Singapore's crackdown on harmful online content will raise costs for major internet platforms, but the proposed regulations are unlikely to deter continued investment in the city-state.

In the past two decades, companies including Meta Platforms Inc.'s Facebook, Alphabet Inc.'s Google LLC, and Twitter Inc. incorporated regional offices in Singapore, lured by financial incentives and geographic proximity to other fast-growing Asia-Pacific markets. More recently, though, the government has started imposing new regulations on online platforms in an effort to combat fake news, misinformation and other societal harms.

Singapore's communications minister recently proposed new codes that would grant local regulators power to order the blocking or removal of content deemed harmful. If implemented, the regulations will also require social media platforms to adhere to certain community standards and content moderation processes. The proposed codes are under public review until Aug. 10.

Despite the increasing regulatory pressure in Singapore, the market is too valuable to exit, business and legal experts said.

"For social media companies, moving out of Singapore does not seem a possibility right now, as despite all these strict measures, they have significant operations in the country. At the same time, the government would also not like to spoil its investor-friendly image," said Kunal Sawhney, CEO of Australia-based investment firm Kalkine.

A numbers game

Singapore represents a small portion of social media users, but the city-state has become a regional headquarters for Big Tech companies in the larger Asia-Pacific market. Google Asia Pacific Pte. Ltd., Facebook Singapore Pte. Ltd. and Twitter Asia Pacific Pte. Ltd. incorporated their Singapore offices in 2008, 2010 and 2012, respectively. The companies have all since moved into vastly bigger offices to accommodate their rapidly growing teams in the city.

Only about 5.9 million people live in Singapore, meaning it would account for less than 1% of Meta Platforms' 836 million daily active users, or DAU, in Asia-Pacific. The region represents Meta's largest geography by usage, with more than four times the DAUs reported in the U.S. and Canada.

Meta, in its latest U.S. quarterly financial filing, identified India, Bangladesh and Vietnam as the company's top sources of user growth worldwide in the second quarter. The company reported $6.96 billion in revenue from its Asia-Pacific operations in the period, representing year over year growth of 4.2%.

Regulatory ramp-up

Singapore's government is not alone in upping efforts to regulate social media platforms. Several other Asia-Pacific countries are considering similar restrictions, including Brunei, Indonesia, Malaysia, Myanmar, Philippines, Thailand and Vietnam. The countries' heads of state jointly developed a plan of action to protect children from all forms of online abuse and exploitation in 2019. Australia passed online safety regulations in 2021 that make online service providers more accountable for their users' online safety and gives the government power to block access to certain materials.

"I don't see the proposed codes as being a significant disadvantage to the tech companies having their Asia headquarters in Singapore — the emphasis on stricter content rules is not unique to Singapore," said Eugene Tan, a law professor at Singapore Management University.

Companies will have an opportunity to weigh in on Singapore's proposed regulations as part of the public comment period, and business experts said the government is likely to consider their input.

Twitter's regional head of public policy confirmed the company planned to participate in the public review process.

"We deeply appreciate the open dialogue with the Singapore government and the opportunity to participate in the consultation process," said Monrawee Ampolpittayanant, the company's head of public policy, government and philanthropy for Southeast Asia. "We look forward to continuing to work closely together with the Ministry of Communications and Information and all relevant stakeholders to make the internet safe and healthy for everyone in Singapore."

In its quarterly U.S regulatory filings this year, Twitter noted a number of countries that had recently passed or may soon pass stricter content regulations impacting its business, including Singapore, India and Australia.

Google declined to comment on the matter. Facebook did not respond to a request for comment.

Potential costs

What is undisputed is that the new codes will add costs to the companies' operations.

"Further regulation on censoring materials places high logistical costs, manpower costs, free speech liability exposure and negative branding images for these international technology companies," said Rita Mkrtchyan, senior attorney at Oak View Law Group.

While financial penalties have not been specified for the codes, many expect them to carry similar fines to Singapore's Online Falsehoods and Manipulation Act, passed in October 2019. The so-called "fake news" law, which aims to crack down on the spread of misinformation, has a penalty of up to S$1 million per offense.

"Companies like Facebook, Twitter and Google ... they will have to comply with the government's proposed laws or will face putting their operations in the region at risk," Sawhney said.