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Believe to achieve

High Growth _ 2017 Global Entrepreneurial Index

Serial British entrepreneur, Richard Branson, was so underwhelmed at the service he got from British Airways that he did what any self-respecting entrepreneur would do – he started his own. It sounds like a remarkable feat, and it was. What made it possible, though, was that Branson had access to huge amounts of investment capital – but he also had society’s support of the entrepreneurial spirit. Had Branson tried that as a Filipino entrepreneur in the Philippines, there’d be no Virgin Atlantic Airways today.

That more or less illustrates, two of the biggest problems which entrepreneurs and business start-up merchants face in the Philippines – venture capital for their projects is scarce and society has yet to buy-in to the idea that this particular breed of businessfolk are worthy of its support. And yet for their success entrepreneurs need both things – access to cash and to be believed in.

In this final infographic adapted from the 2017 Global Entrepreneurship Index (GEI) – an annual indicator supplied by the Washington-based Global Entrepreneurship and Development Institute – under the GEI sub-index, ‘Aspiration’, we look at two more factors that contribute to a healthy entrepreneurial society. In other words, a society where entrepreneurs and their side-kicks, innovators, can add their weight to a country’s economic growth. Those two factors are: ‘High Growth’ and ‘Risk Capital’’.

Although the GEI study covers 137 countries world wide, we’ve extracted just the 10 member states of the Association of Southeast Asian Nations (Asean). This index from an index, provides a clearer focus as far as how the Philippines’ ranks among its peer group and its major regional competition.

‘High Growth’, for the purposes of the GFI, is the percentage of a country’s businesses that intend to employ at least 10 people and plan to grow more than 50% in five years. To this are added two further requirements – the level of business-strategy sophistication and the possibilities of those companies acquiring venture capital.

Here are the Asean scores in the area of ‘High Growth’. Singapore, 1.00; Brunei, 0.49; Philippines, 0.21; Thailand, 0.21; Vietnam, 0.15; Laos, 0.15; Cambodia, 0.14; Indonesia, 0.09; Myanmar, 0.09; Malaysia, 0.08.

In terms of score, this is a reasonable result for the Philippines, showing clearly that here is a high aspiration level to grow small businesses and that among those entities there’s a sound measure of sophistication in their business planning. As far as access to venture capital is concerned, as we’re about to see, that would seem to be elusive for new and young enterprises.

In terms of the GFI, ‘Risk Capital’ determines the availability of finance – mostly equity finance. This can come either as informal investment from individuals or via the capital market. In the latter, the size, the institutional depth and the liquidity of the relevant stock market are the key factors.

And the Asean scores in the area of ‘Risk Capital’ are: Singapore, 0.81; Vietnam, 0.47; Brunei, 0.44; Laos, 0.40; Myanmar, 0.40; Thailand, 0.28; Malaysia, 0.23; Cambodia, 0.18; Indonesia, 0.17; Philippines, 0.12.

Here, for the Philippines, it’s a very different story. This result is almost shameful. Clearly, there’s very little investment support for entrepreneurs operating start-ups and young businesses from either individual sources or from the stock market. And this goes to the root cause of the Philippine entrepreneurial sector’s main problem; it’s risk averse because society isn’t behind it and, in fact, doesn’t feel that it has major potential to boost economic growth. That attitude needs to change if he Philippines is ever going to reap the rewards of its entrepreneurs’ effort.

That attitude is changing in most other places – in Asean, for example, Vietnam, a much younger market than the Philippines, is light years ahead. But also, look at the frontier markets of Laos and Myanmar – how come the appetite for risk is so much higher there than in a strong developing economy like the Philippines? The answer, in a word, is aspirations. To achieve, everyone from the government to the venture capitalists to society needs to believe.

10 Comments

  • Business wise, ordinary Filipinos abound with aspirations. They make do with what they can – the reason why there are convenience stores even at every corner of the remotest places. They are mostly good risk takers too – so much so that usury while prohibited flourishes even in the countryside. Talented and skilled Filipinos also would not be left behind in innovations.
    The true problem is scarcity of capital, credit and developmental support. Funds are usually only available for business ventures when people have something to mortgage or pawn.

  • The core problem is that foreigners are not allowed to own land and that they are only allowed to own 40% of a company even if they paid up 100% of the capital. Tell me, is this attractive for a foreign investor? Why do so many foreign investors relocate their factories from the Philippines to Vietnam? Tell me.

    • Foreign investment will not be conducive to a better life for Philippine people because they are more often than not just used for cheap labour. The foreign investment model clearly creates a false economy that mostly benefits the already rich. It is time to look at other countries business and investment history and plan a better future for everyday Philippine people. What good is foreign investment which the Chinese have in the Philippines if wages remain at such poverty levels? Philippines needs to start at a very basic level to allow innovation to be the basis of a better economy. Selling your countries land and infrastructure is a big step backwards. If you are not aware perhaps study how Australia is and has been sold to outside interest. This has raised the cost of living to the point even with high wages Australians are struggling to maintain the lifestyle they once enjoyed.

    • Yes Peter you are correct but wise foreign investment. Leasing not selling and owning. Strict codes of conduct and assurances. Partnerships not monopolies. Lets look at Smart communications and see if that is paying off for the Philippine people as a business model. Start from the ground up I suggest as the ”normal” way keeps the poor poor and feeds only the rich. Philippine people do not need this, cetainly not yet.

    • Yeah it is an act of balance. Foreign investors, however, always choose the cheapest and easiest way and this is currently Vietnam, Cambodia and even Birma. It will be hard to reattract these companies to return to the Philippines.

  • Philippines cannot be fixed from the top down so for now Entrepreneurs needing huge start up capital is almost ridiculous to even think about. First things first and that is to push the government into relaxing costs of import duties and also to find a way of making shipping out of Philippines affordable and competitive to other countries. Labour is surely cheap enough to make manufacture in the Philippines affordable but the work ethic here is not close to world standards. When you see in the most basic business ( retail ) workers on phones, standing around in groups talking or fondling each other, standing in front of a tv etc you know the place has a long way to go. In retail it is go go go from the time you start work to the tme you finish. A worker can never say they have nothing to do because cleaning and arranging of merchandise is needed around the clock but this does not seem the case here in Philippines. Quality and workmanship needs a big big overhaul along with education. Perhaps if these things are addressed one day things will get better.