Development of Entreprenuership in Pakistan

8/8/2019 Development of Entreprenuership in Pakistan

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The words entrepreneur, intrapreneur and entrepreneurship have

acquired special significance in the context of economic growth in a

rapidly changing socioeconomic and socio-cultural climates,

particularly in industry, both in developed and developing countries.

Entrepreneurial development is a complex phenomenon.

Entrepreneurship in Global

Perspective

Introduction The word 'entrepreneur' is derived from the Old French word

'entreprendre' which was first used by the economic 'theorist' Richard

Cantillon in 1755 in an essay where he used this term to describe a

person who assumed the risk of buying goods in the belief that they

could sell them at a higher price at a later time. So, the term in French

was used to describe 'one who undertakes' this particular risk.

Who Is An Entrepreneur?Entrepreneur Is A Person Who Brings In Change through Innovation For

the Maximum Social Good.

An entrepreneur is a person with a dream, originality and daring, who

acts as the boss, who decides as to how the commercial organization

shall run, who coordinates all activities or other factors of production,

who anticipates the future trend of demand and prices of products.

The entrepreneur displays courage to take risk of putting his money

into an idea, courage to face the competition and courage to take a

leap into unknown future and create new enterprises/ business. This

creative process is the life blood of the strong enterprise that leads to

the growth and contributes to the national development.

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An entrepreneur is one of the important segments of economic growth.

Basically he is a person responsible for setting up a business or an

enterprise. In fact, he is one who has the initiative, skill for innovation

and who looks for high achievements. He is a catalytic agent of change

and works for the good of people. He puts up new green-field projects

that create wealth, open up many employment opportunities and leads

to the growth of other sectors.

Definition of Entrepreneur

According to Oxford Dictionary:

One who undertakes an enterprise, especially a contractor acting as

intermediary between capital and labor.

1725: Richard Cantillon:

An entrepreneur is a person who pays a certain pricefor a product to

resell it at an uncertain price, thereby making decisions about

obtaining and using the resources while consequently admitting the

risk ofenterprise.

1934: Schumpeter:

According to him entrepreneurs are innovators who use a process of

shattering the status quo of the existing products and services, to set

up new products, new services.

1961: David McClleland:

An entrepreneur is a person with a high need for achievement [N-Ach].

He is energetic and a moderate risk taker.

Peter .P. Drucker:

Innovation is the specific tool of entrepreneurs, the means by which

they exploit changes as an opportunity for different business or a

different service

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1964: Peter Drucker:

An entrepreneur is one who always searches for change, responds to

it as an opportunity. Entrepreneurs innovate. Innovation is a specific

instrument of entrepreneurship.

Walker:

An entrepreneur is one who is endowed with more than average

capacities in the task of organizing and co-coordinating the various

factors of production. He should be a pioneer, a captain of industry.

The process undertaken by an entrepreneur to augment his business

interests gave birth to ENTREPRENEURSHIP.

To put it very simply an entrepreneur is someone who perceives

opportunity, organizes resources needed for exploiting that

opportunity and exploits it.

Examples:

Computers, mobile phones, washing machines, ATMs, Credit Cards,

Courier Service, and Ready to eat Foods are all examples of

entrepreneurial ideas that got converted into products or services.

Entrepreneurship in Pakistani context

Entrepreneurspeople within communities who organize, manage, and

measure the risks of a business or enterpriseare essential to building

the economies of urban and rural areas across the country. Rural areas

conventionally lost their young people to big cities with more career

opportunities. Eventually, the more businesses will create the more

jobs, the more jobs, the better the economy, the better the economy,

that outcome the better our life style.

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The Pakistani state was born out of the partition of India an event that

was characterized by conflict, lasting enmities, a mass migration and

the birth of a theological state. More importantly, the new state of

Pakistan had to deal with an entrenched feudal elite and a largely

migrant professional class borne out of retreating colonial bureaucratic

and military structures. Following the trends of the day, Pakistan also

put in place a planned, closed economy for a big push towards and

industrial take off in its early days of independence. Central planning

quickly assumed the government knows best approach and

developed a deep suspicion of the market. The result was a plethora of

legislation put in place for a fully government directed economy.

The military -bureaucratic complex saw itself as the savior of the

country in many different roles: (a) those who had sacrificed for the

new state; (b) the visionary nationalists; (c) the modernizers; and (d)

the deliverers of development. Contrarily, the professional migrants

were in charge of all the countrys resources and the development

agenda which increasingly demanded a more egalitarian growing

society. The governing elite soon discovered that while direct salary

structures could be compressed to satisfy the egalitarian rhetoric, rent-

seeking activities including direct corruption could enrich them

invisibly. State Owned Enterprises, state led land development,

licenses and controls and development projects were all lucrative

devices for rent-seeking.

The state increasingly moved into developmental functions

developing infrastructure, providing services, and managing and

curbing markets. This expansion of the state was fuelled by the

growing donor community. The availability of easy financing as well as

expanding control over state resources provided bureaucrats with

incentives to move in the direction of directed development. Given the

resource constraintboth physical and human, the magisterial

functions of government that include law and order, property rights

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and judicialbegan to experience a decline. This decline in turn

contributed to the decline in governance and reinforced rent-seeking

and corruption. Rather than entrepreneurship, policy planned for

investors and investments became the norm. Incentives were offered

to attract investment.

Such incentives included licensed monopolies in protected markets,

cheap land and credit and subsidized inputs.

Deep capital controls were adopted along with foreign travel

restrictions ostensibly to conserve foreign exchange. The closed

economy as well as the well-meaning dictates of planning saw financial

repression as an easy means of taxation. In the final analysis, even the

banking system was nationalized so that it could be a full partner in

the planning effort. The beneficiary of the cheap credit was the

investor and the government both of whom found it easy to default.

For political reasons, default was not considered a serious crime hence

increasing the subsidy element to investors.

Since the path to success lay with the state and the state used the

metric of granting favors to confer success, entrepreneurs began to

invest in developing rent-seeking networks with key government

officials at the center. This is now the dominant regime of business

operation in the country. This did not allow for the development of

entrepreneurship in the sense that modern economics and business

has come to knowan innovator, a risk-taker, and a builder.

Instead, the incentive regime has created a rent-seeking businessman

used to gaming and (mis)using policy. These new classes of

businessmen that acquired wealth and learnt ways to manipulate

policy are now dominant. As a result, wealth remained concentrated in

the hands of those that the government favored. Consequently, even

in private enterprise, merit gave way to government discretion. This

environment slowed the growth of entrepreneurship and indigenous

enterprise.

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Rent-seeking is defined as a situation in which an individual or firm

makes money by manipulating economic environment rather than by

profit making through trade and production of wealth.

Development of Entrepreneurship inPakistan

In Pakistan, policy has always been biased towards the elite. This is

especially true of the economic policy which has been biased towards

the large scale sector. The result is that this sector has developed on

the incentives of rent-seeking rather than entrepreneurship. The

development of small scale sector to some extent reflects the

characteristics of entrepreneurship however this sector has largely

grown up as an informal sector continually besieged by the state in its

quest to protect its favorite child the large formal sector. Below we will

attempt to understand the historical tension between rent-seeking and

entrepreneurship in Pakistan.

a) The Big Push for industryb) The Neglect of the Small

c) Agriculture and the Elite bias

d) Subsidies for Export

a) The Big Push for Industry

Enterprise for the government was synonymous to large

industry only Policy measures gave rise to rent seekers instead of

entrepreneurs

Government policy was never neutral and favored

industrialization through out (Stephen 1969 & Hussain 1999)

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This resulted in losses on bad loans for banks to the extent that, for

example, governments had to inject equity of RS.20 billion and RS.7

billion into United Bank Limited (UBL) and Habib Bank limited (HBL)

respectively to make these viable for privatization that took place in

recent past.

1977-88: Zia years of encouragement of private sector, preference still

given to large scale sector.

b) Neglect of the Small

Small scale manufacturing sector developed in the context of a

difficult / biased industrialization process

Reality: Informal and Small scale sector dominate our lives.

Today almost 40% of business takes place in the informal sector

Small scale sector is the breeding ground for innovation but

continues to attract little research

c) Agriculture & the Elite bias

Impressive agricultural 1960 and 1970 ( green revolution)

The main elements of the green revolution were: tube wells,

characterization and High Yield varieties (HYV) - all the three

elements have been a source of rent seeking

ADB, followed a liberal credit policy and made numerous loans to

farmers (cheap availability of credit)

Overvalued exchange rate made tractors available in Pakistan at

below world market prices

HYV of food grains were provided to farmers at subsidized prices

Akmal Hussain, The new technology made it possible to

accelerate agricultural growth substantially through an elite

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farmer strategy which concentrated on the new inputs on large

farms only.

d) Subsidies for Exports

In 1960s, the dual exchange rate system was used to subsidize

machinery imports and penalize consumer imports while offering

a large subsidy to exporters.

This policy again favored large scale industrialist and exporters

at the expense of small scale producers

Businesses have grown on the back of various protective

measure that had a tilt towards rent-seeking rather than welfare

improvement.

Protections available to businessmen reduced their risks

Conclusion:

Current Scenario:

Entrepreneurship is stifled because of rent seeking.

If entrepreneurship is to develop, deep government reform is needed

which limits rent seeking, encourages innovation and fosters enterprise

The following is recommended:

Reinventing the Role of Government

Removing Instruments of Rent seeking

A new Growth Strategy

Building Growth Cities

Identifying Lemons

Releasing the energy of the domestic Sector

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The Entrepreneurial Process

The entrepreneurial process involves all the functions, activities, and

actions associated with perceiving opportunities and creatingorganizations to pursue them.

A wide range of factors, in Pakistani context, could influence someone

to become an entrepreneur, including environmental, social, personal

ones, or a combination of them.

After one decides to be an entrepreneur, there are four steps of the

entrepreneurial process he/she has to follow:

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Spot and assess the opportunity.

Draw up a business plan.

Establish the resources needed and get them.

Run the company created.

Spot and assess the opportunity:

To identify an opportunity and analyze its potential in terms of: market

needs, competitors and market potential and product lifecycle. It is

important the entrepreneur to test his/her business idea/concept with

potential customers, asking if they would buy the product or service,

doing some research to find the market size and whether if it is

growing, stable or stagnating, finding out about his/her competitors

strengths and weaknesses, threats and opportunities.

Draw up the business plan:

The business plan is an important part of the entrepreneurial process.

A well planned business will have more chance to succeed all the otheraspects of the company being equal. It is crucial for the entrepreneur

to know how to plan his/her actions and lay out strategies for the

business to be created or under expansion.

Establish the resources needed and provide them:

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The entrepreneur should use his/her planning ability and bargaining

skills to get to know the best alternatives on the financing market for

their business, that is, which will offer the best cost benefit ratio.

Run the firm created:

Running the company can seem to be the easiest part of the

entrepreneurial process, since the opportunity has been identified, the

business plan developed and the source of funding provided. But

running a company is not as straightforward as it seems. The

entrepreneur must recognize his/her limitations, recruit a first rate

team to help manage the company, implementing actions to minimize

problems and maximize profits. That is, the firm has to produce more,

with the fewest resources possible, combining efficiency and efficacy.

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Case Studies

Netsol Technologies - Achievementsof Flourished Entrepreneur

NetSol Technologies, Inc. was founded in the year 1995. Salim Ghauri

is the President of NetSol Technologies, Inc. and the founder & CEO of

Network Solutions (Pvt.) Ltd. Lahore, Pakistan, (a wholly-owned

subsidiary of NetSol Technologies, Inc.) He has been a software

developer since the early 1980s, and between 1981 and 1995, he

designed and developed financial applications for large size databases.

Having started out with humble beginnings in the city of Lahore, NetSol

soon grew to a sizable business having operations in Australia, China,

Pakistan, Thailand, UK, and a headquarters in California, USA.

Before establishing Network Solutions, Mr. Ghauri was a successful IT

consultant in Australia. His last assignment was with BHP Steel in

Sydney. As a system integrator he was responsible for software and

hardware solutions. His main achievement was the introduction of a

PC-based network in BHP Steel. From 1988-89, Mr. Ghauri consulted

with the State Rail Authority of NSW Australia for its MIS reporting

Before moving to Australia, he was in Saudi Arabia, where he started

his IT career at Citibank, Riyadh in 1979. After leaving Citibank, he

started his first venture with the help of local funding. Mr. Ghauri is

credited with setting up the first IT-based training institute and a

software house in Damam, Saudi Arabia.

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His basic education is in computing. He got his petroleum engineering

in 1977. But he pursued computing because one of my subjects in

petroleum engineering was FORTRAN language and he had developed

flair of computing. His career started in 1979 with City Bank in Saudi

Arabia in its IT department. From 1979 to 2004, Heve been living his

life in the kingdom of IT. He worked for City Bank for 5 years and in

1986 he moved to Australia as an IT consultant till 1995. After that he

came to Pakistan to establish an IT consortium here.

Salim Ghauri started business in 1996, it was the time when IT was the

most talked issue and Salim Ghauri was able to get in to business

quickly. But besides being lucky, his people worked really hard. Once

Salim Ghauri got the business from overseas he worked hard and

delivered the quality product in time.

As far as his achievements are concerned, he has developed a financial

application that caters leasing businesses. Only a few companies in the

world have developed such applications. At the moment His product is

running in 9 countries like Australia, Japan, Thailand & Korea etc.

These are not commercial countries for Pakistan. Most Pakistani

companies work for USA and Europe but NetSol has focused on Asia

Pacific Region.

In 1996 NetSol got its big break, when it was awarded a major

offshore contract with Mercedes Benz Thailand, many more such

contracts were to follow. Focusing on quality NetSol went on to attain

the ISO 9001 and ISO 27001 certifications in 1998 and 2008

respectively, and in 2006 it achieved CMMI Level 5 certification, a

distinction shared by fewer than 100 companies worldwide. NetSol was

also the first US Company to dual list on both the NASDAQ Capital

Market and the Dubai International Financial Exchange DIFX, which

became NASDAQ Dubai in 2008.

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Main customers of NetSol Technologies are in Japan, Korea, Taiwan,

Thailand and Singapore etc. One of the best achievements of NetSol

includes is that they are focusing different areas in the world apart

from USA and Europe. They are also in North America. NetSol

Technologies have a company that is based in USA where they are

training professionals.

Another aspect is of the quality NetSol Technologies offers and they

are dominating the market in Pakistan as far as quality is concerned. It

is their belief that if they want to compete with the world (including

India and China), they need to focus and have the edge if they want to

get the business. They have developed a very structured approach to

do business.

Evaluation:

NetSol Technologies is a multinational also opertating in Pakistan. It is

categorized as flourished business now due to Saleem Ghauri who has

started the journey in IT sector during 70s and due to his untiring

efforts now it is among the most established IT firms in Pakistan. He

has worked abroad in many counties of Asia and Europe and now

working in Pakistan. His major achievement is Financial applications in

leasing business that is operating in 9 countries . Ghauris achievement

have made him a role model for all those who belong to IT sector in

Pakistan and abroad.

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Najam Kidwai-A famous Entrepreneurin IT sector (Achievements ofFlorushing Entreprenur)

Najam Kidwai was born in Bradford, England. Being a young Asian in

England was hard in the 70s and 80s. His parents used to say that to

progress in life you have to have a decent education. Najam kidwai

was always interested in technology. The idea was to build technology,

to create technology, and to understand technology. The only way to

do that was by going thru university. So he went to university. He

earned a degree in technology management and then opted for

masters in business innovation.

Najam Kidwai has a BSc (Hons) in Technology Management, an MSc in

Business Innovation and is 34 years old. Najam Kidwai is a frequent

speaker on technology issues and has presented at many global

technology and venture capital conferences.

He built a company called CyberEye, which was a virtual reality

company, developing software for medical market in 1992-93. Then he

setup an offshore development team in Pune, just outside Bombay. It

was very early off shore. He raised $8 million in financing when he was

23 years, which he think is a pretty good achievement. he lost lots of

money in America raising my funds but he managed to get them back.

Najam Kidwai had lots of publicity on BBC, 60 minutes, FT, etc.

People read all these stories and gave him money. So from there,

basically for last 8 to 10 years, he have been involved in some best

online projects in world, one is egg.com which is worlds largest online

bank with market capitalization of $1.6 billion. he was also involved in

ESI, which is British online firm which was purchased by E*Trade. he

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also built and sold two consulting companies. Najam Kidwai built a

portal in 9 different languages. It was a voice portal with very

innovative technology. He have raised lots of VC funding. He have

done lots of work in States by bringing US technology companies in

Europe & South East Asia. Currently Najam Kidwai is in process of

raising a $20M Venture Capital fund in Pakistan to invest in technology

companies in Pakistan. It is a venture capital fund focused on early

stage technology investing, which will be raised in Pakistan. If a

person/company has good ideas, like if hes setting up a Dot Com

company, they would help them by giving money to develop the

project to completion. More importantly they have a world class in-

house consulting capability (with consultants from the likes of

McKinsey, Accenture, Booze Allen etc.) that will help the entrepreneurs

execute. So the idea is to create jobs and wealth in Pakistan & create a

supportive environment for Pakistani entrepreneurs. His focus would

be on medical devices, wireless technologies, networking and

enterprise software.

Najam Kidwai, is a young and vibrant personality and also a very

successful businessman and entrepreneur. He is currently raising an

early stage technology venture capital fund in Pakistan, called Clever

Thinking Ventures, which will be a $20M fund focused on making early

stage investments in the enterprise software, medical devices,

networking and wireless technologies.

Previously he has held a variety of roles such as CEO, VP, Director &

General Manager with a sales focus and has built and launched a

+number of UK & US based technology companies in Europe and South

East Asia. Najam has extensive experience in emerging technologies,

specifically, wireless, CRM, Outsourcing iTV, enterprise software and

natural-language.

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Najam has raised over $55M in VC funds to date and has built and sold

two technologies/consulting companies for millions of dollars.

Najam was also heavily involved in the development of the first online

funds supermarket of -www.egg.com (most successful online bank in

the world) Egg.com is an online bank, which was created in 1997. They

decided they wanted to make an online bank with no physical

branches. People could deposit their money here and get a very high

interest rate. That was incredibly successful although it cost them a lot

of money to build it. They had a five year business plan to get 1 million

customers. Then they launched an online credit card and within two

years they had 3 and a half million customers. Reason for success wasthat everything you got charged on credit card, you got 2% cash back.

You also had 6 months interest free credit.

Previously (1999 2002), a co-founder of AtomicTangerine (a Venture

Consultancy and SRI International spin-off), Najam Kidwai led

AtomicTangerines Commercialization practice and was responsible for

taking the intellectual property from partner labs (SRI, Sarnoff, KRDL

and alliances) and promising new business opportunities resulting in

licensing the technology or creating new ventures to capitalize on the

IP created.

Najam Kidwai has been involved with many award-winning online

businesses such as ESI (E*Trade UK) and Egg. In 2000/1, Najam Kidwai

was instrumental in founding and building AtomicTangerines European

operations, revenue ($10,000,000+ in UK).

As of December 2001, Atomic Tangerine was acquired by RedSiren

Technologies (www.redsiren.com). In June 2001, Najam Kidwai was

responsible for facilitating and structuring the acquisition by BSG PLC

of AtomicTangerines Experience Design Business.

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Najam Kidwai currently sits on the boards, as an advisor to

www.primetext.co.uk,

www.rockingfrog.com,www.ambientdevices.com,www.chicago.com

and Epigraph Inc. Najam Kidwai is a member of the Institute of

Directors, the British Computer Society and the Electronic Commerce

Association.

Evaluation:

Najam kidwai is a famous entrepreneur in IT sector who has been

categorized in the flourishing businessman. His achievements start

from small virtual eye company to currently serving as advisor in

British computer society and Electronic Commerce Association.

yellO.pk: Achievements of EmergingEntrepreneur)

Just out of Beta mode in September 2009 and already with a user base

of 40,000 unique users monthly, YellO.pk is the brainchild of Samir

Feroze also known as Chief Yeller. He describes yellO as a place foryou to discover everything you want to know about your city in

Pakistan.

YellO is a map-based location platform which lets you discover local

events, business reviews, classified ads and blogs. Due to this, it is fast

becoming a platform for positive social activism, a hub for finding local

events and a place to discover local business reviews. The content is

all user-generated ensuring that everything is open, honest and

transparent about things going on around the city.

The seeds for yello had been germinating in Feroze mind from as far

back as 2006. However, it was only in 2008 that he managed to start

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his research and development on the platform. Starting off with a

couple of software engineers, today the team comprises about 40

people and two offices in Karachi and Lahore.

In the limited time, yellO has been active; it has been used to mark

collection points around Pakistan for the Swat relief fund and

highlighted the amazing efforts by ordinary citizens in Pakistan, like

the founders of The Rozgar scheme, which gives microcredit to the

poorest sections of the population.

Feroze says, We had always wanted a platform to highlight the

amazing things happening around us which often get overlooked. The

fact that the information in yellO is user-generated means we get to

discover much more through yellO than through traditional media.

The future is rich and profitable as yellO enters multiple mobile

platforms, better web interfaces, a magazine and seamless SMS

integration.

Evaluation:

Samir Feroze is a young emerging entrepreneur in the IT world who

has started its virtual platform yellO.pk in 2008. Now this website is

emerging as a platform for information seekers that contains every

interesting thing happening around in your cities that has provided it

opportunities to grow and making it even more profitable business,

increasing its consumer base and now it has established two offices in

Karachi and Lahore.

These individuals and companies also motivate us by showing that we

can compete successfully in this new business world with people twice

our age and companies only God-knows-how-many-times-as big. With

the worlds industries and markets in constant shift, there is perhaps

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no better time to take risks especially when it comes to making choices

in the new digital world.

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Introduction ........................................................................................................................1

Who Is An Entrepreneur? ................................................................................................1

Development of Entrepreneurship in Pakistan ...............................................................6

The Entrepreneurial Process ............................................................................................9

Case Studies ......................................................................................................................12

Netsol Technologies - Achievements of Flourished Entrepreneur ..............................12Najam Kidwai-A famous Entrepreneur in IT sector (Achievements of Florushing

Entreprenur)

........................................................................................................................................... 15

yellO.pk: Achievements of Emerging Entrepreneur) ...................................................18

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Development of Entreprenuership in Pakistan

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