August 21-27, 2017
By PRIME SARMIENTO in Manila
For China Daily Asia Weekly
The rise of opportunity-driven entrepreneurs will not only sustain growth in China but also transform the fast-growing economy into a high-income one.
These entrepreneurs can be vanguards of innovation-led growth — the next step for a country which less than a decade ago was still posting double-digit growth on the strength of market reforms, high investment and exports.
In its flagship Asian Development Outlook 2017 report published in April, the Asian Development Bank (ADB) said China needs to change its growth model so that it can move from being a middle-income to a high-income economy.
China’s growth model, the ADB said, relied on high rates of investment and net exports that are mostly funded and enabled by the State. This model has raised China’s GDP per capita from the equivalent of 5 percent of the United States’ GDP per capita in 1980 to almost 25 percent in 2015.
But the ADB said China’s convergence has started to slow in the past five years, and thus the next stage of development needs to come from innovation-led growth “which will require policies and institutions that are quite different from the ones that were so successful in helping China move out of low-income status”.
The ADB said one way to foster innovation-led growth is to encourage opportunity-driven entrepreneurship.
“Opportunity-driven entrepreneurship, as opposed to necessity-driven entrepreneurship, which is driven by economic necessity — for example, lack of jobs and economic opportunities — refers to starting new businesses based on profit opportunities stemming from new ideas, technologies, products or services. Think of Steve Jobs and his friends starting Apple in a suburban California garage,” Park Donghyun, the ADB’s principal economist, told China Daily Asia Weekly.
Park said new, smaller enterprises are “the hotbed of invention and innovation”. He then cited the southern Chinese city of Shenzhen as a hub for opportunity-driven entrepreneurs in East Asia, “where the entrepreneurial buzz is deafening, similar to (California’s) Silicon Valley”.
“Talented young people from all over China flock to Shenzhen to experiment with new ideas and to try and create tech startups,” he said.
The once sleepy fishing village, declared a special economic zone more than 30 years ago, has indeed come a long way. Shenzhen is now home to some of China’s leading tech companies, including Huawei, Tencent and ZTE.
But while Shenzhen stands out, it is certainly not an exception. According to the latest Global Startup Ecosystem Ranking report published in March by US-based Startup Genome and the Global Entrepreneurship Network, Shanghai and Beijing scored high in terms of performance (such as overall startup valuations, exits, and early- and growth-stage success) and funding (access to investment).
Likewise, China was ranked 22nd in the Global Innovation Index 2017 report published by Cornell University, INSEAD business school and the World Intellectual Property Organization. China is the only middle-income country included in the top 25 innovative countries, with the report noting China’s continued research and development (R&D) investments and rising number of patents filed.
“The use of intellectual property — a sign of continued innovation — has intensified, albeit only in selected middle- and high-income economies. The latest figures point to a 7.8 percent patent filing growth in 2015, much higher than it was in the previous five years, yet that growth is mainly driven by China,” the report said.
Entrepreneurial success is relatively new in a country which only opened up its economy in the 1980s. Market reforms — such as the establishment of special economic zones and introducing the country’s first patent law — combined with a huge domestic market have encouraged people to set up their own businesses. Once stereotyped as a global factory of copycat products, China today is home to some of the world’s most successful and innovative entrepreneurs, such as Jack Ma (Alibaba), Robin Li (Baidu), Pony Ma (Tencent) and Lei Jun (Xiaomi).
Chinese leaders recognize that entrepreneurs like these will be the new key drivers of growth. This is why at the 2014 Summer Davos in North China’s Tianjin, Premier Li Keqiang promoted a mass entrepreneurship and innovation program. In light of this new campaign, the State Council, China’s cabinet, has implemented several business-friendly measures and policies such as reducing taxes levied on small and medium-sized firms, cutting red tape, and the promotion of Internet Plus, which aims to integrate the mobile Internet, cloud computing and the Internet of Things with traditional industries.
Local governments have also subsidized incubators and innovation parks, and started venture capital funds to finance micro enterprises.
At this year’s Summer Davos in Dalian, Northeast China’s Liaoning province, the premier again emphasized mass entrepreneurship and innovation and he pointed to the progress being made. In his speech at the opening of the meeting on June 27, Li said promoting entrepreneurship generates more jobs and fosters inclusive growth. He said creating an “enabling environment” has encouraged more people to venture into entrepreneurship, with 14,000 enterprises registered daily in China in the past three years.
Entrepreneurship has been top of the agenda of many Chinese local governments in recent years, noted Sally Maier-Yip, founder and managing director of 11K Consulting, a UK-Asia public relations agency.
Maier-Yip helps her mostly Europe-based clients to be more visible in the Chinese market. She said government representatives she had met in recent months — from Beijing as well as South China’s Guangdong province, including Shenzhen — were “working hard to promote creativity and innovation through entrepreneurship”.
Indeed, a white paper issued in August 2016 by the World Economic Forum’s Global Agenda Council on China highlighted the country’s recent strides in its campaign for innovation and entrepreneurship.
The paper cited the rapid development in more than 130 high-tech parks and independent innovation demonstration zones. These parks and zones represent less than 1 percent of China’s territory but account for nearly 40 percent of R&D investment by all of the country’s enterprises, as well as 32.8 percent of revenue from sales of new products.
China also established courts in Beijing, Shanghai and Guangzhou to protect, apply and manage technology innovations and intellectual property rights (IPRs). These courts have the power to adjudicate in civil and administrative cases concerning patents, new plant species, integrated circuit layout designs, protected technology and computer programs. The rights to use, dispose of and benefit from new technologies are delegated to the organizations that develop them. These include research institutes and corporate R&D personnel.
The Global Agenda Council on China also cited the maturing legal and policy environment, noting that the revocation and/or devolution of many administrative and non-administrative government functions have supported innovation and entrepreneurship.
The council said China can still improve on several fronts to promote entrepreneurship. For one, the government can encourage collaboration between innovators, non-governmental organizations and grassroots bodies to level the playing field. Private companies can be encouraged to develop advanced R&D centers, increase spending and encourage equity crowdfunding.
The council said giving preferential financial, fiscal and tax treatment can help small and medium-sized enterprises to be more innovative. Innovative talent also needs to be nurtured by promoting hands-on, inquiry-based and research-oriented learning methodologies in colleges and universities.
Apart from business-friendly policies, it is the success of Chinese entrepreneurs that is pushing the younger generation to eschew traditional career paths in favor of setting up their own businesses.
“Recent success stories of Chinese entrepreneurs such as Jack Ma of Alibaba have also encouraged entrepreneurship in China to grow even further and faster,” Maier-Yip of 11K Consulting said.
She said some of her PR firm’s Chinese clients are “young entrepreneurs in their mid- or late 20s who aspire to run a successful business, be their own boss and go global”.
Homegrown businesses spot openings ASEAN is seeing the rise of entrepreneurs tapping opportunities and government support to launch innovative and successful enterprises
August 21-27, 2017
By PRIME SARMIENTO in Manila
For China Daily Asia Weekly
After obtaining her business degree in Melbourne, Australia, Denise Chai returned to her native Brunei.
Encouraged by the advice of successful businesspeople, then 20-year-old Chai decided to follow in her parents’ entrepreneurial footsteps.
So, in 2008, she partnered with her mother to open a boutique in Brunei’s capital, Bandar Seri Begawan.
The boutique, Deseo, Spanish for “desire”, was stocked with imported stylish clothes, home decorations and gift items and soon built up a loyal clientele.
Three years after setting up Deseo, Chai bought a Korean restaurant and revamped the menu to serve halal Korean dishes to a predominantly Muslim domestic market.
Almost a decade after her entrepreneurial foray with Deseo, Chai is now the co-owner of a boutique along with four restaurants.
Chai said her businesses were borne out of “curiosity and passion, (and of) wanting to do something different”.
She is among a growing number of entrepreneurs in the 10-member Association of Southeast Asian Nations (ASEAN) tapping opportunities in their home markets to build their own businesses.
According to the Asian Development Bank (ADB), these “opportunity-driven entrepreneurs” help sustain growth in the region, which expanded by 4.7 percent in 2016. They will also enable middle-income ASEAN economies to become high-income countries.
The latest ADB flagship report, Asian Development Outlook 2017, published in April, noted that entrepreneurship turns new ideas or technology into innovation-based growth.
“As economies become more sophisticated, opportunity-driven entrepreneurship, which is often built on new ideas or technology, increasingly outweighs necessity-driven entrepreneurship, which responds to existing market needs,” the report said.
Quoting a paper published by the International Monetary Fund in April 2016, the ADB said “necessity-driven entrepreneurship is propelled by economic need when work opportunities are scarce, while opportunity-driven entrepreneurship involves the development of new ideas or technology”.
The ratio of opportunity-driven to necessity-driven entrepreneurship is 1.6 times higher in high-income economies than in middle-income ones, the ADB said. This is why it is important for middle-income countries to encourage and nurture entrepreneurs who provide novel products or services.
Pacita Juan, chairperson of the ASEAN Women Entrepreneurs Network, said these entrepreneurs usually start small- or medium-scale businesses that can serve as “laboratories for future big business”.
“Entrepreneurs can adjust to the fast pace of business by being small. Even big companies now have to think fast and be agile and nimble,” she said.
Juan has had firsthand experience in nurturing a small business into a large-scale operation. In 1993, she and her partners set up the Figaro Coffee Company in the Philippines. The cafe pioneered the specialty coffee trend in the country.
Figaro, which started with a single kiosk, is now among the Philippines’ biggest coffee chains with more than 90 branches.
Juan later started another business, this time to promote her advocacies: Environmentalism and support for local products and communities.
The first outlet of the Environment & Community Hope Organization Store, or ECHOstore, launched in 2008. It sells organic produce, eco-friendly toiletries and upcycled artisanal crafts sourced from small farmers and poor communities.
ECHOstore now has seven outlets. Its success has spurred Juan to create related businesses such as ECHOcafe, a farm-to-table coffee chain, and ECHOfarm, an organic farm in Amadeo, Cavite province — about 60 kilometers south of Manila.
ASEAN is home to many opportunity-driven entrepreneurs who started small and managed to grow their businesses. They now cater not only to their respective home markets but international markets too.
These include the Philippine fast-food giant Jollibee Foods Corp, the Singapore-based ride-hailing app Grab (established in 2012 in Malaysia as MyTeksi), and the Thai luxury silk brand Jim Thompson.
But, according to Park Donghyun, principal economist of the ADB’s economic research and regional cooperation department, ASEAN needs a level playing field to create more opportunity-driven entrepreneurs.
“New firms and smaller firms, and new entrepreneurs, are often the hotbed of invention and innovation. But, unless there is a level playing field, these new firms and entrepreneurs cannot flourish,” Park told China Daily Asia Weekly.
He also stressed the importance of rule of law — specifically, intellectual property rights protection.
“Intellectual property rights protection prevents big incumbent companies from expropriating the innovations of new entrepreneurs. Second, new firms must have access to finance if they are to flourish. Not even the best ideas in the world can get off the ground without funding,” Park said.
“Finally, strong competition laws prevent abuse of market power by big established companies to make life difficult for new entrepreneurs.”
Park said he is yet to see an entrepreneurial hub in the region akin to California’s Silicon Valley.
But that may soon change as several developing ASEAN countries are setting up policies and programs to encourage entrepreneurs to start and grow innovative businesses.
Malaysia is perhaps one of the most aggressive in promoting opportunity-driven entrepreneurship.
In 2014, it launched the Malaysian Global Innovation & Creativity Centre (MaGIC), which aims to make it the startup capital of Asia by increasing the number of enduring, high-growth startups to compete on a regional and global scale.
“Malaysia has an aggressive vision — she aims to become a high-income nation by the year 2020,” a statement on the MaGIC website said.
“A key part of realizing that vision requires agencies like MaGIC to educate and encourage entrepreneurs to leverage technology and innovation in their business models and scale beyond Malaysia to remain competitive in the light of current global trends,” the statement added.
MaGIC conducts coding boot-camps, dialogues, training workshops, mentoring sessions, study visits to Silicon Valley and grants to nurture Malaysian startups.
In the Philippines, the Department of Trade and Industry has established more than 600 Negosyo Centers (business centers) nationwide to help entrepreneurs with business registration, monitor improvements in business processes and provide advice and training.
The Department of Science and Technology, together with Philippine tech leaders, also drafted a Philippine Roadmap for Digital Startups — a project to create at least 500 startups with a cumulative valuation of $2 billion by 2020.
Thailand, meanwhile, has OTOP — the One Tambon One Product program. As part of this initiative, the government supports and markets unique locally made products from each tambon, or sub-district. Products include processed food, handicrafts and textiles.
The Community Development Department and the Department of Industrial Promotion are among Thai government agencies working with villagers to develop their products and provide skills training.
ASEAN is also working to create an ecosystem that remains more conducive to starting and growing businesses.
For instance, in its Doing Business 2017 report, the World Bank ranked Malaysia and Thailand 23rd and 46th, respectively, for ease of doing business out of 190 economies surveyed.
Brunei and Indonesia were among the top improvers in the ranking. Brunei climbed from the previous year’s position of 135 to 72, while Indonesia rose from 154 to 91.
The World Bank said Brunei made the biggest advance toward the regulatory frontier on the back of six business regulatory reforms.
These include increasing the reliability of power supply by implementing an automatic energy management system to monitor outages and service restoration, and improving access to credit by distributing consumer data from utility companies.
The World Bank said Indonesia made starting a business easier by abolishing the minimum capital requirement for small and medium-sized enterprises and encouraging the use of an online system for name reservation.
Indonesia also launched an online system for ﬁling tax returns and paying health contributions, along with a fully automated geographic information system. Both initiatives help to reduce the time firms spend paying taxes and filing property registration details.
Switched on Bruneian entrepreneur on a mission to transform energy supply is generating interest with a battery-powered system that is clean, affordable and reliable
August 21-27, 2017
By PRIME SARMIENTO in Manila
For China Daily Asia Weekly
Bruneian Brandon Ng is just 29 years old but he has already cofounded an innovative startup that aims to solve one of the world’s biggest problems — intermittent power supply.
“The word innovation is overused,” said Ng, who is now based in Hong Kong. He believes it is most deserved when referring to solutions that are a little ahead of their time.
“If you have a problem and someone proposes a solution that doesn’t make sense today but could make sense in two, three, five or 10 years, then there’s a much higher likelihood that is innovative, because that’s probably genuinely new,” he said.
In 2014, Ng, together with engineer Luca Valente, cofounded Ampd Energy. The startup developed Ampd Silo — an energy storage system which uses advanced, rechargeable lithium-ion batteries to generate reliable backup power supply.
Ampd Energy was first runner-up for the prestigious Engadget Best Startup Award at this year’s Consumer Electronics Show in Las Vegas, and Ampd Silo is already generating interest among buyers in Southeast Asia, the Middle East and Africa. Ng himself was included in Forbes’ 30 Under 30 Asia 2017: Industry, Manufacturing & Energy.
Despite such early success as a startup founder, Ng did not set out to be an entrepreneur or to solve the problem of power supply disruption. Ampd Energy, in fact, was established because of an electric motorcycle.
In 2012, Ng was using an electric scooter to navigate the busy streets of Beijing. Working at that time as an investment banker, Ng was on a one-year career break, learning Mandarin at Tsinghua University.
He was planning to return to his life in banking in London after mastering Mandarin. But his curiosity over the steep price of fully fledged electric motorcycles pushed him in another direction.
He could not understand why electric motorcycles were retailing for $13,000 each, while a gas-powered one sold for just $8,000. So Ng, who has an engineering degree from Imperial College London, partnered with Valente and another engineer. They pooled their savings and produced a prototype of a cheaper electric motorcycle.
“We wanted to make electric motorcycles that were both price and performance competitive with gas motorcycles,” Ng told China Daily Asia Weekly.
“The issue with electric motorcycles at that time was always price. How do we get the price down? The biggest issue is (the) batteries — the most expensive component in the finished vehicle.
“We spent a lot of time on (developing) these batteries: How do we make the batteries cheaper without compromising safety, reliability, power and packaging?”
Ng said standardization of components helped in lowering cost without sacrificing quality. He added that being in China, with its immense manufacturing capacity across various industries and market verticals, gave him access to suppliers that produce high-quality materials at lower prices.
The partners’ success in developing more affordable electric motorcycles encouraged them to market their products to the Indonesian police force. But the blackout that interrupted a meeting with their distributor in Sumatra sparked a novel business idea.
Ng recalled: “We joked with our distributor at the time: Wouldn’t it be funny to power the whole building with our motorcycles? But then we thought: Why do we need the motorcycles? Why don’t we just use the batteries?”
Changing the direction of the business made a lot of sense to Ng.
“From a business value standpoint and from an engineering standpoint — because that is what engineers do, solve the big problems — (unreliable power supply) is a huge problem that affects 3 billion people and many enterprises globally. So we decided to shift our vision-mission to solve (the problem of) unreliable power supply,” he said.
Ng and his partners went back to the drawing board and raised $3.8 million in seed funding, mostly from angel investors.
In 2014 they relocated to Hong Kong to join the Hong Kong Science and Technology Park’s Incu-Tech incubator program — for handpicked, high-potential individuals — and to work closely with their contract manufacturers in the Pearl River Delta.
“We want to be close to our suppliers. We want to design a component in the morning, send it to our suppliers in the afternoon and it will be ready for the next day,” Ng said. He added that being in Hong Kong, with its open economy, gave his startup the credibility and network support it needed to grow.
Over the next two years, Ng and his team worked to develop a battery-powered energy storage system that can be used when there is a power outage. The result of this research and development was Ampd Silo.
Ng said his company aims to sell Ampd Silo to hospitals, telcos, banks, government agencies and shopping centers — sectors in which power disruption can lead to significant costs and lost opportunity.
The first orders were shipped in mid-June to Jakarta, Indonesia’s capital. Ampd Energy will also deliver Ampd Silo to Nigeria, South Africa and Vietnam in the next few months.
The unit, which starts at roughly $8,800, is more expensive than a diesel-powered generator which sells for $7,000 to $8,000. And Ng believes Ampd Silo’s premium price is justified on the basis that the system requires almost no maintenance: There is no need to change the batteries regularly to ensure it runs smoothly.
Ampd Silo is also more eco-friendly: It emits no fumes and does not use lead acid batteries. Such batteries are often disposed of poorly, and lead is an extremely toxic material. He added that Ampd Silo’s batteries are recyclable, thus reducing waste.
“You can continue to use Ampd Silo’s batteries even after the end of its life — in lower intensity applications, for example,” he said.
The emphasis on Ampd Silo’s eco-friendly attributes is in line with the company’s core vision-mission which Ng said is to “provide power that is clean, affordable and reliable”.
“The very existence of this company depends on the well-being of people and that includes the environment,” he said.
To stay true to the vision, Ng said he measures Ampd Energy’s return on investment (ROI) beyond potential monetary returns.
“We are a growing company and we are investing in growth.” He said Ampd Energy’s ROI will be based on whether or not it has achieved its “goal of transforming global energy supply in terms of reliability, environmental impact and cost”.
“We’re hoping to achieve that goal in five to 10 years,” Ng said.