Thursday, August 15, 2013

Entrepreneurship in Pakistan

An Entrepreneur is the one who takes on the risk of starting their own enterprise or investing in other start-ups. Successful entrepreneurs are known for finding innovation and market gaps for new products and services. Entrepreneurs have the ability to take business to the point at which it can sustain itself on internally generated cash flow. The future of entrepreneur is to reform and revolutionize the pattern of production. 

Entrepreneurship spurs improvements in productivity and economic competitiveness, and with technological advances and economic liberalization, the assumption that nurturing entrepreneurship means promoting a country's competitiveness which today appears more valid than ever. Entrepreneurship development has the potential to create jobs through the formation of new business ventures; utilization of available labor and resources to create wealth, stimulate growth, boost the economy and increases a nation's GDP, and reducing dependence on social welfare programs. Entrepreneurs create new businesses and new businesses in turn create jobs, intensify competition, and may even increase productivity through technological change. High measured levels of entrepreneurship will thus translate directly into high levels of economic growth. While it is easy to see that starting a new business to exploit a perceived business opportunity would lead to economic development, it is also possible that necessity entrepreneurship may not lead to economic development. Being pushed into entrepreneurship (self-employment) because all other options for work are either absent or unsatisfactory can even lead to under development.

According to many, the two widely acknowledged causes of small business failure are 1) lack of knowledge about the business, and 2) insufficient capital to sustain the venture through break-even and profitability. The issue of knowledge can be overcome by given proper instruction, most entrepreneurs can learn the basics of running a given business. Information and learning can be obtained through traditional schools, franchisors, books, consultants, or on the job training as an employee. Than is the matter of capital, with a bit of intelligence and careful planning, a venture can be started with limited means and grown as finances, time and ability permit. However, the actual root cause of entrepreneur failure is the non-existence of two things. There is not a passion for the work involved and/or there is not a quality, personal fit with the venture. The root cause of business success or failure is not due to a lack of knowledge or capital, it is due to a poor fit between the owner and the chosen venture. The successful entrepreneur always enjoys a good relationship with the business.
In case of Pakistan, the entrepreneurs face many challenges and problems. The factors for such low levels of entrepreneurial drive lie within our culture, bureaucracy, financial hurdles and academic perceptions of entrepreneurship. Entrepreneurship is associated with small and cottage industries; there is a stigma with failure and a general resistance to new ideas; businesses are rooted in traditional and low value-added sectors such as textiles, rice and leather. Also, younger business communities, often educated abroad, do not have the requisite experience or financing to establish businesses, family-owned businesses are slow to adopt professional modes of management; business culture is excessively male dominated with very few women entrepreneurs or business heads. 

Other factors include corruption at practically all levels, high taxes and stringent government regulation creating unnecessary hurdles for entrepreneurial businesses. On the private sector front, multinational corporations and international banks have rapidly expanded their presence and they provide good, salaried opportunities to young professionals. The typical aspiration of an MBA student graduating from a Pakistani business school is to secure a stable job with a multinational or other large corporation where they can advance through a stable, prosperous career. However, with the growing population and fewer job openings, traditional avenues of employment are limited.

Other hurdles towards establishing independent businesses include financial barriers to entry. The venture capital industry is almost absent in Pakistan. Despite reforms initiated by the State Bank of Pakistan, access to equity and formal debt financing have not improved. Access to finance is a recurring constraint to enterprise development in Pakistan, especially in the case of new and small enterprises. 

The other major constraints in entrepreneurial growth are with regards to tax administration and tax rates, electricity, and access to financing, security, housing, capacity building and infrastructure. The list of less constraining issues includes crimes, access to land, labor regulations, and telecommunications. The issues related to financing costs, economic policy uncertainty, corruption, macroeconomic stability, customs and trade regulations, anti-competitive practices, business licensing and operating permits, skills and education of the labor force, energy efficiency and transportation are cross cutting in nature and affect all sizes of enterprises. But regarding tax issues and electricity, medium firms express the strongest complaints, followed by large firms, small firms, and micro firms. However, small firms complain most about for access to the finances. 

In such scenarios the government should eliminate the barriers to entrepreneurship by providing infrastructure, defense, land, education. Such set ups should be provided which encourage start-ups and support existing small and medium size enterprise by enabling them to adapt innovative strategies and technologies and thus compete more effectively at the global level. The educated, young, and emerging entrepreneurs need to take the lead and be encouraged to become the vanguard of Pakistan’s economic growth.

BY Anum Batool first publish at HWeb

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