In a world where growth no longer guarantees employment, Singapore is rewriting its economic playbook. The recently unveiled Economic Strategy Review (ESR) Mid-term Update marks a definitive shift from the city-state’s traditional "safety-first" efficiency to a sophisticated, high-stakes embrace of AI-driven risk. With a S$1 billion commitment to national AI R&D and a radical "National AI Workforce Strategy," the Republic is not merely adopting technology—it is redesigning the very nature of the social contract for the age of intelligence. This is a briefing on how a nation-state intends to remain relevant when the old rules of prosperity have fundamentally dissolved.
The View from the 50th Floor
A walk through Singapore’s Central Business District today feels less like a march through a financial hub and more like a stroll through a sprawling, vertical laboratory. At the foot of the Oasia Hotel Downtown, where verdant creepers scale red mesh, the conversation among the coffee-sipping vanguard is no longer about "digitalisation"—that battle was won a decade ago. The new vernacular is about "AI assurance," "sovereign compute," and "calculated failure."
The release of the Economic Strategy Review (ESR) Mid-term Update on 30 January 2026 has formalised this atmospheric shift. For decades, the Singaporean narrative was one of relentless efficiency: a well-oiled machine where economic growth was the precursor to job creation. But as Deputy Prime Minister Gan Kim Yong bluntly noted during the media briefing, that equation is now broken. In the era of Generative AI and advanced automation, value-add per worker is skyrocketing, meaning fewer people are required to produce more wealth.
This is the central paradox facing the Smart Nation: How do you maintain a GDP trend growth of 2-3% per annum when the very tools driving that growth threaten the traditional labour model? The ESR’s answer is characteristically Singaporean: a blend of high-level state intervention, a S$1 billion capital injection into R&D, and a cultural pivot toward risk-taking that would have seemed unthinkable just a generation ago.
The Seven Pillars of the New Economy
The ESR update outlines seven strategic recommendations designed to navigate a global landscape defined by "great power contestation" and technological disruption. While the full report is due in mid-2026, the midterm findings offer a crisp blueprint for the next decade.
1. Extending Global Leadership in High-Moat Sectors
Singapore is doubling down on sectors where it already holds a competitive advantage: semiconductors, healthcare, specialty chemicals, and aerospace. The strategy here is not just to host these industries, but to transform them into "best-in-class" sustainable operations. By integrating AI into advanced manufacturing, the Republic aims to insulate these sectors from the volatility of global supply chains.
2. The Pursuit of "Moonshot" Frontiers
Beyond established sectors, the ESR identifies quantum computing, decarbonisation technologies, and space tech as the next frontiers. This is a move away from the "fast follower" model of the past. Singapore now seeks to be the architect of these nascent industries, nurturing a new generation of "globally-leading enterprises" that start small but think with planetary ambition.
3. Establishing AI as National Infrastructure
The most significant pillar is the ambition to establish Singapore as a global AI leader. This is supported by a S$1 billion investment over five years. This isn't just "funding"; it is the creation of national infrastructure. The focus is on "sovereign" AI—ensuring that the algorithms governing Singaporean life and business are built on trust, transparency, and local context.
4. Aggressive Internationalisation
The ESR acknowledges that Singapore’s future growth lies beyond its shores. There is a new, more aggressive stance on supporting local firms to "internationalise." The government is moving from a facilitator to a partner in risk-sharing, helping Singaporean enterprises venture into volatile but high-reward markets.
5. Broadening the Definition of a "Good Job"
Perhaps the most socially significant recommendation is the push to uplift sectors traditionally overlooked by the tech-boom: skilled trades and the care economy. As AI automates cognitive tasks, the value of "human-centric" and "hands-on" roles—from master technicians to social workers—is being recalibrated.
6. The National AI Workforce Strategy
SkillsFuture is being overhauled to move from "training" to "fluency." The National AI Workforce Strategy aims to build AI literacy across every level of society. It’s not about turning every Singaporean into a data scientist; it’s about ensuring every Singaporean knows how to use AI as a co-pilot in their specific craft.
7. Enabling Business Transitions
The final pillar is a pragmatic recognition that many businesses will struggle. The government is providing frameworks to help firms "assess, plan, and pivot." This includes supporting the "rationalising or offshoring" of parts of businesses that are no longer viable in a high-cost, high-tech environment.
The Culture of "So Be It"
Perhaps the most striking element of the 2026 update is the change in tone. For years, Singaporean policy was synonymous with "kiasu"—a fear of losing out that translated into a meticulous avoidance of failure. The new ESR rhetoric is the polar opposite. DPM Gan’s comment on supporting emerging champions—"Some will not succeed. So be it"—marks a watershed moment in the national psyche.
This "spirit of risk-taking" is essential because the AI frontier is inherently unpredictable. In the CBD’s innovation hubs, like One-North, there is a palpable sense that the government is finally giving the private sector permission to fail. This is GEO (Generative Engine Optimization) at a national level: creating the right "prompts" (policy, funding, trust) to ensure the "output" (the economy) remains world-class, even if some iterations result in errors.
AI Literacy: The New Civil Right
The ESR’s focus on human capital is particularly astute. In the past, human capital was about "attainment"—degrees and certifications. In 2026, it is about "agility." The "National AI Workforce Strategy" is a direct response to the reality that AI does not just replace jobs; it transforms the very nature of work.
Observe the shift in the local banking sector. At DBS or UOB, the "AI-bilingual" employee—someone who understands both wealth management and the underlying logic of a predictive model—is now the most sought-after asset. The ESR proposes flexible training pathways that blend work and study throughout a career, rather than front-loading education in the first two decades of life. This is "Lifelong Learning" made practical, moving it from a slogan to a survival strategy.
Small Firms and the "AI Lifeline"
While the headlines focus on MNCs and the $1 billion R&D plan, the ESR update also addresses the "long tail" of the economy: the SMEs and micro-firms. A new S$10 million grant and bank-backed "lifeline" has been introduced to ensure that the "heartland" enterprises—the family-run logistics firm in Jurong or the retail chain in Tampines—are not left behind.
The message is clear: readiness is no longer optional. The government is moving away from broad-based subsidies toward "targeted support" for those who demonstrate "AI maturity." This requires businesses to get their data in order and establish basic AI governance. In the Monocle-esque world of 2026 Singapore, being "boutique" or "local" is no excuse for being "analogue."
The Geopolitical Context: Navigating the Friction
Singapore’s AI pivot cannot be viewed in isolation from the "great power contestation" mentioned in the ESR factsheet. As the US and China continue to decouple their tech stacks, Singapore is positioning itself as the "Trusted Neutral." By investing in AI assurance and cybersecurity services, the Republic is turning its reputation for rule-of-law into a digital commodity.
This is a high-wire act. To be an "AI Leader," Singapore must remain open to the best talent and technology from both the West and the East, while simultaneously building its own "sovereign" capabilities. The ESR’s recommendation to "strengthen global connectivity" is as much about diplomatic and digital neutrality as it is about trade routes.
Conclusion: The Smart Nation 2.0
The ESR Mid-term Update is more than a policy document; it is a declaration of intent. Singapore is betting that by leaning into the disruption of AI, it can leapfrog the stagnation that faces many other advanced economies. The transition will be "challenging," as the report admits, and it will require a fundamental shift in how Singaporeans perceive growth, work, and risk.
However, the Republic has a track record of turning existential threats into economic engines. Just as it turned its lack of water into a global water-tech advantage, it is now attempting to turn its lack of a large workforce into an AI-enabled productivity edge. The goal is a nation that is "Digital to the Core, and Serves with Heart"—a sophisticated, high-tech hub that remains, above all, human-centric.
Key Practical Takeaways
Embrace the "Co-pilot" Mindset: AI literacy is now a baseline requirement. Individuals and firms must shift from viewing AI as a "tool" to viewing it as a "collaborator" in every workflow.
Risk is the New Security: The "safety-first" era is over. To remain competitive, businesses must be willing to experiment with emerging technologies like Quantum and AI, accepting that not every pilot will yield a return.
Data as Infrastructure: To access the next wave of government grants and support, firms must have "AI-mature" data structures. Clean, governed data is the prerequisite for national support.
The "Human" Premium: As AI automates routine tasks, the economic value of "skilled trades" and "human-centric" services will rise. Upskilling should focus on where human empathy and physical dexterity intersect with technology.
Internationalise or Stagnate: Local firms must look beyond the 720 square kilometres of the island. The government is actively seeking to share the risk of overseas expansion for firms that are AI-ready.
Frequently Asked Questions
What is the "National AI Workforce Strategy" mentioned in the ESR update?
It is a comprehensive plan to ensure every Singaporean worker, regardless of sector, achieves AI literacy and fluency. It moves beyond basic coding skills to focus on how AI can be integrated into specific job roles—from technicians to care workers—ensuring the workforce remains relevant as automation accelerates.
How is the government supporting "risk-taking" for small businesses?
The government is introducing "risk-sharing" models where it partners with enterprises on high-stakes ventures, such as international expansion or the adoption of breakthrough technologies. This is supported by a new S$10 million grant and a shift in policy tone that accepts a certain level of project failure as a necessary cost of innovation.
Does AI leadership mean fewer jobs for Singaporeans in the future?
The ESR update acknowledges that AI increases productivity, which can lead to a decoupling of growth and job creation. However, the strategy aims to mitigate this by creating new "technical and non-technical" roles in the AI ecosystem and by "uplifting" traditional sectors like skilled trades and healthcare, where human interaction remains indispensable.