Entrepreneurship: South East Asia’s Ticket to Prosperity
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10 December 2016
The first regional ASEAN entrepreneurship study, conducted by the Global Entrepreneurship Monitor (GEM), indicates that the region is among the most entrepreneurial in the world, making it a fertile ground for innovation. Sixty-six per cent of people in the region view entrepreneurship as a positive career choice, above the GEM global average of 62.46%.
Thus, entrepreneurship may be South East Asia’s ticket to prosperity, says the report. It’s the primary driver of sustainable economic growth and job creation, and a recent research report reveals positive new business and entrepreneurship trends across the region.
Six Southeast Asian countries – Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam – comprise around 9% of the world’s population and 3.17% of the world’s gross domestic product. The region is ripe for entrepreneurship, as neighbouring countries in Asia and in the Pacific Rim see the Association of Southeast Asian Nations (ASEAN) as providing good opportunities for trade, business and economic partnerships.
Study empowers policy makers
The report shows the extent and nature of entrepreneurial activity in the region, along with similarities and differences between participating countries. It includes evidence-based recommendations to empower policy makers to build appropriate policies for the regional promotion of entrepreneurship, job creation and inclusive growth.
Mike Herrington, Executive Director of GEM says: “ASEAN is well positioned to play an increasingly important role on the global economic stage. An Asian Economic Community (AEC) is no longer an abstract but a reality that the regional governments are urged to embrace.”
Most entrepreneurial in the world
GEM measures entrepreneurship rates as a percentage of the adult population between the ages of 18 and 64 who are in the process of starting or who have started a business. It differentiates between nascent entrepreneurship (businesses less than three months old), new businesses (businesses between three months and 42 months), and established businesses – those that have survived their first three-and-a-half years.
Herrington said that the data coming out of the ASEAN-6 region is positive. Although the nascent entrepreneurship rate for the region is low (just 5% compared to 7.6% GEM average), this is offset by a new business rate of 10%, which is the second highest regional average globally and is almost double the GEM 2014 average. The established business rate (14.1%) is the highest regional average and is also significantly above the GEM average of 8.4%.
Within the region, Malaysia and Singapore lag with lower levels of entrepreneurship across all stages of business, while Thailand and Vietnam lead the pack, followed by Indonesia. The established business rate in Thailand is a healthy 33.1%. In Singapore it is just 2.9%.
Job creation and innovation concern
Of concern for the region is that the report shows only moderate levels of innovation. Just over half of ASEAN entrepreneurs said their products/services are not new to customers. About 60% of businesses in the region believe there is high competition, which poses a significant challenge to business viability.
In addition, few businesses are generating significant job numbers. The report found that more than half of entrepreneurs in the region expect to generate no jobs and 35% expect to create only between one and five jobs. Ironically Singapore, which has low entrepreneurship rates, is the only country that reported significant job creation.
Singapore is also the only country to have a significant percentage of entrepreneurs in financial intermediation, communications, professional and government services. The majority of entrepreneurs in the region are in low-growth retail, hotel and the restaurant businesses.