Uneven opportunities lead to dearth of entrepreneurs

LAHORE: Pakistan has a dearth of new entrepreneurs, as the general public lacks access to resources and crucial business information, which is available to those with wealth and influence.

This lack of a level playing field has given monopoly to only a few industrialists and traders, who dominate the economic scenario in their respective fields. Whenever an infrastructure project is planned, those with prior information buy the land around the road at very low rates, and then sell it at an exorbitant price after development.

Similarly, if planners take a decision to lift ban on the import of an item, those privy to the information, open letter of credit and reap the profits of reduced duty. In the same way, when they know of a future hike in duty, they buy all available stock, which ensures higher profits as government imposes a higher duty. 

Such opportunities strengthen the hold of the moneyed class on national resources. A genuine entrepreneur cannot innovate or move ahead when the resources are meant for the people with wealth or power.

We have an industrialist class dominated by few families; a traders’ class of a few thousand with the art of bringing in foreign products at minimum levies; and property tycoons who launch one property project after another.

These influential classes mint money when the growth is high and maintain their incomes when it is in decline. Accumulation of huge wealth is not entrepreneurship. The way wealth is generated determines whether a person is an entrepreneur or a thug.

Wealth can be accumulated from smuggling, under-invoicing, wrong declaration of imported goods or other illegal means. These incomes come under the definition of fraud and have nothing to do with the entrepreneurial spirit.

An entrepreneur operates within the given rules and creates wealth through better product design, better service, and better marketing. There are 60,000 corporate entities in Pakistan, and 30 million small and medium enterprises (SMEs).

Most of the SMEs are barely surviving because they do not have access to capital and information about the available opportunities. The only profitable way to run a small firm is to hide the profits from bribe-hungry bureaucrats. In the absence of a level playing field, informality becomes the only way for people to survive.

All those societies where entrepreneurship is high have lesser level of inequality and less poverty as well. The entrepreneurial spirit dies when opportunities are available only to privileged individuals. Pakistan’s transparency score of 32 is the best ever since the inception of corruption perception index in the 90’s. It still has a long way to go.