Entrepreneurship is a very popular topic these days and is frequently touted as the solution to many social and economic ills in Pakistan. But what do we really know about the state of entrepreneurship in Pakistan? How do we compare with other developing countries?
The last statistically rigorous survey on entrepreneurship in Pakistan dates to 2012; it was organized by IBA in partnership with several other universities using a methodology devised by the Global Entrepreneurship Monitor (GEM) organization. This methodology is also used by 69 other countries so it is possible to compare Pakistan with selected benchmarks.
The survey covered attitudes, aspirations and activities and was thus very rich in terms of the perspectives it provided. It focused on individual participation in venture creation and covered all phases of the lifecycle of a venture: pre-start efforts; start-up; running new or established enterprises; and exit.
The survey revealed three important aspects of our attitude towards entrepreneurship: First, the proportion of Pakistanis who have a positive attitude towards entrepreneurship is 67 percent; this is encouraging but is still less than the average for developing countries in the GEM database. Second, the proportion trying to start a business was only 8 percent; among developing countries this proportion is 12 percent. Third, 31 percent reported that fear of failure would prevent them from starting a business; this is higher than the average for other developing countries.
So, from the point of view of attitude, there is much work to be done. Pakistanis are relatively more afraid of starting their own ventures, and are initiating new ventures at a relatively low rate. Clearly, more needs to be done to promote a pro-entrepreneurship attitude. Education and training may help in this regard.
The survey also revealed several important facts about entrepreneurship activity in Pakistan. It is useful to start with the Total Entrepreneurial Activity (TEA) rate which, by definition, covers nascent activities plus activities that are less than 42 months old. The TEA rate for Pakistan is 12 percent; this is less than half the average in other developing countries.
TEA may be divided into opportunity based and necessity based entrepreneurship categories. The former category is of more interest to us because it indicates interest based on personal passion and opportunities rather than compulsion and need. Only 24 percent of the Pakistani TEA rate is of the opportunity type compared to 42 percent among developing countries. This means only 3 percent of Pakistan's entrepreneurial activity is opportunity based.
So, from the perspective of activity as well, we are not as entrepreneurially oriented as we might think. In addition to education and training, this suggests a role for supportive policy, what is commonly referred to these days as an enabling ecosystem.
Where do we stand on the policy framework for entrepreneurship in Pakistan? The GEM methodology also includes an expert panel of about 40 persons who assess the prevailing policy framework. The relevant 2012 exercise for Pakistan showed the following areas to have the poorest ratings by experts: Government Policies: Support and Relevance; Government Policies: Taxes and Bureaucracy; Government Entrepreneurship Programs; and Entrepreneurial Education at School Stage. It is clear from the above that much of what needs to be done is connected to government policy and service delivery.