Minister of Economic Development Pavlo Sheremeta (left) with CIPE Deputy Director Andrew Wilson (center) and László Kállay, SME expert and Professor at Corvinus University of Budapest (right).
In the weeks following the so-called “EuroMaidan” protests in Kyiv that led to the installation of an interim government and the scheduling of early presidential elections, attention in Ukraine began to turn to the need for urgent measures to jump-start the economy, as well as for a comprehensive set of policy reforms in the medium- to longer-term to get the country on track.
With stagnant growth, large fiscal deficits, and the likelihood that international assistance from the IMF will be predicated on a set of austerity measures, many analysts believe that the only way to stimulate Ukraine’s economy is to support the growth of the small and medium-sized enterprise (SME) sector, which represents just a small fraction of the country’s economy in comparison to the countries of Europe which Ukraine aspires to join.
To help articulate just what changes are needed, and to ensure that that the SME sector has a voice in the policy reform discussion, a group of Ukrainian business associations representing SMEs and leading think tanks organized a national forum to discuss a coordinated strategy for reform on April 8-9 with support from CIPE.
Participants at a recent capacity building workshop for women’s chambers in South Asia.
At CIPE, we take a systemic and institutional approach to supporting entrepreneurship. Systemic in that unlike other organizations, rather than providing training or microloans to individual entrepreneurs, we seek to understand the policy barriers that often make it difficult to register firms, access credit, or conduct business. Institutional in that we support the efforts of civil society organizations – chambers of commerce and business associations – that seek to engage and advocate with policymakers to eliminate those barriers.
In the case of promoting women entrepreneurs, CIPE has focused in a wide range of countries on building the capacity and strengthening the governance of women’s chambers and association, thus making them more effective participants in that advocacy process.
Recently, a group of CIPE staffers took part in an informal email discussion that illuminates certain aspects of our approach to working with these organizations, which we wanted to share with readers of this blog. The conversation began when Julie Mancuso, Program Officer for Africa, wrote to several of her colleagues: “I am curious as to best models for women’s chambers and whether separate is usually better. Should women be engaged ideally through a strong local chamber, rather than starting their own, organized primarily around gender? Is this an area of debate or is there an agreed-upon model one way or the other?” Her specific question concerned her work with a coalition of women’s business associations that are weighing the relative merits of creating their own chamber or operating under the umbrella of the national chamber.
Informal businesses in rural areas are a key part of the economy in many countries, like India. (Photo: Wikimedia Commons)
The informal sector — the unlicensed, unregistered small businesses that make up the bulk of economic life in many countries — is not all bad.
A recent article in the Economist analyzed the issue of informality in the Indian economy and drew out a range of excellent points regarding the size of the country’s informal economy and the energy and dynamism that undocumented economic activity has brought to rural India, as well as the difficulties that informality can bring. These include costs to the entrepreneurs themselves, in terms of accessing credit and problems achieving scale, among others, as well as costs to the overall economy in terms of lost tax revenue and the circulation of money outside of the financial system. Indeed, there has been no shortage of research on the challenges posed by informality around the world.
What this article gets wrong however, is its conclusion, regarding what India can do to promote the formalization of the informal sector. The author writes “The best way to speed up the process is to extend the reach of the financial system. In return for coming into the formal economy and paying taxes, firms would get access to capital.” This analysis misses an important point about informality.
Yesterday I wrote about how CIPE is helping women business leaders to break down barriers in South Asia – both barriers between countries and barriers that are keeping women out of the economic mainstream. CIPE’s third networking and training session for the heads of women’s chambers of commerce and business associations, held on September 18-20 in Lahore, Pakistan, was a resounding success, including a dinner at the Lahore Chamber of Commerce that drew the Governor of Punjab as a featured speaker.
But we also wanted to take some time to focus on the training program itself, and the results of the hard work that these women are putting in to building their organizations. There is no shortage of programs in South Asia to build links among women entrepreneurs – to encourage trade and business ties – but CIPE is focused on strengthening the capacity of the chambers and associations, both so they can better represent their members in the policy process, and help their members grow their own businesses.
The biggest changes can start with small steps – particularly in the effort to change cultural barriers and to ease decades-old national tensions. Often it is the private sector, seeking to open new markets, explore possibilities, and expand trade and commerce, that is at the forefront of such changes.
Last week in Lahore, Pakistan, CIPE organized the third in its series of training and networking sessions for a group of women’s business leaders from across South Asia, helping bring about a range of positive steps – both for national understanding and opportunity for traditionally marginalized women.
This network, which CIPE has been developing with the support of the National Endowment for Democracy, includes participants from major and emerging chambers of commerce and business associations from Pakistan, India, Bangladesh, Nepal, Sri Lanka and Bhutan.
The idea to bring together representatives from these countries – particularly given the tensions between India and Pakistan, and the history between Bangladesh and Pakistan, was not guaranteed to succeed. But after two meetings, one last winter in Dhaka and then again in the spring in Kathmandu, it was becoming clear that these women business leaders were growing closer, learning from one another, sharing ideas and information, and finding ways to strengthen their organizations.
The world was saddened this week by the passing of Ronald Coase, who won a Nobel prize for his groundbreaking work providing clarity and insight on a range of questions of economic behavior. His paper The Nature of the Firm looked at why people would choose to create firms rather than be individual market participants, introducing the concept of transaction costs to economic theory. His later study of transaction costs in the context of externalities, in The Problem of Social Cost, informs many of the ideas underpinning CIPE’s work.
The Afghan-Pakistan border. (Photo: EPA)
While most of the coverage of today’s summit meeting in Islamabad between Pakistan’s Prime Minister Nawaz Sharif and Afghan President Hamid Karzai focused on crucial issues of security and the peace process, the two leaders also covered one of the key drivers of long-run regional stability: enhanced trade and economic relations between the two countries.
According to press reports, the sides discussed cooperation on infrastructure, power, and transportation projects. In particular, Pakistan promised to follow through on its pledges under the Afghanistan-Pakistan Transit Trade Agreement (APTTA), which is designed to facilitate the flow of goods from Afghanistan and for export via Pakistan, as well as through customs into Afghanistan, among other provisions. While the agreement is signed and in place, it has long faced an extensive range of issues in practical application.
CIPE has been working with the Pakistan-Afghanistan Joint Chamber of Commerce and Industry on joint advocacy efforts between business leaders in both countries to try to unblock APTTA implementation. Now that such public, high-level support has been given to the process, it will be up to the private sector to maintain the pressure to realize the APTTA vision of free-flowing trade between these neighbors.
Marc Schleifer is Senior Program Officer for South Asia at CIPE.