the sharing economy in singapore - regulate or stimulate?

The Sharing Economy in Singapore: Regulate or Stimulate

Contents

1 Pinsent Masons Introduction

2 Introduction

2 The larger picture

3 Regulating the Sharing Economy

3 New Approaches

3 Recommendations

4 Contacts

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Pinsent Masons | The Sharing Economy in Singapore

Pinsent Masons Introduction

Established in 1831, Pinsent Masons LLP (“Pinsent Masons”), is a full service international law firm. The firm has more than 1,500 lawyers, is headquartered in London, and has offices in Paris, Munich, Doha, Dubai, Istanbul, Singapore, Hong Kong, Shanghai, Beijing and throughout the UK.

In Singapore we operate as a joint law venture known as Pinsent Masons MPillay. This allows us to combine the unrivalled depth and breadth of Pinsent Masons’ experience in construction and engineering law with the local law expertise of MPillay.

Pinsent Masons MPillay is the only Joint Law Venture operating in Singapore with a focus on construction and engineering law. The unique structure gives the firm full rights of audience before Singapore courts and specialist tribunals.

Pinsent Masons leverages our technical expertise in each of our Global Sectors to help our clients succeed. We are specialists at advising clients in the Infrastructure, Energy & Natural Resources, Advanced Manufacturing & Technology Services, and Financial Services. Our Sector focus allows our lawyers to not only be proficient in the legal and regulatory matters facing our clients,

but also to provide commercially driven advice driven by a deep understanding of these sectors.

“The Internet Society (ISOC) is a global cause-driven organization dedicated to ensuring that the Internet stays open, transparent and defined by its users. It is an independent source of leadership for Internet policy, technology standards, and future development that works to ensure that the Internet continues to grow and evolve as a platform for innovation, economic development, and social progress for people around the world. The Singapore chapter of ISOC focuses its efforts on the promotion of the Internet and its associated technology and applications to help organizations and individuals work together and develop Singapore’s unique voice. It works to advance and promote the use of the Internet and its associated technologies, engages with a wide range of Internet educational initiatives and promotes the expansion of Internet access at all levels of the local community. ISOC Singapore also provides forums for professional networking and knowledge sharing, and aims to promote recruitment and job market development in local technology industries and lead initiatives for the expansion of broad community access and infrastructure development.”

This report was made possible with the support of the Media Literacy Council and the Asia Internet Coalition.

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IntroductionThe sharing and knowledge economy, powered by the internet, now constitutes a significant economic and innovative force. The popularity of recent startups like Uber, which makes mobile applications that connect people to drivers of private vehicles for hire, or Airbnb, an online marketplace where people find and rent accommodation, underscore this sector’s rapid rise.

In Singapore, such startups are very much welcomed as contributing to a vibrant economic scene. On the other hand, the business models they use tend to disrupt the existing regulatory frameworks.

Some of the questions raised by new services that operate on the fuzzier borders of regulatory attention include: Should companies other than taxi companies be allowed to “operate” taxis? Should non-banks be able to operate as banks by collecting deposits? How should equity crowd-funding platforms be imagined by those responsible for financial oversight?

It is a common refrain among technology companies that these regulatory processes are far too slow to adapt to an industry that moves at lightning fast speeds. As some commentators have said, “The legal system cannot keep up with an economy built on Moore’s Law.”

On the other hand, what companies call “disruption” and “innovation” may in fact be cause for alarm for governments and regulators. Policies that had been carefully shaped over years could be undone by a single technological trend, and open the floodgates to potential abuses.

The Larger PictureWithin this issue of regulation keeping pace with technology trends, countries in Asia are seen in a variety of ways – as either unable to understand the disruptive implications of communications technology, or far too heavy-handed in clamping down potential innovation.

But this simplistic point of view raises more questions than it answers: are new rules needed at all for the new economy? Or can off-line rules be adapted? If the rules do need to be harmonised, are there general principles that can be followed? What would be the possible disadvantages of harmonising the rules towards the online economy or towards the off-line economy?

Finally, does Asia/Singapore have a case to be different?

Pinsent Masons | The Sharing Economy in Singapore

Regulating the Sharing EconomyThe “sharing economy”, as this current wave of internet startups are being called, represents a confluence of constantly evolving technologies and trends. Even the term isn’t absolute – some experts prefer to call it “collaborative consumption”, underscoring the point that most “sharing economy” services employ the use of excess capacity (be it cars, like Uber, or apartments, like Airbnb). Many of these sites are networks driven by the web and by internet technology, and yet conducted chiefly offline, often on an interpersonal level. From a legal perspective, people in this “sharing economy” present a particular challenge – they’re both “people” and “business”, and cannot be neatly classified as just either. Additionally, online and offline considerations are not the same for businesses.

So pigeonholing these new trends into existing legal frameworks is a process fraught with definitional and competitive issues, and may create a regime of onerous red tape and compliance requirements that ultimately make the businesses unviable. Vested interests would, for instance, prefer that new businesses be defined in terms of older trades that are affected by their arrival, which then stifles innovation in emerging sectors.

On the other hand, it is almost impossible (and sometimes unnecessary) to draft entirely new laws for an industry that moves at lightning fast speed. Regulators, therefore, need to be adaptable – using the web’s innate “disruptive” potential to develop regulatory and legal frameworks for an economy built on Moore’s Law. The role for governments is also evolving. Other than regulating, governments are beginning to see themselves as promoters and change agents – they can play a useful role in the evolution of business. Thus regulators acquire the role of promoters – encouraging ways for new businesses to be more self-organised in making their needs known.

Governments need to keep the public interest first, and yet not impose an economic cost by impeding participation in future economic drivers. It needs to conceive new legal and regulatory paradigms, and yet not fall for the “first mover disadvantage” of rapid obsolescence in the face of rapid change.

From a regulator’s perspective, the potential consequences of light regulation, especially with the Internet, are fuzzy. It’s not so much the potential for direct harm, but triggering precedents that could lead to problematic consequences down the line.

Conversely, for startups – this gridlock becomes a significant pain point, and a tricky balancing act between compliance and operational agility. To use just two examples – the emerging trends of peer to peer car sharing, and equity crowdfunding are both in regulatory limbo, with startups in the space unable to move or innovate until they’re in the clear. But even a lag time of a few months could make them uncompetitive with services elsewhere with clearer regulatory paths.

New Approaches The way forward may lie in three sets of interconnected issues – which touch on Singapore’s regulatory apparatus, ways of thinking and questions of communication:• Laws should be seen not just as “restrictive”, but empowering.

Governments too often assume that laws are meant to curtail, and businesses too often see regulation as just red tape. With the knowledge economy, however, it is possible for regulation to take a step back from excessive interference, and allow rapid “permissionless innovation” in certain delineated areas.

• The decision making process on laws and policy needs to be more consultative, with a wider funnel of communication between the top and the bottom. The web makes a distributive decision making process possible – either through an agency that cuts across parts of government, like an ombudsman, or through a wider, more inclusive communication process that listens to the voices of smaller economic entities and wider stakeholder groups.

• Singapore has always been a crucible for experimentation, and has significant precedent in thinking ahead, and keeping one foot in the future. Parts of government can adapt, and even internalize, the web’s “disruptive” and “agile” potential to create a responsive, relevant regulatory apparatus for the knowledge economy.

Recommendations:Some suggestions were proposed at the roundtable to facilitate business. Further suggestions are welcomed as additions to this draft document:• Business with disruptive business models where the rules may

need to be changed, should be allowed a “safe harbour” in which the business is allowed to operate for a period on the understanding that the regulation may change.

• Startups and SMEs could use the equivalent of an Economic Development Board (EDB), to cut through the red tape and facilitate rapid innovation. Startups and SMEs could also self-organise to make their needs better known.

• Empowering laws for digital startups such as “intermediary defence” (i.e making platforms not responsible for third-party content).

• Governments and businesses (startups, SMEs and multinationals) need to kickstart a dialogue on compliance, competitiveness and the public interest – with their attendant complex trade-offs and balances.

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Bryan Tan PartnerStrategic Business Services, TMT Singapore T: +65 (0)63 058 490E: [email protected]

E: [email protected]: www.isoc.sg

Contacts

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