Marking Global Entrepreneurship Week 2020 in SriLanka, the Global Entrepreneurship Network (GEN) Sri Lanka organized a webinar on ‘Navigating the Pandemic: Survival and Success through Entrepreneurship’ last week. There were some incredibly insightful panelists, speaking on topics ranging from managing through crisis, to strengthening the ecosystem. I was invited to share thoughts on policy approaches to support entrepreneurs. For the benefit of a wider audience, I summarize my remarks shared on the panel in this blog post. The full video of the event is embedded below
Policy approaches to support entrepreneurship – two priorities to pursue
Good morning everyone – its a pleasure to join this session, as we mark GEW 2020. One thing that I find particularly interesting about the GEN network is that there is a focus on the role of smart policy tools to support entrepreneurship. In fact, GEN even has an awards and recognition scheme for ‘policy champions in entrepreneurship’ – which I definitely recommend to all of you interested in this space – you’ll see some super examples of governments and policymakers using innovative policy measures to strengthen the ecosystem for entrepreneurship and innovation.
I will speak on two areas that policy can help – finance and procurement.
The first is on finance.
Financial assistance schemes, especially during and in the aftermath of Covid, should go beyond the standard tools of concessionary loans if they are to be meaningful and sustainable. It should be more long-term, patient financing, and about helping startups and banks de-risk. Better policy tools are those like credit guarantee funds that help reduce the risk of banks in financing entrepreneurs; also tools like export credit insurance that de-risks small entrepreneurs who want to export overseas in a tricky external environment where sometimes payments will get delayed, there could be defaults, you could have sudden lockdowns in those markets etc, which then hurt the small exporter here.
Another Covid-related policy measure important for entrepreneurship and the private sector is in how relief is granted. In many countries that have deployed successful Covid-relief efforts for business, have done it cohesively and comprehensively – not piece meal and disconnected.
A recommendation I had shared with Government as Covid set in, was to carve out ‘one pot of money with many windows’, including the treasury guarantees for loan moratoriums, central bank refinancing of concessional loans, relief measures for households, payroll relief, postponing utility payments for businesses, etc. Rather than it coming from ad hoc multiple sources, doing it through one program, one identified and earmarked POT works better – it is then Better managed, has better accountability, easier to communicate to stakeholders and help them understand the relief schemes for business. Also with crafting it this way – one pot, with many windows – the possibility of leveraging that pot of Govt money to get other money – development partners, etc – becomes much more possible.
The second policy area might seem narrow at first, but I guarantee you its a hidden gem – that is, public procurement
Procurement (the process of obtaining goods and services from the market) is an increasingly common feature of policy support for innovation, with growing recognition that innovation frequently occurs in response to specific demand or stimulus. Moving on from COVID, one idea I want to leave with you is the role of public procurement in growing the startup and innovation ecosystem.
Here I draw from a toolkit that I was part of crafting as a member of the World Economic Forum’s Global Future Council on Innovation Ecosystems and published a year ago. It was called ‘Accelerating the emergence of innovation ecosystems through procurement’.
The starting premise of this is the following
Governments spend lots of money on procurement, using people’s money. Wouldn’t it be fantastic if this public procurement is used to spur innovation in the country, rather than encouraging just more of the same, encouraging mediocrity, encouraging rent-seekers, encouraging only larger established firms that are simply very good at bidding for project after project? How can this tax payer money be leveraged to spur new products, new processes, innovation and new firms?
As we highlighted in the toolkit,
- Procurement represents 12% of gross domestic product (GDP) and 29% of total government spending across OECD countries .
- Using the “power of the public purse” to drive innovation was identified as a key opportunity by NESTA in 2007.
- Yet, according to Startup Genome 2019, procurement remains an area in which governments have taken the least action
There are many examples of places that have done a great job of leveraging public procurement to drive innovation and entrepreneurship – from Dubai to Queensland, Boston to Singapore Australia. Given that the GoSL has announced much by way of doing things domestically – we saw that in the Budget speech as well – there is an opportunity to think about public spending differently.
Unfortunately what we realised across many countries, including Sri Lanka, is that these public procurement rules are often start-up and innovation unfriendly. So this must be addressed early. In Budget 2019 one thing we introduced was an earmark of 10% of public procurement reserved for SMEs and startups – this was a great first step, but it has to be actioned – including re-writing the rules to be more open for innovation.
One thing we have to be cautious in this, though, is to avoid creating ‘tenderpreneurs’! – where preferential treatment is then misused and misplaced. There are many systems to put in place to avoid this, so that it can be done right – for instance outcome-based procurement; staged procurement ; and moving from risk-wary to risk-aware procurement.
So let me end there – having spoken about the two key policy areas that Governments can focus on right away – smarter financing and Covid-relief measures; and secondly using public money to be more smart money, in a way that spurs innovation and new entrepreneurs.