In Asia: Weekly Insight and Features from Asia

Since the 1980s, microfinance institutions in Bangladesh, such as the Grameen Bank, have touted the success of women microentrepreneurs in starting and operating thousands of microenterprises throughout the country. While this is certainly an achievement, Bangladeshi women have not achieved the same level of success in the small and medium-sized enterprises (SME) sector.

In Bangladesh, male small business owners far outnumber female business owners, despite some recent progress. A business owner in Bogra, northern Bangladesh. Photo by Geoffrey Hiller.

The importance of SMEs to overall growth in an economy is well-known. Although the exact definition of SMEs varies from country-to-country, they are generally much larger – in terms of both assets and number of employees – than microenterprises. SMEs are often lifelines for larger firms – including foreign-owned firms – supplying them with raw materials, parts, and services. They are also more productive than microenterprises, driving employment and competition.

On an individual level, starting and operating an SME requires not only entrepreneurial spirit and start-up capital (which many microentrepreneurs have), but also managerial and logistical expertise. In addition, in cumbersome business environments like Bangladesh, starting and operating an SME often requires a business person to be well connected to bureaucrats or at least to networks who can access them. Women entrepreneurs in countries like Bangladesh frequently lack access to such expertise and networks, limiting their ability to become SME entrepreneurs. Moreover, expectations of women’s role in the family as wives, mothers, and homemakers may limit their ability to pursue economic opportunities outside of the home.

Read more »

In a recently released report on Asia in 2050, the Asian Development Bank (ADB) predicted that seven Asian economies – China, India, Indonesia, Japan, South Korea, Thailand, and Malaysia – would be the drivers of Asia’s rise over the coming decades and that the region could account for more than 50 percent of global GDP in the next 40 years. The report warned, however, that these economies need to avoid falling into the “middle-income trap” – countries that stagnate at middle-income status and are not able to take the next leap to developed nation status – to enjoy such continued regional prosperity.

In fact, the middle income trap is already a serious concern for Malaysia. According to World Bank data, real GDP growth has slowed considerably, from an average of over 9 percent between 1990 and 1997 to around 5.5 percent between 1997 and 2008. In addition, domestic investment measured by gross capital formation as a percentage of GDP has also decreased drastically, from above 40 percent in the mid-late 1990s to below 20 percent in recent years.

Such large decreases in investment and growth rates in the last decade raise serious doubts about whether Malaysia can attain its goal of reaching developed nation status by the year 2020. In light of this, the Government of Malaysia has acknowledged the important link between good business environments to encourage private sector investment and favorable economic outcomes such as long-term growth and international competitiveness. To this end, the government has undertaken several initiatives to improve the business environment and encourage economic transformation.

Read more »

In Bangladesh, where the 2010 Economic Governance Index – which measures and ranks business environments across 19 districts – was just released, the capital city of Dhaka did not perform among the top districts. Of course, in terms of business performance and investment, Dhaka remains Bangladesh’s single most important city.

Bangladesh's capital and financial center, Dhaka, above, is home to both international and domestic banks, as well as the Dhaka Stock Exchange. Yet, it struggles with rapid urbanization - each day, nearly 5,000 new people move to Dhaka, the world's 10th most polluted city. Photo by Sanchita Saxena.

With nearly 10 percent of the country’s population of 150 million, Dhaka is the 9th most populous city in the world. With 15 percent of the national GDP, the city is the heart of Bangladesh’s financial sector, home to both international and domestic banks, as well as the Dhaka Stock Exchange. Thus, a paradox emerges. Although the city is the center of business activity, attracting both foreign and domestic investment, it is perceived by the private sector as having only the 10th best business environment in the country, out of 19 measured.

Read more »

Any casual observer walking through the heart of a district capital like Bangladesh’s northeastern city of Sylhet or Rangpur, further north, would be impressed by the bustling economic activity. In the early morning, streets are filled with colorful trucks honking their way toward the market place. Their paths are crossed by overloaded rickshaws delivering raw materials to nearby tailors and small manufacturers. Despite such signs of a vibrant economy, doing business in Bangladesh is far from easy.

In Bangladesh, business people, such as this shop worker, face basic challenges that stunt their growth potential, including cumbersome administrative procedures and lack of transparency from authorities.

In Bangladesh, where The Asia Foundation works with micro, small, and medium enterprises (MSMEs) at the district level, business people often complain about cumbersome administrative procedures, unfair tax administrations, obsolete regulations, and an overall lack of transparency from authorities.

Read more »

Vietnam has garnered international attention over the past two decades with its remarkable economic growth and strong poverty alleviation record. The adoption of the doi moi (renovation) policy in late 1986, marked by a shift to market-oriented development and international integration, has transformed this country of 86 million. Crucial legal reforms embodied in such laws as the Enterprise Law, the Land Law, and the Investment Law have further spurred economic development, encouraging the emergence and growth of market activities, the private sector, and foreign investment in a country long governed by central planning. The private sector in particular is playing an increasingly significant role in the economy. According to the World Bank, in 2007 the domestic private sector contributed 46 percent of the GDP, and private sector investment in the economy grew steadily from 23 percent in 2000 to 38 percent in 2006. With some 1.5 million new entrants into the labor market each year, the domestic private sector is critical to employment generation.

Read more »

After a global economic slump in 2009, Cambodia welcomed World Bank forecasts that projected its economy would grow in 2010. However, despite an auspicious start to the New Year, the imbalanced growth between Phnom Penh and the provincial areas are major concerns for improved and sustainable economic development. The private sector in Cambodia, particularly the micro, small, and medium enterprise (MSME) sector that constitutes the bulk of the country’s economy, has been inhibited in its ability to grow and create jobs because of a wide spectrum of institutional barriers and development constraints.

Small- and medium-sized businesses, such as this pottery wholesale shop, are particularly hard-hit by development constraints in Cambodia. Photo By Karl Grobl.

Read more »

The recent release of two reports – one from the World Bank/IFC and the other from the IFC/Asia Foundation – compelled more than 200 Cambodians to gather on May 25th in a conference room overseeing the Tonle Sap river. They were business owners, public officials, and development organizations, all keen to discuss ways to make the life of business owners in Cambodia easier and more productive.

The lack of information on regulations, time-consuming procedures, unofficial charges, and the poor delivery of essential public services hamper business growth.   Making it easier, cheaper, and more transparent to start and operate a business could significantly help Cambodia compete in both the international and domestic markets, according to the World Bank/IFC Second Investment Climate Assessment (ICA) and the Provincial Business Environment Scorecard (PBES), published by IFC and The Asia Foundation.  At a time of unprecedented global financial and economic crisis, the issue is not anecdotal. Cambodia urgently needs to improve its business environment at the national and provincial level if it wants to mitigate the shock of the international crisis.

Read more »

Earlier today in Vietnam, The Asia Foundation and its local partners released one of the year’s most highly anticipated reports: the 2008 Provincial Competitiveness Index (PCI). The PCI ranks the ability and willingness of provincial governments to develop business-friendly environments for private sector development. This marks the fourth in an annual series of Vietnam’s largest and most comprehensive assessments and rankings based on the views expressed by 7,820 domestic entrepreneurs and managers from firms across Vietnam’s 64 provinces.

Investors use the Index as a reference for their investment decision-making, and PCI results have been cited by Vietnam’s Prime Ministers and in more than 500 investigative and news articles. Each year, PCI gauges the progress of economic and administrative reforms and provides guidance to Vietnam’s policymakers, business leaders, and entrepreneurs. Looming as Asia’s next tiger economy, Vietnam is growing at an average of 8% per annum.

Read more »

On a recent afternoon in Hanoi, I found myself sitting in a crowded conference room sipping tea and munching snacks with a young team of researchers, sifting through stacks of completed surveys looking for small coding errors in the data. Anyone watching would have been hard pressed to imagine we were putting together one of the most highly-anticipated economic policy reports of the year, but that is exactly what we were doing.

The Vietnam Provincial Competitiveness Index (PCI) rigorously assesses and ranks all 64 Vietnamese provinces on a broad range of characteristics of their economic governance. First developed in 2005 by The Asia Foundation and its local partner, the Vietnam Chamber of Commerce and Industry (VCCI) — under the USAID-funded Vietnam Competitiveness Initiative (VNCI) ” the goal of the PCI is to create a tool to measure year-to-year changes in standards of economic governance in Vietnam’s provinces from the perspective of private sector development.

Read more »

Which local governments govern best? That is the central question addressed by the Local Economic Governance report launched on Tuesday by KPPOD (Regional Autonomy Watch) and The Asia Foundation. The report ranks 243 districts across Indonesia on the quality of their local economic governance based on a survey of over 12,000 businesses in 15 provinces, one of the largest surveys of its kind in the world. It provides the most comprehensive picture yet of the successes, and failures, of regional autonomy. Read more in the The Jakarta Post.

Neil McCulloch is the Director for Economic Programs at The Asia Foundation in Jakarta. The above is an excerpt and link to the full article in The Jakarta Post.