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Small business lessons direct from south-east Asia

Wednesday, 21 November 2012 | By Ken Phillips

Last week I attended a regional small business conference in the capital of Laos, Vientiane. Friendly people. Great value for money!

 

Lao culture is very much alive! If you visit, I’d recommend riding a bicycle around town. It’s dead flat with lots of interesting side streets, restaurants, temples and so on. The traffic appears slightly chaotic but in fact moves at a surprisingly gentle, courteous pace.

 

This boutique conference was hosted by the National University of Laos and supported by the Asia Development Bank.

 

It’s part of an initiative started some ten years ago by Professor Charles Harvie at Wollongong University aimed at engaging in the Asian region focusing on small business development issues. It’s a truly worthy cause.

 

Academics came from Thailand, Malaysia, Vietnam, Australia and Germany to name some. The discussions were engaging, if you’re into exploring a fine understanding of small business people!

 

Inevitably, attention turned to entrepreneurship and job creation. Laos is minerals rich and on the edge of a resources boom. It has massive hydro-electric power generation potential, capable of powering the boom and broader economic activity.

 

But the challenge in such situations is that big projects create great wealth but don’t, of themselves, generate large numbers of ongoing jobs.

 

It’s a common theme heard in other resource-rich nations – Australia, for example. The difference between Laos and Australia is, of course, a massive difference in established wealth. But the challenge of spreading resource-boom wealth across a broad spread of the population is common.

 

Walking and cycling around Vientiane outside the conference confines, the scene was typical of developing Asia: Tuk-tuks of all sizes and types cram the streets touting for business and street vendors seem to have everything and anything for sale (no fakes of course!).

 

This is mingled with restaurants and retail outlets ranging from the ramshackle intermingled with outlets of air-conditioned elegance. Everyone seems to want to sell anything to anyone. It’s raw commerce in your face.

 

It reaches its zenith in the Vientiane local market. Entering its dark crammed alleyways is another world. Stock is piled to the rusted tin, wooden and plastic sheet excuse for roofing. Electric wires snake on the uneven ground and curl overhead dangerously close.

 

Amazingly, somehow air-conditioning ducts have been pushed through in places, making some parts of the chaotic environment quite pleasant in the stifling tropical heat.

 

But ignore the OHS (work safety) disaster zone, the smell and look of meat and fish in the open mingled with clothing, bags, caps, shoes and so on, and it’s here that the growth and jobs creation activity happens in the economy.

 

Whether it’s the market in Vientiane or Paris, New York or Sydney, the facts are the same. It’s the huge volume of small business activity that swamps anything that big business can muster.

 

This is true in terms of comparative economic activity but most particularly in terms of contribution to jobs. But across the globe it’s big business that receives the analysis, attention, government support and subsidies.

 

Turning back to the Laos conference and the discussions around entrepreneurship, the underpinning theme is that entrepreneurs are people who take a small business and make it big. The emphasis in government economic policy, it seems, is finding those individual entrepreneurs who can turn small into big.

 

I disagree. The real surge and benefit from entrepreneurship is in the activity and spark that comes from the countless millions of individuals operating as businesses of one, or maybe a few. These people are entrepreneurs.

 

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Yet there seems to be a rejection in academic and policy circles of this truth. Entrepreneurship too often is talked about as a rare trait and that people who run small businesses are doing nothing different to set them apart.

 

I disagree again. I recently viewed a short documentary on women in India running vending businesses on the Indian railway network. They hawk their small range of wares up and down the carriages of overcrowded Indian trains.

 

These are slum-dwelling women trading illegally. They are regularly arrested and fined. Yet they immediately return to the trains. Then their motivation is revealed.

 

The documentary shows the viewer the (basic) two-room apartments these women are buying. Their business activity is taking them and their families out of the slums. This is entrepreneurship!

 

To run their businesses, these women must be highly attuned to the needs of their customers (the market). They must shift and change what they do constantly to meet the demands of their market.

 

If they don’t, they don’t have sales or profit. This is the mark of entrepreneurship. It’s mostly small things involving fine-tuning to market demands that make up entrepreneurial activity. And it needs to be recognised as such.

 

If the activity of small business people is not recognised as entrepreneurial at its essence, government policy and economic regulation will misfire.

 

It will focus on the glamour, glitz and excitement of big economic numbers produced by big business.

 

This is so much of the history of economic policy in the ‘developed’ world since the Second World War. In the developed economies, small business activity mostly happens in spite of government policy rather than because of it.

 

If there’s one thing that developing economies should consider, it is to learn from the successes and, more importantly, the errors of the developed economies.

 

Economic policy should work against concentrations of wealth. Policy should frustrate wealth concentration.

 

Many of the economic problems currently on view in Europe and the USA relate to wealth concentration – the banks, Wall Street and the likes.

 

Policies should encourage, allow and rejoice in wealth creation. But it must be wealth creation that occurs through the greatest spread of the population possible.

 

It’s in the small business, with the individual, self-employed entrepreneur, that wealth creation and its widest distribution is most likely to occur.

 

If there’s a message I took from the Laos small business conference last week, it was that this message still has a long development path before it’s fully understood and implemented.

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