ASEAN economies have relatively weak digital entrepreneurship systems and should address negative popular perceptions of people who start their own businesses, the Asian Development Bank (ADB) says.
In the annual update to the bank’s Asia Development Outlook released last week, the ADB devotes an entire chapter to entrepreneurship in the digital age.
Using a newly developed Global Index of Digital Entrepreneurship Systems, the report ranks 113 economies including 21 developing economies across Asia, of which 7 are ASEAN members.
In terms of quality of environment for digital entrepreneurs, Singapore ranks first worldwide — ahead of the United States and other Western countries.
Singapore is ranked among 15 “leaders” whereas 8 other European countries plus Japan and South Korea are considered “followers” while Malaysia and China are among another 15 economies considered to be catching up.
But most developing ADB members lag far behind. Among ASEAN countries, Indonesia, Thailand and Vietnam are considered “laggards” while Cambodia and the Philippines are “tailenders” (Brunei, Laos and Myanmar were not included).
The relatively low rankings suggest “plenty of scope for improvement,” the report says.
Moreover, “new analysis confirms the importance of a conducive environment in fostering dynamic entrepreneurs who innovate and create a lot of jobs.
“Further, a survey of 685 entrepreneurs across Southeast Asia indicates that digital entrepreneurs outperform their non-digital peers.”
Among the eight pillars of the index, developing Asia’s scores are relatively balanced, “suggesting that a broad policy mix is likely to have a greater impact on performance than focusing on a single policy area,” the report says.
“Developing Asia as a whole performs worst in culture and informal institutions, which implies that people generally have a poor opinion of entrepreneurs in terms of status and career choice.
“Stressing the positive role of entrepreneurship in general education curricula can create a cultural environment more conducive to entrepreneurialism,” the report says.
“Specific policies such as incentivising universities to encourage entrepreneurship among students through, for example, university business incubators.”
Culture and informal institutions are the least favourable pillars of the index in five ASEAN economies — Cambodia, Indonesia, the Philippines, Thailand and Vietnam.
“One way to strengthen the pillar is to improve public perceptions of entrepreneurship,” the report says.
“Where the local entrepreneurial ecosystem is underdeveloped, policy makers can help kickstart mentoring, networking, and collaboration among entrepreneurs by, for example, helping to form start-up associations.
“Policy makers can significantly improve the entrepreneurial climate through such indirect and low-cost interventions.”
The report also highlights the need for better digital regulation in developing Asian economies.
“Only a few economies have made significant progress in legally regulating digital markets,” it says.
“It is imperative for laws and policies to strengthen competition in them, which are often winner-take-all in nature and thus vulnerable to anticompetitive abuse.”
Even advanced economies with well-developed digital infrastructure like South Korea “must adapt their legal frameworks to promote a more vibrant, competitive digital business environment.
“More generally, digitally underdeveloped economies tend to have legal frameworks that adapt too slowly to rapidly evolving digital business models,” the report says.
Citing a separate ADB study earlier this year, the report notes that only 34 of 60 economies in Asia and the Pacific legislated data protection, 6 had draft legislation, 16 had no legislation, and 4 had no available information.
For e-transactions, 50 economies had legislation, 3 had draft legislation, 2 had no legislation, and 5 had no data.
“Policy makers intent on encouraging entrepreneurship would do well to reduce the risk and uncertainty facing entrepreneurs by strengthening the institutional environment, notably by strengthening property rights protection,” the report says.
In terms of legal systems for digital entrepreneurship in ASEAN, the study showed that Singapore and Malaysia ranked highest followed by Indonesia, Laos, the Philippines, Thailand, Vietnam, Cambodia and Brunei.
The study also found that around 90 percent of the populations of Brunei, Malaysia and Singapore were using the internet in 2019 followed by around 80 percent of Cambodians.
Internet use was around 70 percent in Thailand and Vietnam, and less than 50 percent in Indonesia, Laos and the Philippines.
“A conducive digital and institutional environment — notably high-speed broadband network and strong rule of law —positively and significantly affects productive entrepreneurs who innovate, export, and create many jobs.”
But “policy makers must realise that their direct influence on entrepreneurship is limited and indirect, unlike building power plants or public health clinics.
“What they can do is influence trade-offs for the individual between entrepreneurship and other pursuits by creating a conducive institutional, digital, and overall environment for entrepreneurship.
“It is especially important that policy makers alter the trade-off for talented and creative individuals whose start-ups may blossom into gazelles.”
The report concludes that sound institutions that mitigate economic risk and uncertainty — especially with strong rule of law— are significant determinants of entrepreneurship.
“Physical infrastructure, including digital technology infrastructure, is a necessary but insufficient condition for digital entrepreneurship.
“Favourable cultural, institutional, and legal infrastructure matters just as much.”
Source: Agency Kampuchea Press