Tag Archives: SMEs

SMEs: the Intersection of Economic Development and Democratization

Small and medium-sized enterprises make a significant contribution to the economies of Southeast Asia.

Because small and medium-sized enterprises (SMEs) are measured according to the size and level of development in a particular country, the definition of an SME varies from country to country. This is one of the main reasons that SME research and data analysis entail serious impediments. Despite debate over whether SMEs are beneficial compared to multinational corporations, there is no denying that SMEs drive sustainable growth and positively affect the economies of individual countries and the global economy.

First of all, SMEs play a significant role in national economies around the world, according to a June 2017 report by the Organisation for Economic Co-operation and Development (OECD). In many countries, SMEs represent 98 percent or more of all businesses. They are also great economic engines, accounting for an average of 70 percent of jobs in OECD countries and 45 percent of net total employment and 33 percent of gross domestic product (GDP) in emerging economies. Moreover, the World Economic Forum and the National Center from the Middle Market (NCMM) have shown that SMEs, as the main source of economic growth, produce the region’s middle class and consequently contribute to poverty reduction.

Additionally, SMEs are central to efforts to achieve more inclusive growth. They create opportunities for upward mobility in society by allowing disadvantaged or marginalized groups including youth, women, seniors, migrants, and minorities to actively participate in a country’s productivity. By employing broad segments of the labor force, including low-skilled workers, SMEs provide employees with access to social services, such as improved health care. For example, as part of its efforts to increase SMEs’ participation in the macroeconomy from 20 to 35 percent by 2030, Saudi Arabia’s government announced that four in 10 startups launched in 2017 were owned by women.

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The LIFE Project, Serving up Economic Opportunities in the Food Sector

Members of the LIFE project consortium interview the owners and workers at a family-owned and operated produce store, also in Beşiktaş. Produce stores, called manavs in Turkish, are a common fixture in Istanbul.

Strolling through the streets of Fatih, it becomes clear just how many Syrians have relocated to Istanbul, Turkey. The transformed neighborhood—home to the government’s immigration office—has dozens of Syrian shops, which draw refugees looking for a taste of home and foodies eager to sample the area’s new eateries. In fact, the food industry has become a major pathway for Syrians who are looking for economic and social integration in Turkey. For this reason, CIPE and a consortium of partners recently launched the Livelihoods Innovation through Food Entrepreneurship (LIFE) project. The two-year project will establish two self-sustaining food business incubators in Istanbul and Gaziantep, geared towards Turkish and Syrian communities alike. The incubators, which will support more than 200 entrepreneurs and 1,000 workers in the food industry over the course of the project, will provide technical support to entrepreneurs, business formalization and mentorship services, as well as foster cultural exchange and understanding.

A member of the LIFE project consortium interviews the owners of a small gözleme shop in the Beşiktaş neighborhood of Istanbul. Gözleme is a traditional Turkish pastry.

Since the outbreak of the conflict in Syria in 2011, Turkey has received 3.2 million Syrian refugees. Of those, 90 percent live outside of refugee camps, most of them in cities. The Turkish government has invested significantly to address the influx, spending approximately $30 billion over the past six years. This effort has included creating programs to support the integration of Syrians into Turkish society, including initiatives to help Syrians looking to open restaurants and other businesses. Even still, the refugee influx has strained government resources and services. In creating more competition for employment, the influx has also affected host communities, contributing to tensions between Turkish, Syrian, and other refugee groups. These tensions are especially pronounced in the informal sector, businesses that are not registered with the government. The informal sector, which makes up 34 percent of the Turkish economy, is where most Syrians find employment because there are fewer barriers to entry than in the formal sector.

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Associations Play an Important Role in Improving Ukraine’s Business Climate

CIPE expert Nataliia Kobylchak (left) and Mykolaiv coalition member Iryna Yerofeyeva (right) at CIPE’s M-Test training in Mykolaiv, Ukraine.

By Nataliya Zhuhay and Caroline Elkin

As in any state ruled by law, local government officials in Ukraine are obligated to work within the framework of existing laws when developing regulations. But in practice, the regulations they create often act as obstacles for entrepreneurs to run their businesses. These flawed regulations can be poorly written, full of holes that corrupt officials can exploit, or do not correspond to existing laws. Until recently, such regulations did not take into account the costs they imposed, for example, on the café owner who wants to open a summertime terrace—or for that matter, any other basic entrepreneurial activity.

In December 2015, Ukraine’s Cabinet of Ministers adopted a resolution requiring all legislators to calculate the cost of implementing regulations for small businesses. This procedure is known as the M-Test. Although the resolution seems to represent a victory for Ukrainian business owners, many challenges remain. First, previously adopted regulations are not subject to the M-Test. Secondly, officials are not required to examine existing regulations for their corruption potential. Thirdly, the State Regulatory Service of Ukraine is unable to change problematic regulations because it can only make recommendations. Thus, only the courts are capable of compelling local governments to withdraw or change regulations. In practice, though, entrepreneurs are reluctant to pursue such matters in court, preferring instead to keep their heads down. As a result, the conditions for doing business on the local level discourage entrepreneurs rather than encourage them.

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Improving Afghanistan’s Economy from the Bottom Up

Lead farmer Abdul Rahman with grapes. Afghanistan. 2008.
Photo: © Nicholas Bertrand / TAIMANI FILMS / WORLD BANK via Flickr

CIPE and the local Afghan business community teamed up to develop an initiative that is helping to spur economic growth and create jobs in the provinces. Driven entirely by the provincial business communities in Nangarhar, Kandahar, Balk, and Herat, CIPE’s Provincial Business Agenda (PBA) program has produced a wide range of results that improve the local business climate, which has suffered setbacks in recent years. In areas far from Kabul, the economy has been particularly hard-hit by a drastic reduction in international development spending since 2014, resulting in a huge increase in unemployment in the provinces. This has caused many Afghans who were previously employed by the military and international donors to move to Kabul to look for work—or to leave their country out of desperation to earn a living.

CIPE started working at the provincial level in 2008, but has stepped up its efforts since 2014 as its role has become increasingly vital. CIPE works with home-grown, provincial-level small businesses to identify the day-to-day problems Afghans face when trying to start or grow their businesses, which leads to the creation of more jobs. CIPE takes the bottom-up approach in Afghanistan. We do not create business associations, because in CIPE’s experience, the local business community views donor-created business associations as inauthentic. We work with associations and chambers that formed because the business community came together out of the innate understanding that there is safety in numbers and power in collective action. Given the context of decades of war, continuing violence and deep-rooted ills, removing the obstacles caused by poor governance is a reasonable starting point for a country as complex and as dangerous as Afghanistan. Creating an environment that is friendlier to small businesses is a good first step towards improving the overall economy.

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Democratic and Economic Development in the Digital Era

In the last decade, new information and communications technologies (ICTs) have become less expensive and more accessible for people around the world. According to the International Telecommunications Union, more than 3 billion people (nearly 47 percent of all the people on earth) now use the internet. Likewise, by the end of 2016, the total number of mobile broadband subscription was expected to reach 3.6 billion. This growing global usage of ICT has made it easier for citizens and organizations to access information and share data, conduct business online, and virtually network with others. Rapid technological advances, in turn, are poised to have a profound impact on democratic and economic development around the world.

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Democracy that Delivers Podcast #42: Kalsoom Lakhani on her Journey from Storytelling to Empowering the Startup Community in Pakistan

Podcast Guest Kalsoom Lakhani

Podcast guest Kalsoom Lakhani

On this week’s Democracy that Delivers podcast, Invest2Innovate (I2I) CEO and Founder Kalsoom Lakhani talks about the trends, opportunities, and challenges that entrepreneurs face in Pakistan and the report that I2I just launched that looks at the environment for start-ups and investors in the country. Lakhani traces her work today back to her childhood in Bangladesh and Pakistan, and to her early interest in conflict resolution that stemmed from hearing about her family’s experiences during the Bangladesh War of 1971. The stories she heard as a child still resonate today as she seeks to increase understanding around the world about what everyday life is really like in countries such as Pakistan that are often best known in the West for violence and instability. Lakhani talks about how her interest in social justice led her to venture philanthropy and to the work she does today helping shape a supportive environment for entrepreneurs to start and grow businesses in Pakistan.

Follow Kalsoom on Twitter: @kalsoom82.

Download a free copy of the Invest2Innovate 2016 Pakistan Entrepreneurship Ecosystem Report.

Want to hear more? Listen to previous podcasts at CIPE.org/podcast.

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Crunch Time for Egypt’s Economic Reform

via Wikimedia Commons

via Wikimedia Commons

This blog originally appeared in Arabic on CIPE-Arabia.org

Indeed, Egypt is going through a very difficult period. The current economic situation is intrinsically linked to the accumulated weight of poorly addressed economic challenges over the past forty years.  Economic problems were either ignored, or in other instances, their root causes were not addressed in a profound and decisive manner.  On the other hand, undoubtedly, Egypt has all the capabilities to become one of the largest world economies.  This potential has been noted in reports of financial institutions such as the 2010 Citibank report.

The current difficulty stems from fact that there is no alternative to undertaking a comprehensive economic reform program. However, in the short run all Egyptians- the wealthy, the poor, and the middle class, will have to bear the brunt of these reforms. That said, with sound management of reform program, Egyptians will enjoy the fruits of reform in the medium to long run.

There can be no doubt that enacting economic reforms is crucial for Egypt’s progress. Thus, “No,” is my final unequivocal answer to the most critical question of whether Egypt has other alternatives to entering into the loan agreement with the International Monetary Fund (IMF).

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