AS we advance together as a nation, it is best for us to understand the basic agents of what makes an economy successful: the entrepreneur.
The entrepreneur is defined as someone who takes a risk to establish and expand a business that offers useful products or services in a market.
The benchmark of what makes an entrepreneur successful is not only how much profit he or she makes, but also how much value has been created from the process of maintaining and building up a business.
These values can take in the form of how much jobs have been created, how much taxes they pay to the government, and how much contribution they make in intensifying general innovation and productivity of a country.
In Organisation for Economic Co-operation and Development (OECD) economies, small and medium-sized enterprises (SMEs) account for over 95 per cent of firms and 60 to 70 per cent of employment and generate a large share of new jobs (OECD, 2000).
Understanding this would go a long way to reduce our unemployment figure as well and to diversify our economy. Additionally, multinational enterprises (MNEs) such as ARM Industries, Apple, McDonalds, and Starbucks did not appear out of nowhere.
Rather they were started out small, at times by one or two entrepreneurs in the beginning before they eventually expanded outside their domestic markets.
The same case for the big businesses in Brunei today, which have since generated jobs and investment. They did not just spring out of nowhere. For many of these businesses are the handwork of traders and entrepreneurs who “made it” after long years of hard work and sacrifice.
Policy-makers need to understand that if we are ever going to take Brunei forward, the country has to look at entrepreneurs as a source of prosperity.
How can we capitalise on this understanding?
In this global economy, what counts now more than ever in building a successful economy is how well its innovation system can be created.
An innovation system refers to an environment from where innovation can be generated and expanded forward. For instance, Silicon Valley is a high innovation economy that has successfully placed itself as an epicentre for IT and innovation. This, in turn, has contributed towards making California a highly attractive place to set up business from people all over the world.
Because of this it has made the state into a global economic powerhouse and this has made the US state the sixth largest economy in the world. Building an innovative economy will more or less require the government to intervene in key sectors of the economy vis-a-vis the Beijing Consensus by implementing the right macroeconomic and microeconomic framework that would spur primarily the creation and development of SMEs, as well as to create an attractive ecosystem where MNEs can be attracted into setting up in the country. To spur Small and Medium Enterprises (SMEs) and MNEs, the government must inject the following factors into the economy: Easy access to capital, a clear-cut bureaucratic procedure to register and run a business, a strong labour market, a pro-business and pro-corporate legislation, a strong tax mechanism, and a strong symbiotic relationship between business and government.
Above all, the government has to create a level playing field where everyone can easily set up a business and become an “entrepreneur”, for we are not lacking in these agents given our people’s inherent disposition towards entrepreneurship as reflected with the rich trading history that our society possess which can be stretched back to the Golden Age in the 15th century.
What is most important, additionally, is the need for the government to differentiate between MNEs and SMEs.
MNEs are big businesses that span across at least two countries and which can be a key source of much needed technological innovation as well as to provide mass jobs for the people.
SMEs, on the other hand, tend to be businesses that can range from startups, farmers, fishermen, to department stores in the country.
In South Korea, one main reason why it has blazed well into the 21st century from its humble beginnings after the Korean War in the 1960s (its GDP was practically the same as Ghana then) was how the government successfully nurtured and built its big businesses, for example, Samsung, Hyundai and LG.
The government realised that they serve as agents to bring in cutting-edge innovation and management talent from abroad. These dimensions are then slowly and gradually fed into the local system so as to self-perpetuate locally based innovation. To support this, the government injected capital and other forms of support, such as easier access for FDIs and tax breaks.
At the same time, South Korea also worked at enhancing its SMEs. On this note, they took a page out of the Washington consensus albeit selectively.
These areas of change involve the creation of an environment where SMEs can easily set up anywhere and anytime, and compete with one another while at the same time work in an open playing field where competition is valued in an open and transparent market-government environment.
Inevitably it all goes back to the entrepreneur and how the government treats this agent of change.
By giving the entrepreneur room to expand their business in a pro-market uplifting environment or framework built by the government, unbridled by unnecessary forms of government bureaucracy a nation such as Brunei can prosper well, as evident by the examples of California and South Korea. Thus the need for us to shape positive changes in these areas.
As our country advances in this volatile economic order, understanding the role of the entrepreneur would be vital if we are ever going to succeed as a nation.
Rather than penalising businesses or small-time traders, the government ought to encourage them by means of updating the general business legislation, and provide financial and infrastructure support.
I am confident that with the right approach, Brunei can move towards generating mass jobs for its unemployed, building a sustainable income base for the government and enabling our nation to blaze ahead in this changing regional and global market.
– Abdul Malik Omar
Published in Borneo Bulletin (October 25th, 2017)