development rollout was measured and iterative due to its utilization of digital talent.
The lesson we must take away from this case study: digitalization of both our people and economy is key to compete in today’s global business.
Finding Asia’s True Gem
Having one of the world’s largest economies, a slew of highly-recognizable multi-national companies, and strong cultural influence via its media, Japan has historically been the crown jewel of developed nations in Asia.
But in 2021, does Japan still deserve this title, and is there a better candidate for the most competitive economy in Asia?
Our take: Japan’s lagging digitalization and lacking connection to global talent pools has led Japan to fall from grace. It might have the third largest economy in the world, but the country certainly isn’t living as if it is one of the world’s richest.
Here are some of the facts about Japan:
- Japan is not as futuristic or digitalized as people think. Believe it or not, the country’s workflows and bureaucratic processes are still all run on paper – 20 years after the government announced aspirations to digitalize the country.
- Compared to Singapore, Japan did not handle the COVID-19 pandemic as well as most people think. Contact tracing apps that failed to work and a lack of digital vaccine passports shows Japan’s inability to successfully use digital technology to tackle the pandemic.
- In a world where every country has a shortage of tech talent, Japan hit particularly hard; much-needed foreign talent is not coming in, because almost no Japanese companies have employees who can speak anything apart from Japanese.
These are just some of the variables that are calling Japan’s status as a powerhouse economy into question. So on this week’s edition of Insights at REANGLE, we will explore what is causing Japan so much trouble with its digitalization efforts, and compare it to another Asian country which seems similar to it on the surface, but has taken vastly different actions to successfully do what Japan has struggled to do - Singapore.
Singapore & Japan: Demographical Siblings?
Both Singapore and Japan have striking similarities in several ways, particularly when analysing their demographical trends.
First, both countries have waning economic growth. In 2019, the gross domestic product (GDP) growth rate sat at 0.73% in Singapore, while GDP growth rate was 0.65% for Japan. Both countries have a relatively mature economy which partially explains the stagnating growth, but a significant contributing factor lies with the fact that both countries also have a shrinking workforce.
This leads to the second key point – both Japan and Singapore have a rapidly aging population. In fact, both countries have some of the lowest population replacement rates in the world, with Singapore’s 1.216 births per woman and Japan’s 1.369 births per woman in 2019 both falling very short of the fertility rate needed to replace a population (2.1 births per woman). This will naturally lead to both countries experiencing a steadily shrinking workforce.
Third, the two countries are also well-known for their prosperity. Japan is the third largest economy in the world by nominal GDP, while Singapore has the fifth highest nominal GDP in Southeast Asia despite being second to last in population size. Both countries also rank in the top 20 within the Legatum Prosperity Index, indicating a high degree of wealth.
Differences: The Devil is in the Details
However, taking a closer look, we see stark differences in the economic performance and productivity of these two countries that peels away the superficial similarities, painting a very different picture altogether.
Despite Japan’s overall status as a powerhouse economy with its massive nominal GDP of US $4.9 trillion, individuals in the country are not prospering as much as one would think. Singapore’s nominal GDP of US $374 billion might seem meagre in comparison, but 2019 GDP per capita shows Singapore ahead at US $65,650 while Japan’s is at US $40,113. This stark difference seems shocking, but taking a look at other factors, the picture becomes clearer.
First, Singapore’s economy is significantly more digitalized than Japan’s is, despite Japan having a longer and more historied past with information technology. On the United Nation’s E-government Development Index, which categorizes how member countries are using technology to “promote access and inclusion of its people”, Singapore ranked 11th while Japan lagged behind at 14th. Singapore also ranked first in Asia on the Digital Transformation Index, owing to the country’s strong environment for digital infrastructure and ease of doing business which has helped promote strong digital transformation efforts in its commercial sector.
Second, Singapore’s economy is highly open and is infamously easy to do business in. In the World Bank’s yearly rankings for Ease of Doing Business, Singapore ranked 2nd, while Japan was more than a handful of steps behind, ranking 29th.
Singapore’s ease of doing business is owed to several factors, including its low tax rates, high level of connectivity to the world (particularly the rest of Southeast Asia), English-speaking and highly-educated population, immigrant-friendly policies, and political stability. In contrast, Japan is infamously insulated from the rest of the world, highly bureaucratic, and poses many barriers to foreigners, including its homogeneous culture, monolingual status, and hesitance to immigrants.
The Power of Digital Talent
While both countries also have relatively good standing in global rankings for education, there is a distinct difference in the way Singapore and Japan promote the growth of the area every country is experiencing a shortage of: digital talent.
For many years running, Singapore has pushed the digitalization of the country at all levels, most clearly within its own government. The Government Technology Agency (GovTech) was spun off from a different agency in 2016 to specifically focus on bringing Singapore’s Smart Nation initiative to fruition, a plan to create tech-enabled solutions powered by Internet-of-things, big data, and more.
Japan, similarly, has a branch of its government called the Digital Agency… Except this branch of the government has yet to be formed. Plans and legislation to form the Digital Agency only rolled in this year, with the organization expected to be formed by September 2021.
The contrast in progress can be most clearly seen in the way each country’s government has deployed its in-house digital talent to develop technology to tackle the COVID-19 pandemic. While Singapore’s TraceTogether app was widely praised for its efficacy, quick rollout, and continued maintenance from GovTech in 2020 through 2021, Japan fumbled with its contact tracing; a stunning discovery in February 2021 found that Japan’s COCOA contact tracing app had failed to give any form of notification to at-risk Android users for 4 whole months, partially caused by the lack of follow-up service.
More recently, with the launch of online vaccine booking platforms, Japan experienced a catastrophic crash of its online booking system upon launch, prompting citizens to flood telephone lines and government offices with requests. And even after citizens get themselves vaccinated, they will, rather strangely, be receiving an actual physical piece of paper for their vaccine passport; in contrast, most developed countries including those in Europe and Singapore itself have digital vaccine passports ready to go.
Digitization is Economic policy and National Security issues
Digitization is not just Tech-Savvy thing any more. It is core of national policies now.
First, it is abundantly clear that all working professionals in the world will need to upskill digitally to stay competitive in today’s global economy. The skill set of digital talent is not just limited to what tech and digital talent such as software engineers or data analysts use – today’s digitally-skilled talent need to be familiar with modern enterprise software, cybersecurity best practices, iterative agile development for digital products, and virtual communication tools. Digital skills need to be woven into the fabric of society, something Singapore is working hard at with national upskilling programmes such as SkillsFuture while Japan flounders.
Second, the key to a globally competitive economy is one that can connect to the rest of the world. This is where Singapore succeeds, being well-connected to Southeast Asia due to its location, and also being able to communicate with and do business with the Western world due to its English-speaking population. Combined with its openness to immigrants, Singapore is willing and able to accept the necessary workforce it needs to run its economy. In contrast, Japan feels practically cut off from the rest of the world, something we can observe due to the country’s low rate of immigration into the country, and inability to recruit the right talent it needs to run its digital infrastructure.
Lastly, the matter of a future-ready society is not just limited to work and being economically competitive. As we have seen with Japan’s pitfalls managing its digital platforms to tackle the COVID-19 pandemic, having baseline working digital infrastructure is a matter of public safety and health. Technology has also permeated into virtually all other areas of our lives, including national security, culture, entertainment, warfare, finance, inclusivity, and so much more. This is why it is key that Singapore had digital leadership from the top with its GovTech agency, and we are hoping Japan can follow suit soon with the launch of their own Digital Agency later this year.
The Take-Away
Though both countries have their similarities in strengths and upcoming challenges, the ways in which Singapore and Japan are handling their future could not be any more different. While Singapore has pushed for openness, agility, and constant digitalization, Japan is stuck with paper-based workflows, bureaucratic nightmares, and struggles to receive enough digitally-skilled immigrants to replace the shrinking workforce needed to sustain its massive economy.
This is why REANGLE set up and launched our business in Singapore, instead of Japan (despite our founder’s country of origin) – we foresee that Singapore’s current actions will give it the competitive edge needed to be a key player in our world’s digitalized marketplace, as Japan is lagging behind.
About REANGLE
Our mission is to bridge the gap between deserving talent and opportunities, particularly for digital and green businesses in the Asia-Pacific region. Contact REANGLE for digital talent development, business development and transformation, or consulting for green companies via LinkedIn or our website.
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