Government and Entrepreneurs
President Obama’s recent summit on entrepreneurship in the Muslim world demonstrated that governments and entrepreneurs can and must work together to create opportunity. Governments are often perceived as obstacles to entrepreneurship, not necessary partners. This is understandable given the bureaucratic hurdles entrepreneurs must overcome while growing their enterprise.The Arab and Muslim world is having its own conversations about governments and entrepreneurship. In March Dubai hosted the HCT Third Global Entrepreneurship 2010 conference, under the patronage of the UAE Minister of Higher Education and Technology, and organized with the help of the Kauffman Foundation on Entrepreneurship and the Wharton School.
The function of government in relation to entrepreneurship is to inform, initiate, incentivize, and invest. Many governments around the world do not understand entrepreneurial endeavor, or feel that it undermines their role in driving the economy. A few even assume that only they can organize, operate, and manage risk in a business venture. Dubai, given its recent financial difficulties, appreciates more than most the limitations of a government-driven boom. Some entrepreneurs themselves scoff at the idea of government support.
Yet knowledge of the international and local regulatory environment is critical to entrepreneurial success. The high-tech industry in India supports this point. One of its leaders observed that, initially, this economic segment boomed because it operated in an unregulated environment but, as it grew, it had to deal with government labor, trade, and other policies. Collaboration from the beginning would have been more efficient.
First, governments around the world should inform themselves and their citizens about entrepreneurship. The UAE should be applauded for hosting this conference that educated its people about private enterprise. The Muslim world in general and the Arab world in particular, with the majority below 30 years of age, its dependence on finite resources, and limited government functions, will benefit from going back to its entrepreneurial roots. After all, Khadijah, the wife of the prophet Muhammad, was among the leading entrepreneurs of her time.
As new industries arise to replace old ones, and migrant labor outlives its usefulness as the local population seeks employment, entrepreneurial ingenuity must become the new “oil” of Middle Eastern economies. The rest of the Muslim world will benefit by giving its young and growing population practical encouragement for their entrepreneurial dreams. By helping the Muslim World revive its entrepreneurial spirit America will create new trading partners with a shared stake in geopolitical stability.
Second, governments can play a vital role in initiating linkages between entrepreneurs. Entrepreneurs, across sectors and demographics, may not have access to each other, while each has to interface with the government. Therefore, governments are uniquely situated to forge connections between their various agencies and entrepreneurs, as well as facilitate entrepreneurial alliances. This would go a long way toward building transparency and confidence in government institutions in the Muslim world. The Obama summit should have brought more individual American and Muslim entrepreneurs together. Hopefully next year’s Summit in Turkey will do so. Sharing our best practices and showcasing our entrepreneurs demonstrates our good will in exporting a productive capitalism.
Third, governments should provide incentives to entrepreneurs. Incentives range from financial, to such measures as creating business incubators and export processing zones. Start-ups that are selected for and complete a business incubation program will be more likely to succeed in the long term. The Obama Summit set up two partnerships with Silicon-Valley incubators. Other governments have created export processing zones which lower trade barriers and bureaucratic procedures in a defined region. This serves the entrepreneur’s need for liberal trade policies expediting the movement of goods and services across borders. Foreign direct investment and monetary policies that facilitate foreign currency exchange strengthen ties between international ventures and nations.
Lastly, governments must invest in new enterprises. This includes not only direct-capital investment, but also lowering the costs of starting and sustaining a new business. Many current tax regulations unnecessarily strain a company’s resources. Entrepreneurs seek a non-burdensome tax policy that encourages rather than punishes growth. Islamic finance can also help drive many of these start-ups.
In summary, entrepreneurs are looking for their governments to provide clear, consistent, and conclusive rules and regulations. They need to know that the rules apply equally to everyone and will not vary from region to region or industry to industry. Local entrepreneurs, but especially foreign ones, must believe that legal judgments will be enforced wherever they do business. Entrepreneurs depend on stable and functioning infrastructure such as roads, power supply, and communication links. They rely on the rule of law and a strong public sector so that their private enterprises can contribute to national development.
In return entrepreneurs can lead the way for their governments to enjoy peaceful and prosperous international relations. Governments and entrepreneurs are partners in the economy whether they like it or not – why not make it mutually beneficial? One year ago President Obama called for a new beginning with the Muslim World. His summit was a good start moving from distrust to shared enterprises.
Moushumi Khan is a Research Associate at the Institute for Social Policy and Understanding (ISPU).
This article was also published in the Global Expert Finder on May 19, 2010.