Singapore most enterprising Asian economy: study

By Chuang Peck Ming

The Business Times
March 23, 2011

SINGAPORE - Singapore is better known for the multinational corporations that dominate its economy, than for entrepreneurs. Especially compared with Asian economies such as Hong Kong and Taiwan, Singapore is believed to lag far behind when it comes to entrepreneurship. Studies and surveys of the subject have only encouraged this view.

But new research claiming to offer a more accurate picture has concluded otherwise. Zoltan Acs of George Mason University in the United States and Erkko Autio of the Imperial College Business School in the United Kingdom have in their global study produced a Global Entrepreneurship and Development Index (GEDI) showing Singapore as the most enterprising among key Asian economies.

GEDI places Singapore 15 in a ranking of 71 of 'the most important countries in the world', when it comes to savviness in risk-taking, spotting and seizing opportunities, and starting and growing businesses. Singapore is ranked above South Korea (20), Hong Kong (23), Japan (29), Malaysia (31), China (40), Indonesia (46), India (53), Thailand (56) and the Philippines (70).

It also ranks higher than Israel (21), which has some of the world's most vibrant high-technology industries, and developed economies like Germany (16), France (18) and Italy (27).

Mr Acs and Mr Autio find economic development more or less goes hand in hand with enterprise, so it's not surprising that the top spots in the GEDI rankings are taken by developed economies - Denmark at No 1, Canada No 2 and the US No 3.

Uncle Sam falls behind its Canadian neighbour because it has a bad 'entrepreneurial attitude', according to the scholars.

Four of the five Nordic countries are in the top 10, which suggests that welfare states are not necessarily unfriendly to enterprises. The four exclude Finland - the country that produced Nokia - which is ranked 13th.

Past studies of entrepreneurship have tended to focus more on quantity rather than on quality - they have surmised that the more start-ups there are in a country, the more entrepreneurial it is. Regardless of whether they are street hawkers or founders of multibillion dollar businesses such as Facebook - they are all lumped together. This approach suggests that a country becomes less enterprising as it grows richer.

GEDI builds on many of the early studies but pays more attention to qualitative aspects of entrepreneurship, zooming in on high-impact entrepreneurs and high-growth businesses. It sees countries roughly going through three stages of economic development - a factor-driven stage, an efficiency-driven stage and an innovation-driven stage.

GEDI defines entrepreneurship as 'a dynamic interaction of entrepreneurial attitudes, entrepreneurial activity and entrepreneurial aspiration that vary across stages of economic development'.

While not minimising the big role MNCs play in Singapore's economy, GEDI's rankings show that the government's efforts in pushing for greater entrepreneurship have paid off.

Singapore has done particularly well in 'entrepreneurial aspirations', where it is ranked 3rd among the 71 economies, and 'entrepreneurial activity' (9th).

In taking its businesses global, Singapore scored high in entrepreneurial ambitions. It also did fine in growing businesses, adopting new technology and introducing new products.

Singapore got top marks for providing opportunities for startups, having a lively technology sector and developing and attracting talent in fostering entrepreneurial activity.

Singapore's ranking in 'entrepreneurial attitude' however is pretty low at 35. It also falls short in the availability of venture capital, a key ingredient in the growth of entrepreneurship.

For full text: http://business.asiaone.com/Business/News/Story/A1Story20110322-269472.html.

SME developmentstrategies for Sri Lanka: Learning lessons from nighbouring countries

Daily Mirror
February 1, 2011
By Devangi Perera and Anushka Wijesinha

Striving for the growth and competitiveness of the Small and Medium Enterprise (SME) sector in Sri Lanka has often been identified as imperative in order to provide more employment, bridge regional growth disparities, and ensure that post-war growth is inclusive and widespread. However, as highlighted in previous posts on the IPS blog1, several issues continue to hamper the faster growth of the Sri Lankan SME sector; particularly the difficult access to finance, improving competitiveness and market relevance, and entrepreneurship and skill development. Yet, these issues are not just limited to Sri Lankan SMEs.

In formulating a robust policy for developing Sri Lanka's SME sector, there is a need to look at strategies adopted in neighbouring regions, particularly in East Asia, that share common SME development constraints. This paper examines some of these, with a view to providing useful input for Sri Lanka's efforts at SME policy development that are currently under way with the leadership of the Ministry of Industry and Commerce and the National Enterprise Development Agency.

1. Access to Finance - a common and persistent issue

In many of the ASEAN countries, the lack of adequate and affordable access to finance has been cited as a major obstacle for SMEs. For example, in Vietnam, a survey of 32,000 SMEs in 30 Northern provinces revealed that 67% were unable to obtain financing due to lack of requisite collateral. Their financial situation is further aggravated by the inability to meet institutional requirements with regard to accounting practices as well as to present business plans of acceptable quality to local banks. Hence, successful business plan preparation is one area that has been highlighted. To ease this constraint, the development and distribution of toolkit packages dedicated to the preparation of a "dehydrated" business plan of 4-10 pages has been a proposed strategy.

Although several special SME loan schemes have been launched in Sri Lanka, among the policies initiated to improve access to finance, business plan preparation appears to have taken a backseat and hence, needs to be considered. Currently, the SME Toolkit Sri Lanka provides some information on its website regarding the format of, and reasons for, creating a successful business plan.

A key reason for the access to credit constraint for SMEs is often the problem of inadequate collateral. The problem of insufficient collateral can be alleviated, to some extent, through the development of credit registries and rating systems. Empirical studies conducted by the World Bank in several countries reveal that establishing credit registries helps to improve access to credit without increasing risk to banks.

In India, a credit registry, the Credit Information Bureau of India Limited (CIBIL), was set up in 2004 through a public-private partnership to consolidate the credit history of commercial and consumer borrowers, including those in the SME sector. The World Bank is also providing assistance to the Small Industries Development Bank of India (SIDBI) and commercial banks to validate and compile credit information on SMEs in an easily transferable format, which would then be shared with the CIBIL.

In Malaysia, a dedicated SME Credit Bureau was set up by the Credit Guarantee Corporation Malaysia Berhad (CGCMB) in 2008 to develop and strengthen credit standing and to improve outreach of and access to financing for small businesses. The Bureau publishes a Self-enquiry Report which allows SMEs to be aware of their credit standing, while helping them to identify areas for improvement that would increase their credit worthiness. Despite the efforts of the Credit Information Bureau (CRIB) of Sri Lanka to establish a Movable Assets Registry (MAR) which would make use of moveable assets as collateral, progress with regard to improving the credit history of SMEs in Sri Lanka is limited.

2. Credit Rating of SMEs - a key step towards easing the access to finance issue

Credit rating systems help to overcome the issue of banks being reluctant to lend to SMEs with inadequate collateral and unproven record. In India, a programme to rate small enterprises was set up in conjunction with various stakeholders which included the Small Industries Associations, the Indian Banks' Association and rating agencies such as the Credit Rating and Information Services of India (CRISIL), Dun & Bradstreet and Onicra. The ratings are based on an evaluation of the performance and credit-worthiness of Small Scale Industries (SSI), and measure their operational, financial, business and management risks. The Ministry of Micro, Small and Medium Enterprises (MSME) subsidizes 75% of the rating fee charged on these firms. By assessing the capabilities and credit-worthiness of SSIs more accurately through the credit rating system, banks and financial institutions are better able to manage their risk and extend more credit to regional enterprises.

3. Taking SMEs to the Next Level - a Picking Winners approach?

There are major differences in the capabilities and competitiveness of SMEs within sectors and industries. SMEs that are more efficient, innovative, growth-oriented, outward-looking and learning-capable, deserve closer attention and collaborative support due to several reasons, and these SMEs must be identified and assisted. First, such firms have better prospects for success being more focused and manageable, administratively and financially. Second, they would be more receptive to policy support and facilitation, targeted with an efficiency-oriented and time-bound approach. Third, having been provided initial assistance and facilitation, they would also have better success in self-diagnosis and self-improvement.

However, up-to-date and comparable data and information on these SMEs are unavailable, not only in Sri Lanka, but in many ASEAN countries as well. Data and information on SME capabilities and competitiveness in various segments are essential to accurately identify their current core competencies as well as common areas of weakness that would necessitate follow-up capacity building. They also serve as a systematic and robust indicator of the changes in the competitive edge of SMEs over time. Operational benchmarks and guidelines for cost, price, etc., can be established based on the available information and data on the capabilities and competitiveness of top-rank SMEs, for SMEs at the lower tiers to follow. Data needs to be collected and grouped under categories like matters relating to the overall business environment, entrepreneurial characteristics, current levels of capabilities and competitiveness, potential for quality and productivity upgrading, finance and human resource development.

Given the current fiscal constraints of the Sri Lankan Government, it is important that financial resources allocated for SME support have a maximum impact. Assistance needs to be directed towards SMEs most likely to succeed, grow and generate more employment, rather than blanket assistance to all SMEs. For this, better information needs to be gathered regarding the capabilities and competitiveness of the country's SMEs, in order to identify top performers. The key is to create a suitable enabling environment and ease of access to credit to all SMEs, while government support at the state's cost ought to be targeted to potential SME champions.

4. Integrating SMEs into the Broader Picture - clustering and subcontracting

SMEs are increasingly becoming subject to great demands brought about by world trade liberalization and globalization. Capturing the market opportunities that are becoming available is not easy for individual SMEs to do, with many unable to achieve economies of scale and carry out functions such as training and technological innovation. Clusters are a powerful means by which SMEs can address some of their problems with regard to demand fluctuations, and procurement of inputs, as well as enjoy economies of scale and improve their bargaining position. It also becomes more cost- effective for the government, large enterprises, universities and other supporting agencies to provide BDS to a whole cluster of enterprises, rather than to individual enterprises in several locations. Although business clusters are well established among larger enterprises in Sri Lanka, it is still rare and nascent in the SME sector.

Subcontracting linkages between large enterprises and SMEs have been found to greatly improve the productivity of SMEs. Such linkages are an extremely important source of technological and marketing improvements and help reduce information and transaction costs. Subcontracting ties also provide important spillover benefits to SMEs in terms of easier acquisition of new technologies, management methods, marketing and input materials, and production techniques. They also help to reduce uncertainty and risk for SMEs as a result of stable orders and favourable payment conditions.

In Malaysia, the Industrial Linkage Programme by the Small and Medium Industry Development Corporation (SMIDEC) promotes the creation of linkages between SMEs and MNCs or large corporations in the country. Under the Vendor Development Programme by the Ministry of Entrepreneur & Cooperative Development (MECD) in Malaysia, large corporations provide technical training to SMEs in exchange for the purchase of parts and components from the former. This needs to be a key priority in Sri Lanka's SME development efforts also, so that smaller businesses are able to establish lucrative links between themselves and larger enterprises at home and abroad.

Way Forward

Although the SME sector in Sri Lanka shares similar problems to those of some ASEAN countries and India, it is clear that they are far more advanced in their SME development policies and their innovative thinking. Sri Lanka can draw valuable lessons from their efforts, particularly Thailand's SMEs Promotion Plan (2007-2011) and the ASEAN Policy Blueprint for the ASEAN SME Development Decade 2002-2012. However, the key is to distill the lessons to suit the Sri Lankan context and develop its own comprehensive, yet forward-looking agenda for SME development in this decade of new post-war growth.

Full text: http://print.dailymirror.lk/business/127-local/34512.html

Not Just Talk

Clever services on cheap mobile phones make a powerful combination—especially for entrepreneurs in poor countries.

Economist print edition: January 27, 2011

COUNTERFEIT drugs can make up around a quarter of all those sold in poor countries, according to some estimates. They provide a lucrative and lethal business, against which most consumers are powerless. “If your anti-malaria pill is made of any old white powder, you may not survive,” says Bright Simons, one of the founders of mPedigree, an advocacy group from Ghana.

Mr Simons is not just fighting with words. Late last year mPedigree launched a mobile service in Ghana and Nigeria that could make a dent in the fake-drug trade. People buying medicine scratch off a panel attached to the packaging. This reveals a code, which they can text to a computer system that looks it up in a database. Seconds later comes a reply saying whether the drug is genuine. The service is paid for by pharmaceutical companies that want to thwart the counterfeiters. Hewlett-Packard runs the computer system and found a cheap way to print the scratch-off labels.

This is just one of many such services mushrooming in poor countries, using mobile-phone technology that once carried only humble voice and text messages. Rohan Samarajiva, the boss of LIRNEasia, a think-tank in Sri Lanka, calls it “more than mobile”. Jussi Hinkkanen, Nokia’s head of policy in Africa, says the mobile revolution is moving “from ear to hand”.

The number of users is still small: even among young people in South-East Asia (a tech-friendly lot) only 8% had used “more-than-voice” services, according to a poll by LIRNEasia. But the potential is exciting. Mobile phones are the world’s most widely distributed computers. Even in poor countries about two-thirds of people have access to one (see chart 1). As a result, such devices and their networks, though mainly still much simpler than in the rich world, have become a platform on which many other services can be built. This boosts innovation—just as smartphones and faster wireless data networks have led to an explosion of mobile applications (“apps”).

Classifying mobile services in poor countries is not an exact science. Richard Heeks, director of the Centre of Development Informatics at the University of Manchester, sorts them by their impact on development. One category is services that “connect the excluded”. In their simplest form they provide information to those who would otherwise be out of the loop. Farmer’s Friend in Uganda, for instance, sends out market prices and other agricultural information in text messages.

Such services have been around for some time, but they have become more common—and much more varied. Nokia now provides its Ovi Life Tools, a set of information services from weather to sport, to more than 6m users of its handsets in China, India, Indonesia and Nigeria. Esoko, a Ghanaian “communication platform”, in the words of Mark Davies, its founder, allows two-way communication: people and businesses in 15 African countries can upload their own market or other data, which then become accessible via the internet and mobile phones.

Mobile trading platforms are also in this category. At first most of them focused on agricultural goods: Dialog Tradenet in Sri Lanka lets farmers check market prices and text in offers, helping them to time their harvest to maximise income. But many, including Dialog Tradenet, have other things on offer. In India, Babajob.com lists low-skilled jobs. The most popular items on CellBazaar in Bangladesh are second-hand mobile phones. For people with some cash to spare, KenyaBUZZ, one of the larger local websites in east Africa, is selling tickets for cultural and sports events over the phone.

Mobile phones can also spread learning. In Bangladesh the BBC World Service Trust sponsors a service called BBC Janala that allows people on a few dollars a day to improve their English. After dialling “3000”, they can listen to hundreds of English lessons and quizzes, updated weekly. Mobile operators charge about two cents for each three-minute lesson. Since BBC Janala was launched in November 2009, 3.1m people have used it.

Researchers in South Africa working for SAP, a software giant, are trying to connect very small businesses, which make up a large part of Africa’s economy. One service lets craftsmen create a virtual job docket with a few texts or touches on a smartphone, even without mobile-network coverage. The information is uploaded to a computer system later. Another allows rural stores to order goods, saving time-consuming trips to city markets.

A second category of services includes those that cut out the middleman, or at least keep tabs on him. This is especially helpful in using government services. In the Indian state of Karnataka, corrupt officials would often demand a bribe before issuing landownership certificates, which farmers need, for instance, to obtain a loan. The Bhoomi project helps them directly, by using the internet and mobile phones.

Disintermediation is also made possible by mobile money. Services to transfer cash by text message have been around for some years. One of the most successful, M-PESA, began in 2007 in Kenya, where it now has more than 13m users. It is now used for salaries, bills, donations: few things cannot be paid for via a handset. Similar services can be found in more than 40 countries. Though not yet on the same scale, this seems to be only a question of time: in most countries in sub-Saharan Africa, more people have a mobile phone than a bank account (see chart 2).

Other firms are extending the reach of mobile money. Software developed by Tagattitude, a French start-up, uses a handset’s sound channel to transmit money and will be used by several banks in Africa. A Little World, an Indian firm, has combined several pieces of technology to create a “branchless microbanking system” to allow people in remote areas to withdraw cash. A fingerprint reader identifies them and the sum is deducted from their accounts via a special handset. A small printer produces a receipt. The system already has more than 3m users in India. In Andhra Pradesh it directly disburses welfare payments and pensions.

A third, perhaps even more promising category is “crowdvoicing”. Ushahidi, founded by a group of activists in Kenya, is among its pioneers. After the country’s disputed elections in 2008, Ushahidi (which means “testimony” in Swahili) mapped reports about violence, most of them text messages, on a website. Now the organisation offers software and even a web-based service to monitor anything from elections to natural disasters. Similarly, text-messaging software called FrontlineSMS collects and broadcasts information.

Such techniques are increasingly applied in other areas, particularly health. Stop Stock-outs, another African group, has used Ushahidi to map where essential medicines are sold out. By checking whether a drug is genuine, users of mPedigree and another Ghanaian service called Sproxil provide real-time data about which illnesses are on the rise (and can be sent more information as needed). In Mali a company called Pesinet gets agents to send in the weight of newborn babies. If the figure falls below a certain level, the baby is examined more closely.

Then there is txteagle, which hopes to reward those willing to perform small jobs on a mobile phone. Its founder, Nathan Eagle, discovered that nurses in Kenya were much likelier to text in the stock levels at their blood banks if they were compensated with a bit of airtime. This got him thinking about whether other tasks could be “crowdsourced” in this way. Today firms use txteagle for translating words into a local dialect and checking street signs for a satellite-navigation service. Mr Eagle hopes that the service will spread far, in particular to Asia.

A fourth and last category hardly exists yet, but could prove the most important, says Mr Heeks: platforms that allow the world’s poor to “appropriate the technology and start applying it in new ways”. One small example is “beeping”: hanging up after a single ring. First used to signal that someone wants to be called back because of lack of credit, it has become a free messaging system. In some countries, street hawkers assign special ringtones to different customers, which are in effect free messages placing orders.

In rich countries, online stores for smartphone apps gave digital innovation a boost. LIRNEasia’s Mr Samarajiva hopes that something similar will happen in the poor world. An early example is AppZone in Sri Lanka. It allows developers to create, test and sell applications, while operators promote them to their customers.

The list will certainly get longer. Whether such services will be commercial successes is another question. Having looked at 400 mobile businesses, the Monitor Group, a consultancy, concludes that too many are dependent on donor money. Social entrepreneurship often muddles demand and need, says Jan Schwier of Monitor. The fact that an African smallholder needs prices for his crops on his mobile does not mean he will pay for them.

Not many services are set up to grow, says Brooke Partridge of Vital Wave Consulting, which advises businesses in emerging markets. Providers lack technology, money and market knowledge. “We don’t need more new services, but a better focus on commercialisation,” she says.

For others bureaucracy, taxation and bad regulation are the obstacles. In many African countries providers of new mobile services cannot deal with network operators directly, but must use intermediaries to get, for instance, a short code for customers to dial. Governments also use mobile networks as cash cows. A study in 2008 by the GSM Association, an industry group, found that the ratio of mobile-related tax to operators’ revenues in sub-Saharan Africa was 30%. Today the share is probably even higher. And regulators often limit competition, for instance by failing to license radio spectrum to new entrants. All this means that mobile communications are more expensive than they need be. “Price remains the major barrier to the growth of mobile entrepreneurship in Africa,” says Steve Song, a telecoms expert at the Shuttleworth Foundation, a think-tank in South Africa.

Talk of a “Development 2.0”—meaning a mobile-driven transformation of how poor countries develop—thus seems premature. But the potential of mobile services should not be underestimated. If they take off, they could transform lives and livelihoods, not just by connecting the world’s poor to the infrastructure of the digital economy, but by allowing them to become digital producers and innovators.

Fanciful? Maybe, but sceptics said the same about the potential of mobile phones in poor countries a decade ago. Just think what would be possible if smartphones and even tablet computers become as cheap and common in poor countries as mobile phones are today.

For full text: http://www.economist.com/node/18008202?story_id=18008202