From Afghanistan to Zambia, governments in the world’s most disadvantaged countries must prioritise dynamic enterprises and enact policies to help them thrive, create jobs, innovate and transform the economy, according to The Least Developed Countries Report 2018: Entrepreneurship for Structural Transformation, released by UNCTAD.
Subtitled Beyond Business as Usual, the report looks at the conditions for creating and growing high-impact businesses in the least developed countries (LDCs), a group of 47 nations that includes most of sub-Saharan Africa, some Asian countries, and several island states. The group qualifies for preferential treatment in world trade and climate-change arrangements due to chronic disadvantages that leave them among the world’s poorest nations.
“The report establishes a more active stance for the state in steering the emergence of dynamic and transformational local entrepreneurship,” UNCTAD secretary-general, Mukhisa Kituyi said. “By encouraging policymakers to value the benefits of entrepreneurship, this report makes an invaluable contribution to efforts to add value to the least developed countries’ implementation of the 2030 Agenda for Sustainable Development,”he added.
Several structural features of the economies of LDCs tend to weaken entrepreneurship and the growth of enterprises, including limited finances, insufficient infrastructure, lack of institutions, poverty, restrictions on women’s empowerment, high registration costs, and elevated political, economic and environmental risks, according to the report. The result is that most firms in LDCs are micro- or small enterprises and 58 per cent of the formal firms have at most 20 employees.
The report said that large numbers of people in LDCs are forced into small-scale, low-value entrepreneurship by necessity. Entrepreneurship is dominated by self-employment (which accounts for 70 per cent of total employment), informal micro- and small enterprises with low chances of survival and growth and little propensity to innovate. Small companies account for 58 per cent of all firms in these countries.
The report also reveals that the vast majority of entrepreneurs in LDCs are “necessity-driven”. There are 1.7 times as many early-stage entrepreneurs in LDCs on average who describe themselves as “opportunity-driven” than there are who say they are “necessity-driven,” compared to 2.8 times as many in other developing countries.