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Ecosystem strategy

September 01, 2016


ALMOST 70 years after independence, global benchmarking indexes continue to rank many of Pakistan’s economic development indicators — including competitiveness, education and training, women’s participation and entrepreneurship — near the bottom.

Entrepreneurship is “one of the most important drivers of job creation and economic growth”, and governments everywhere are working to create an environment that nurtures and sustains its growth. Pakistan, however, lacks a formal ecosystem development strategy. With 1.7 million people entering the workforce each year, the primary objective of Pakistan’s ecosystem development strategy is to create jobs, which is also essential for socio-economic stability. The resulting private-sector expansion will support the formation of high-growth firms, stimulate the growth of (SMEs which account for 97pc of all jobs in emerging economies) and promote self-employment opportunities.

The ecosystem is a network of institutions and individuals within a defined geographical area representing the different elements of entrepreneurship, shaped by its underlying socio-cultural conditions, with resources that reflect its level of economic development.

Historically, Pakistan’s ecosystem development has emphasised capacity building and training, including business plan competitions, incubators and mentorship. And although the State Bank has led successful financial inclusion initiatives, sustainable entrepreneurial-led growth needs to be built on broader macro-level foundations with an initial focus on four areas:

MSP collaboration is a critical obligation of our business leaders.

• Entrepreneurship education develops personal skills that are equally beneficial to employers, and promotes the cultural acceptance of entrepreneurship as an alternate and viable career choice. It has three essential features: start at primary school, create a curriculum to identify skills and competencies for each education level, and develop a trained and certified teaching faculty. In the World Economic Forum’s (WEF) Global Compet­itiveness Index 2015-16, Pakistan ranks 112/140 in quality of education.

• Expanding women’s economic participation to harness the talents and contributions of the under-represented half of the population, and to address gender disparities for women’s economic empowerment, which also corresponds to Goal 5 of the UN’s SDGs. Pakistani women’s population to labour force participation ratio is 23pc (males 86pc) and only 4.8pc of women have accounts at financial institutions (South Asia average 37pc). Pakistan is ranked 141/142 in the WEF Global Gender Gap Report which measures gender equality. Across nine years of annual data from 2006 to 2014, Pakistan’s rank has always been among the bottom three.

• Regulatory reform to catalyse private-sector growth with better business regulations and to improve regulatory processes. Since 2003, the World Bank’s annual Doing Business (DB) reports have become the primary reference and benchmarking tool in 10 areas of business regulation. An analysis of 11 years of DB data has shown that economies implementing regulatory reforms or performing well on DB indicators generate multiple social and economic outcomes including attracting FDI, creating new firms and new jobs and improvements in rule of law. Although Pakistan’s DB rankings have been consistently poor, they have deteriorated from 110/189 in 2014 to 138/189 in 2016.

• Funding and finance for different stages of the business cycle, including seed capital and growth equity, and expanding financial inclusion. In a 2013 survey, Pakistani entrepreneurs rated funding and finance as the least available component of the entrepreneurial ecosystem. With only 13pc of the adult population having an account at a financial institution in 2014 (deve­loping economies ave­­­­rage 50pc), these statistics show a low level of financial inclusion and exp­lains the lack of a credit history that blocks financing for Pakistani entrepreneurs.

Policy instability has been a significant factor in Pakistan’s inability to develop and implement sustainable growth strategies. Now, however, SDG 17 provides mitigation for past failures by supporting “inclusive partnerships” for “a sustainable development agenda”, and establishes two critical features for implementing the ecosystem development strategy: 1) an industry-neutral institutional platform to drive the agenda and backed by the private sector; 2) multi-stakeholder partnerships (MSPs) of public- and private-sector businesses, academia and the different component organisations of civil society, collaborating to exchange ideas, developing recommendations, and engaging with government agencies for advocacy.

Increasingly, businesses worldwide are integrating MSP collaboration with their corporate citizenship roles because it promotes public participation and transparency in development initiatives. It is a critical obligation for Pakistan’s business leaders to do the same.

The writer is president of the National Entrepreneurship Working Group (NEW-G)

Published in Dawn September 1st, 2016