Innovation, Entrepreneurship & Growth

Vaqar Ahmed and Haroon Sarwar

Planning Commission

vahmed@gmail.com

Presentation at Preston University, Islamabad

11th December 20101

Current Model of Entrepreneurship

• Misuse of government incentives– Public Sector Development Program [Sub-contracting]

– Fertilizer subsidy increased welfare in CIS countries,

– Between 1958-70, 65 percent of total loans disbursed byPICIC went to 37 monopoly houses (Haq, 2007; Chemin,2008)

• Emphasis on rent-seeking rather than risk-taking – Gadoon Amazai Industrial Estate

– Wheat & Sugar Crises

Policy for Entrepreneurship Vs. Investment

• Lobbying for favors

• Protection and subsidy policies

• Cities not entrepreneur-friendly

• Metro

• Zoning Rules & Building Regulations

• Policies are designed for investors and investments – not for innovation

Firms listed on Karachi Stock Exchange?

Software (1)

Retail (3)

Construction (4)

Sugar Mills (37)

Total: 750 Listed Firms

5

Overall InfrastructureQuality

Country Score

Indonesia 2.5

India 3.3

China 3.4

Pakistan 3.4

Thailand 5.0

Korea 5.1

Taiwan 5.4

Malaysia 5.7

Hongkong 6.4Source: Global Competitiveness Report

Hardware

Pakistan Lacks Software of Economic Growth

6

Overall InfrastructureQuality

Country Score

Indonesia 2.5

India 3.3

China 3.4

Pakistan 3.4

Thailand 5.0

Korea 5.1

Taiwan 5.4

Malaysia 5.7

Hongkong 6.4Source: Global Competitiveness Report

Country

Global Innovation Index (out

of 132 countries)

Quality of Education

System

Spending on R&D

Pakistan 79 99 80

India 30 37 36

Indonesia 39 44 28

Thailand 57 67 47

Malaysia 24 23 19

China 26 52 23

Hardware Software

Pakistan Lacks Software of Economic Growth

Promoting Innovation

• Triple Helix System of Innovation (Etzkowitz, 2002)

UniversityUniversityGovernmentGovernment

IndustryIndustry

Issues in Entrepreneurship

Risks

Public Trust and Legitimacy

Control Rent Seeking

Credibility

Ensuring Stability and Security

Reform Regulations and Taxation

Provision of Finance and Infrastructure

Efficient Workers and Labor Markets

Source:

World Development Report, 2005 (World Bank)

Opportunities

Economic GrowthPoverty Reduction

Ideas and

Capabilities

Govt. Policies

Are these conventional policies enough?

Are we really thinking out of the box?

– These conventional policies are donor-driven ideas

– Investment has often also increased in many war economies:

• Israel

• Lebanon

• Sri Lanka

• Iran

• Nepal

Enterprises born out of Simple Ideas

10

Generating Entrepreneurial Ideas

• How many of you are visiting twitter everyday?

Generating Entrepreneurial Ideas

• How many of you are visiting twitter everyday?

• 3 idiots

The Demographic Challenge

Need for Rapid Economic Growth

(i) Rapid population growth increases demand:

– Pakistan adds:

• Every 1 year a New Zealand to its population;

• Every 2 years a Switzerland;

• Every 3 years a Greece;

• Every 4 years a Chile or a Netherlands; and

• Every 5 years an Australia.

– It does not accumulate capital assets at the same pace.

14

Demographic Dividend?

• A bulge in the working age groups in coming 40 years

• This increases potential productive capacity

• BUT also raises challenges:– UNEMPLOYMENT without

adequate investment

– ASSETS & SKILLS for bulge

– COMPETING South Asian countries also have young populations

15

6367717780838384858585

8195110

125142

160178195210224236

56

78

911

1316

2025

31

0 60 120 180 240 300 360

2000

2010

2020

2030

2040

2050

0-14

15-64

65=

Projected Population by Age Groups

Demographic Dividend?

• Chinese Vs. Indian Reform

• Missing link in Past Plans

16

Human Capital

Social Capital

Physical Capital

Productivity-led Growth

Human Capital

• Education• Knowledge• Global Experiences• Focus on Women

• Youth• Skills• Opportunities• Entrepreneurship

• Innovation• Idea Generation• Academia- Industry Nexus• Management Practices

Physical Capital

• Markets• Competitive Markets• Domestic Commerce

• Creative Cities• Dense Clustering• Connectivity• Inclusive Zoning

Social Capital

• Governance & Institutions

• Deregulation• Law and security• Contract enforcement

• Public Goods• Accessibility• Service delivery

• Community Empowerment

• Community Centers• Access to educational and

business networks

• The misuse of incentives

• Rent-seeking rather than risk-taking

• Blind eye to collusion and anti-competitive practices.

• Policies favor big business, not entrepreneurs

• Current education system not harnessing quality of skills

• No adaptability to changing scenarios (new risks and opportunities).

• The misuse of incentives

• Rent-seeking rather than risk-taking

• Blind eye to collusion and anti-competitive practices.

• Policies favor big business, not entrepreneurs

• Current education system not harnessing quality of skills

• No adaptability to changing scenarios (new risks and opportunities).

• Limit government’s role in markets

• Focus on better capacity utilization and organization

• Move towards competitive markets

• Protect property rights and enforce contracts, swiftly

• Encourage innovation and foster enterprise development

• Triple Helix system of Innovation

• Embedding entrepreneurship in education

• Stop ‘sector-picking’

• Limit government’s role in markets

• Focus on better capacity utilization and organization

• Move towards competitive markets

• Protect property rights and enforce contracts, swiftly

• Encourage innovation and foster enterprise development

• Triple Helix system of Innovation

• Embedding entrepreneurship in education

• Stop ‘sector-picking’

Productivity as Driver of Growth

Ideas InnovationEntrepreneur

shipProductivity

ReformsIssues

Ø Creative cities – [Richard Florida / Jane Jacobs]Ø Focus on the software side (Talent à Technology à Tolerance)Ø Creative Cities enhance individual productivity

Problems with our Cities

• Downtown/city centre development discouraged

• City zoning remains unfriendly. Where will the poor go?

• Commercialization fee hinders entrepreneurs

• Lack of sports and recreation facilities for the low income group

• Cantonments within city limits hinders commercial activity

Reforms for Cities

• Development of city centers for dense mixed use

• Focus of policy, research and thinking on the role of cities as engines of growth

• Strengthened decentralization

• Promote Vertical expansion of cities

• Allow places for new ideas and innovation- coffee shops, libraries etc.

Creative Cities for Inclusive Development

Large & ready markets

Generate social mobility

Invest in cultural services

Youth & Community Development

ISSUESISSUES REFORMSREFORMS

Lack of awareness and motivation Increased role of private sector

Lack of productivity and vision Accepting new ideas and creating inclusive markets

Relationship of trust Organizing mass action and increasing trust

Flexibility & adaptability Modernize cities for increased opportunity and space

Ethical code of conduct Effective communication, and information sharing

Diverse interest and needs Promote youth entrepreneurship

Cultural diversity Supervision and consensus through local members

Collective actionImproving social networking through connectivityand outsourcing

Acceptability of used to doing things Providing space for poor and changing zoning laws

Historical mistrustful relationship Prioritizing ethical & cultural values

Women participation Increasing productivity through inclusion of women

Youth MentoringCommunity

InfrastructureLinking Youth with

Community

21

Entrepreneurship

Ideas-led

Domestic Demand First !!

Energetic Youth & Community

Minimum role of

Government

Agenda for Entrepreneurship

Thank You

www.pc.gov.pk