A white paper on the sharing economy in Singapore, and possible approaches to both stimulate and regulate the sector, issued by ISOC Singapore (Internet Society Singapore Chapter), with international law firm Pinsent Masons MPillay.
This is posted in my capacity as Education Chair of the Internet Society Singapore Chapter. To find out more about ISOC, visit www.isoc.sg
2. Contents
1 Pinsent Masons Introduction
2 Introduction
2 The larger picture
3 Regulating the Sharing Economy
3 New Approaches
3 Recommendations
4 Contacts
3. 1
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.
4. 6742
2
Introduction
The 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 Picture
Within 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?
5. Pinsent Masons | The Sharing Economy in Singapore
Regulating the Sharing Economy
The “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.
3