By David Francis on 19 November 2008
People across the globe - including in regions that receive large amounts of foreign assistance - tend to be more confident in business prospects than they are in the government's ability to foster entrepreneurship, according to Gallup World Poll findings.
This trend is pronounced in Africa, and especially in Ghana, where polling data indicates that 88 percent of Ghanaians are optimistic that new businesses will do well - the highest confidence level in the world. Despite the optimism, a majority contends that government will make it difficult for a business to start. According to Gallup, only 34 percent believe the government makes it easy to get the permits necessary to open a business, for instance.
The contrast is caused by a lack of trust in government's ability to create legal structures to protect local investments, combined with wavering faith in the stability of governments and the infrastructure necessary for business to thrive, according to Mike Fleshman, a writer for the United Nations' African Renewal magazine.
"The private sector is waiting for governments to do things that people in the U.S. and Europe take for granted," Fleshman said, highlighting private property guarantees and the adoption of policies to spur the creation of new businesses. "The private sector is waiting to see if infrastructure improves, if courts get strong, if personal property laws get stronger. The idea that weak, brand new governments would run an economy is scary."
Confidence in entrepreneurial success and government assistance vary widely around the globe, although the gap between the two often reaches double digits, as it does with Ghana. In some parts of the world, however, this trend is less pronounced. For instance, 9 percent of Ukrainians are confident that a startup business will succeed, and 8 percent believe that the government will protect business assets, according to Gallup. Only 4 percent plan to start a business within a year.
Some 88 percent of Ghanaian survey respondents said they believe someone eager to start a business will be able to find "hardworking and qualified employees." Eighty-four percent believe that the assets of that business will be safe.
But Ghanaians also deem it difficult to get financing to start a new venture. Only 25 percent of World Poll respondents said it is easy to get a business loan.
This pessimism is reflected in the small percentage of Ghanaian entrepreneurs. According to Gallup, only about 27 percent of people who did not own a business planned to start one within a next year. This follows a three-year downward trend - in 2006, 55 percent of Ghanaians were planning to start a business in the next 12 months. That number dropped to 37 percent in 2007.
Gallup conducted in-person interviews with a representative sample of 1,000 Ghanaians earlier this year. The margin of error in these polls in plus or minus 5 percent.
The Gallup findings raise questions about the effectiveness of investments in entrepreneurial ventures in developing countries, according to Fleshman.
"Decisions made in D.C., New York and Paris, a lot of those policies have been wrong-headed and didn't work," Fleshman said, referring to the headquarters of key multilateral organizations such as the World Bank, United Nations and Organisation for Economic Cooperation and Development.
He added that improvements in entrepreneurial infrastructure take on added importance in light of the recent economic downturn and an expected drop in foreign assistance. As foreign assistance dries up, more and more African countries will be forced to rely on internal economic drivers to maintain growth.
"Governments are beginning to realize … they need to mobilize internal resources," Fleshman said. In a nod to unmet G-8 obligations, he added: "We know from the past that external funding is not reliable."
OECD claims that African nations - Ghana in particular - are making great strides in improving the entrepreneurial environment. African governments are beginning to recognize the need to strengthen the private sector, and have been working to make changes necessary to foster this growth, according to the organization.
"The Ghanaian is exhibiting a changed economic outlook, with improving growth reflecting both strong economic fundamentals and a positive response to them from the private sector," OECD noted in its 2008 status report on the west African nation. "The private sector is responding positively to the improved business environment, with rising bank lending and capital inflows suggesting increased investor confidence in the domestic market."
Fleshman said he expects that trend to continue.
"What everyone is looking at over the next period," he said, "is continued reforms to streamline … rules and regulations that govern the private sector to create more space for entrepreneurship and rely more and more on internal resources for development as opposed to relying on aid."
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