>Entrepreneurship in Developing Economies

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Someone recently asked me at a conference in the Bay Area, as to how has been my experience of entrepreneurship in the US as compared to the developing economies. My answer, which astonished him, was it is far more difficult to succeed in developing economies than in the US.

There are reasons for that and plenty of them, but I list here the three most important. To an extent they are true for all economies; from Bangladesh to Nigeria, from Philippines to Pakistan, from Sri Lanka to Kenya.


Political Instability:

For one, the political instability can play havoc with your plans. Say, if you were in Pakistan, Bangladesh, or even Nigeria, chances are that the political system is heavily dependent upon military and how it reacts to the highly mischievous politicians. Chances are that there will be one political upheaval every five or so years. Enough, to not make business plans and forecasts beyond five years regularly. In fact, I recently, met up with a Chairman of a multinational corporation in Pakistan and asked him precisely about this trend. He said, they used to make a 5 year plans for the country in the past. Now, they are down to 3 as it is difficult to see beyond that.

Government Oversights:

To an extent, if you are running an IT related business, chances are the government will not interfere much. However, that is just the illusion. The governments are slowly becoming aware of what is the all hoopla about this new technology and are becoming a major roadblock in its growth. Take the example of bandwidth. If you are anywhere in Africa, chances are you are paying by the kilobytes that you are using. Yes, not all you can eat, unlimited packages as we see in the US. Even if setting up a software company is cheap, it is too expensive to connect with the outside world on high speed bandwidth.

In Pakistan, the waters are further muddled, with the paranoia built by the government around VoIP. Now, if you are a call center or a software house, and want to use VoIP then you have to first register with the government (Pakistan Software Export Board), and then get a clearance from Pakistan Telecoms Authority (PTA) and this process could take an average of four to six weeks, if not more. And once you do get this clearance, you are still not allowed to do inter office communication using VoIP. You still have to use traditional telephony for that! Imagine that! And yes, they can raid your offices, lock up your staff and do all sorts of government bureaucratic bullying in the name of protecting you against the illegal use of VoIP.

Financing:

Now, this is where it gets really tricky. Numerous surveys conducted by various agencies including World Bank, United Nations has indicated that Financing is one of the major issues in developing countries for SMEs (Small and Medium Enterprises) to survive and grow. The banking systems are also quite archaic in nature and have not really developed since the colonial independence. For example, it is quite difficult for them to finance anything without “physical assets”. Now that is fine, if you are an industrialist, but what if you are an IT company? There are only electronic assets and intellectual property rights. Sadly, such enterprises can secure no funds from any banking institution on these basis. And there are hardly any Venture Capitalists out there either. That leaves the budding entrepreneur with his/her own money or rely on some angel investor.

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About Atif Mumtaz
A serial entrepreneur who loves to travel, discuss politics and hikes on weekends.

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