The Next 50 Years - Innovate to create

Rosalea Hamilton, Contributor

OVER THE last 50 years, there has been growing, but inadequate, focus on entrepreneurial development, conceived as a programme of activities to enhance the knowledge, skills, behaviours, and attitudes of individuals and groups to assume the role of entrepreneurs focused on capital development that could transform the Jamaican economy.

I define an 'entrepreneur' as a change agent seeking to maximise profits by relying primarily on innovative behaviour and other strategic managerial competencies to exploit and create opportunities in the process of capital accumulation. It is recognised that the process of entrepreneurship takes place in different socio-economic environments which, in turn, influence the nature and extent of its development.

Jamaica's economic-development problem is linked to the inability to transform the inherited structure of its economy, which includes excessive dependence on primary and semi-processed industrial exports and on necessary imports of consumer and capital goods and services. This inherited structure has contributed to the persistent trade gap with the associated balance-of- payment problems and a high debt
burden that is now crippling the Jamaican economy. This review of 50
years of entrepreneurial development focuses mainly on the policies and
plans of the Government in seeking to stimulate entrepreneurship. It
assesses whether the developments to date are adequate to transform our
economy.

The Independence Decade 1962-1972: Dominance
of Foreign Entrepreneurship

In the Five-Year
Independence Plan (1963), the main goals were to achieve employment and
equity, backed by education and skill development in an effort to
achieve "economic viability, and social and cultural development and
integration". The economic focus was on encouraging private effort and
enterprise and maximising growth of mineral exports; tourism; and the
manufacturing of consumer goods - typically light and labour intensive -
using import-substitution and export-promotion strategies. The main
beneficiaries were foreign entrepreneurs who directly invested in
Jamaica, or who exported their goods and services to Jamaica assisted by
various incentives, aid, and trade arrangements and supporting
policies, as well as their local business
collaborators.

Micro and small local entrepreneurs,
however, received little or no attention at that time. They continued
their 'Sunday Markets' activities during slavery - at developing a range
of entrepreneurial activities, especially in agriculture. In seeking to
build an alternative to the legacies of slavery and strict indenture,
these entrepreneurs have been producing and accumulating capital and
trading within the traditional capitalist sector. For Nobel Laureate
Arthur Lewis, this is the socio-economic context for understanding
entrepreneurship in Jamaica: the context of a dual economy comprising a
modern "capitalist" sector and a "subsistence" sector. Lewis recognised
that economic growth would be slow unless there was "an adequate supply
of entrepreneurs looking out for new ideas and willing to take the risk
of introducing them". Lewis saw the combination of capitalist
entrepreneurial talent with financial and physical capital flows from
so-called developed countries as the key to development. For Lewis, the
evolution of local industrialists would emerge from the ranks of the
traditional elite after they had learned the tricks of the trade from
the foreign capitalists. This was an important part of the rationale for
the "industrialisation-by-invitation" strategy that dominated the 1963
Independence Plan as well as economic-development strategies well beyond
that period.

The Era of Democratic Socialism
1972-1980: Community Entrepreneurial
Development

During the Manley era of the 1970s, this
development strategy was challenged. The Government's 1977 Emergency
Production Plan, the People's Plan, clearly stated that
"industrialisation by invitation as official policy should be terminated
immediately". Instead, the People's Plan recommended the promotion of
"people's productive organisations that embrace cooperative and
socialist principles" - primarily cooperatives and community
enterprises. It was argued that the advantages of this mode of
productive organisation included permitting the "realisation of
initiative and entrepreneurship at the community level". Following
external models of socialism/communalism, it was assumed that community
entrepreneurship could develop cooperatives and community enterprises
under the administrative control of community councils. During the
period, the policy focus of small-business development was to absorb
labour and address the unemployment problem and not the development of
private capital-intensive enterprises that could change the structure of
output and exports so as to transform the
economy.

Washington Consensus Reform Agenda
1980s-1990s: Financing Micro & Small
Enterprises

The 1980s and 1990s saw a resurgence of
free-market conservatism and a reliance on the reform agenda of the
Washington Consensus, which sought to improve the economic environment
for entrepreneurs through, inter alia, reforming and
reducing public bureaucracy. In so doing, entrepreneurship would
flourish without explicit, direct interventions; however, it was
recognised that more direct strategies, mainly in the form of financing,
were necessary to assist micro and small enterprises (MSEs). Hence,
financing institutions were established: the National Development
Foundation of Jamaica in 1981; the Self-Start Fund in 1983; the Credit
Organisation for Pre-micro Enterprises in 1989; and the Micro Investment
Development Agency in 1991. Through these institutions, MSE
development, which was not necessarily entrepreneurial, continued to be
viewed as a strategy to address the unemployment problem and poverty
alleviation.

The 1996 National Industrial Policy sought to further "integrate the
productive elements of the sector into the overall development process"
by incorporating MSEs in the national export promotion drive; developing
targeted industrial space for small businesses; encouraging sub-contracting relationships betwen big and small firms; increasing the emphasis on training and small business management; and establishing a Micro and Small Enterprise Coordinating Bureau to provide strategic directions to the sector's development. Much of this did not take place until the 2000s.

The 2000s and
Beyond: Capacity-Building Support for MSMEs

By the 2000s, there
was increasing recognition of the need to strengthen the
entrepreneurial capacity of micro, small and medium-size enterprises
(MSMEs). In 2001, JAMPRO's Productivity Centre - later called Jamaica
Business Development Centre - was established with the mandate to lead
Government's facilitation of sustainable development of the MSME sector
by providing information, training, marketing assistance, and technical
assistance to MSMEs. This capacity-building thrust was later
strengthened in 2004 by the European Union's Private Sector Development
Programme, which provided €28.67 million to address the competitiveness
challenges faced by MSMEs.

Other donors, including
USAID, IDB, CIDA, and DFID, have provided capacity-building support
consistent with government policy expressed in the Medium-Term Economic
Frameworks (MTF) during the 2000s. In the MTF (2009-2012), linked to the
long-term Vision 2030, the focus on strengthening the capacity of MSMEs
is one of the seven national strategies to achieve an "enabling
business environment." Although there has been growing capacity-building
support for MSMEs over the past 50 years, this support, however, has
been inadequate given the nature and scale of support required to
address the many weaknesses facing MSMEs. It has not yielded
entrepreneurial development that can transform our
economy.

A 2008 study revealed that only about 30 per
cent of the MSMEs surveyed had completed secondary school and only 11.7
per cent were tertiary graduates. With limited educational backgrounds,
many are challenged to fully exploit opportunities, especially
technological opportunities. In 2010-11, about 80 per cent of the MSMEs
seeking training in the Business Entrepreneurial Empowerment Programme
reported that they had no idea how computers could be used to make their
business more efficient. Vision 2030 recognises that "the training
system does not sufficiently promote a culture of entrepreneurship" and
advocates the institutionalisation of entrepreneurship training in
response to the "inadequate entrepreneurial skills" among
MSMEs.

BIG PUSH NEEDED

As we look to
the next 50 years, entrepreneurial development will be guided by the
proposed "MSME and Entrepreneurship Policy" with its vision to achieve a
"highly entrepreneurial sector which fuels economic transformation
through innovation, creativity, and high performance"; however, this
will require a shift in the perspective of policymakers from a
size-determined concept of MSMEs - seen mainly as important in
addressing the unemployment problem and poverty alleviation - to a
concept of "MSME entrepreneurs" whose innovative activities cannot only
address employment and poverty, but can also facilitate economic growth
and development. It will also require a set of BIG PUSH initiatives that
include the following:

1. Improving data collection,
monitoring, research, and analysis on MSMEs and entrepreneurial
development so as to guide evidence-based policies and strategic
entrepreneurial interventions.

2. In the context of
scarce resources, paying special attention to strengthening the capacity
of MSME entrepreneurs in the creative, copyright industries - such as
entertainment, education, sports, among others - that can facilitate
Jamaica's transformational growth by changing the low capital share in
output and exports. Further, the copyright industries are the most
efficient users of foreign exchange. The evidence suggests that a dollar
of foreign exchange invested in music and other entertainment yields
$6.18 compared to $1.49 in sectors such as
communications.

3. Improving communication and
coordination of private and public sector capacity-building support for
MSME entrepreneurs. Current interventions are too fragmented and
inefficient, yielding suboptimal returns. Also, many MSMEs are unaware
of available entrepreneurial development support.

4.
Strengthening business associations representing MSMEs and fostering
strategic alliances to enable them to undertake
entrepreneurial-development initiatives, especially sector-related
capacity-building initiatives for their members. This includes strategic
alliances between small enterprises and large corporations as well as
building coalitions among NGOs, CBOs, and other civic
groups.

5. Improving governance arrangements and
strengthening the capacity of MSMEs to actively participate in the
policymaking process. Comforted by a long tradition of a stable
electoral democracy, we continue to ignore the importance of improving
representational and direct forms of democracy that can strengthen the
voice of MSME entrepreneurs in policymaking. Unless we pursue this path
to deepen our democracy and develop effective oversight over executive
decisions, it is likely that the entrepreneurial development necessary
to transform our economy will continue to elude us over the next 50
years.

Professor Rosalea Hamilton is Scotiabank
Chair, Entrepreneurship & Development, University of
Technology.