Linking entrepreneurship to prosperity | Political economics


PThe progress and prosperity of major economies around the world are the result of the entrepreneurial spirit that has flourished in the societies involved through facilitation towards a suitable ecosystem.

China’s success in eradicating poverty is the result of an entrepreneurial culture in almost every sector of the economy, from high-tech industries to fashioned products. China can now claim that no one in the country is now below the official poverty line of $2.30 a day available to them.

This is, indeed, incredible in a country of nearly one and a half billion. The miracle has been wrought by the entrepreneurial culture instilled in society in recent years.

Small entrepreneurs are vital engines of the Chinese economy. they contribute 60% of GDP, provide 80% of jobs and pay about half of national tax revenue. Small and medium-sized enterprises (SMEs) have been declared the backbone of the American and European economies.

In the United States, 30 million small businesses account for nearly two-thirds of net new private sector jobs in recent decades. According to the official website of the European Commission, SMEs represent 99% of all businesses in the EU.

The website further states that “SMEs employ around 100 million people, account for more than half of Europe’s GDP and play a key role in creating value in all sectors of the economy. SMEs provide innovative solutions to challenges such as climate change, resource efficiency and social cohesion and help to spread this innovation in all regions of Europe. They are therefore at the heart of the EU’s dual transition towards a sustainable and digital economy. They are essential to Europe’s competitiveness and prosperity, to industrial ecosystems, to economic and technological sovereignty and to resilience to external shocks.”

Starting a business and taking financial risks requires nervousness, energy and patience. People who start new businesses are a rare breed, especially innovators.

It is the responsibility of educational institutions and government bodies to educate and mentor people in the development of their unique ideas. This, however, is no simple undertaking in a conservative society.

It is necessary to encourage people of working age to take the risk of starting new businesses to realize their dreams of independence and self-fulfilment. It needs training and development on the one hand and a proper start-up ecosystem on the other.

We can achieve economic recovery if we act appropriately on the training and development front. Two recent events have reinforced my belief that our young people, especially women, have enormous potential to foster entrepreneurship in society.

The first is the project titled Financial Empowerment of Women Through Entrepreneurship in Pakistan, a collaboration with Cardiff University in the UK and ACF UK funded by the Higher Education Funding Council for Wales. We enrolled 24 women and trained them for three weeks, followed by mentoring sessions to develop their business plans which they eventually pitched to high net worth individuals, business executives and academics at a presentation at the end of the project.

The process of starting a business and taking financial risk requires nervousness, energy and patience. People who start new businesses are a rare breed, especially innovators. It is the responsibility of educational institutions and government bodies to educate and mentor people in the development of their unique ideas. This, however, is no simple undertaking in a conservative society.

One of the participants visited me a month later and shared her success story selling the specially designed mask and matching scarf through a social media campaign. His enthusiasm was incredible.

The second is my recent visit to the Pakistan Institute of Fashion and Design where I gave a lecture on the importance of entrepreneurship to final year students. A roomful of attendees, mostly female students, took a keen interest in the topic and expressed a desire to learn more about the country’s start-up ecosystem.

According to a recent study, Pakistan needs to create 1.3 million additional jobs on average every year until 2035 to meet the growing working-age population. Given the existing circumstances, it seems quite impossible for the government sector to meet this need. We can meet this huge demand by ensuring strong growth in entrepreneurship across all sectors and moving from replicative to innovative entrepreneurship.

Pakistan’s recent ranking in the Global Innovation Index is 107, two points below the previous ranking. This means that we cannot expect frequent innovative breakthroughs on the entrepreneurial front. But there is huge potential even in replicative entrepreneurship for Pakistan in several sectors.

Unique selling propositions coupled with standards compliance can open countless doors for Pakistani start-ups in local and international markets. The survival rate for new businesses is 50-60% worldwide. Interestingly, it is about 80% in Pakistan, according to a study conducted in 2016. Causes of failure in Pakistan include inability to access capital, lack of proper business plans, and avoidance of the partnership.

These factors clearly indicate a lack of awareness and training. There are a number of individual and syndicated venture capitalists and angel investors investing in Pakistani start-ups. According to a report, Airlift raised $12 million and Bykea raised $13 million in 2020. Overall, 28% of venture capital was invested in the transportation industry.

In terms of number of transactions, e-commerce comes first, followed by FinTech. In Pakistan, in general, entrepreneurial initiatives lack proper training and development support. Most of the time, people have achieved their dreams through their own conviction and personal effort. There are now many opportunities to seek formal advice and guidance in developing well-thought-out business plans, market analyzes and survival income estimates.

Therefore, anyone who wants to achieve their dreams through entrepreneurship should look for mentorship opportunities. Partnership remains a taboo in our society today. This limits the potential for entrepreneurial initiative.

In today’s tightly knit global community, collaboration multiplies the chances of success and rapid growth. It is necessary for aspiring entrepreneurs to welcome partnership opportunities, adopting the necessary regulations in terms of ideas, expertise, funding and facilitations to bring synergy in their operations.

Currently, Pakistan ranks 120 on the Global Entrepreneurship Development Index (GEDI). In its immediate vicinity, India sits at 68 and China at 43.

The role of government remains vital to developing a nurturing ecosystem. Initiatives such as ITBs, NICs, and Ignite deserve appreciation, but ignoring other sectors is detrimental to equitable progress. The government should develop sector-specific incubation centers and sector-specific funds to launch start-ups in all sectors of the economy. The key remains the promotion and facilitation of an entrepreneurial culture in society.

The author is Associate Professor of Management Science and Head of Center for Islamic Finance, COMSATS University, Lahore Campus. He can be contacted at [email protected]

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