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.