Commentary: Regional summit in Bali designed to unshackle entrepreneurship
Vincent Lingga, The Jakarta Post, Jakarta | Fri, 07/22/2011 8:00 AM
We don’t expect many investment deals between Indonesian start-up businesses and American prominent entrepreneurs and angel investors during the ASEAN Regional Entrepreneurship Summit opening in Bali on Friday as a follow-up to the Entrepreneurship Summit hosted by US President Barack Obama in April, 2010.
The meeting, expected to be attended by 200 foreign and domestic delegates and to be addressed by US Secretary of State Hillary Rodham Clinton, will serve more as a forum for exchanges of experiences and views about best practices and prerequisites for nurturing entrepreneurship.
But, to be sure, the gathering will heighten the momentum for the development of entrepreneurship in Indonesia because participants from the US, well known as the beacon of entrepreneurship, include well-known entrepreneurs and leaders of the Angel Capital Association, which groups individual investors looking for investment opportunities in start-up businesses.
Entrepreneurialism is deeply rooted in American history. It was founded and then settled by innovators and risk-takers who were willing to sacrifice old certainties for new opportunities.
This culture is greatly supported by flexible labor rules — the freedom to hire and fire workers — big venture-capital industry and the long traditions of close relationships between universities and the industry.
Many American giant companies such as the Amway consumer products company and Wall-Mart began from garages. Even the history of many high-tech giants started up as partnerships: Steve Jobs and Steve Wozniak founded Apple, Bill gates and Paul Allen (Microsoft), Sergey Brin and Larry Page (Google) and Mark Zuckerberg and Dustin Moskovitz (Facebook).
Studies by the World Bank and various business institutes in Europe and the United States found the positive correlations between a broad base of entrepreneurship and economic expansion.
Entrepreneurs contribute greatly to producing and commercializing high-quality innovations, spurring productivity growth and enhancing employment creation and dynamics because creativity and innovation are at the heart of entrepreneurial behavior.
Entrepreneurship is important for continued dynamism of the economy because it is entrepreneurs that are capable of identifying business opportunities and have the will to stake out their capital in business start-ups against all the risks.
Yet Indonesia erected regulatory barriers that make it extremely difficult to start up businesses.
Costly regulators hamper the creation of new firms, especially in industries that should naturally have high entry.
No wonder many SMEs in Indonesia continue operating in the informal sector (underground economy), thereby denying them easy access to low-cost bank financing and other public services and facilities.
The Doing Business 2011 report of the World Bank that rated 183 countries according to their performance in 11 requirements for the ease of doing business ranked Indonesia at the 121st. Even among ASEAN countries, our performance was among the worst, better only than the Philippines.
Regulatory and administrative costs obviously hinder entrepreneurial activity, dampen investment and researches and development and stunt firm growth. They can edge firms out of business by absorbing too much time and resources.
Even difficult exit conditions that make it costly for firms to wind down, such as lengthy creditor claims on assets or too rigid labor regulations on severance allowances, debilitate business start-ups.
As the American experiences have shown, culture is another important factor for building up an entrepreneurial society, influencing career preferences and shaping up attitudes to risk-taking and reward.
The government can play an important role in nurturing entrepreneurship, through formal education and training (including continued education) and fostering entrepreneurial attitudes.
Establishing conducive regulatory framework for the development of venture capital companies will also provide alternative financing for start-up businesses.
In major developed countries, notably the US, the business schools at major universities also function as the incubation centers for small entrepreneurs where innovations and creative ideas are developed and converted into commercial products.
But in Indonesia most university graduates are acutely short of entrepreneurship quality. Hence, they look mostly for paid jobs either in the private or public sectors.
Entrepreneurship thrives mostly among small and medium enterprises (SMEs). The role of small businesses cannot be underestimated.
But neither can the challenges they face, particularly in a world where markets are globalizing and large-scale enterprises dominate so much of the government’s policy making time
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