BEIRUT: Lebanon is one of the world’s most entrepreneurial countries. This is confirmed by the Global Entrepreneurship Monitor (GEM) Report for Lebanon, published this week and showing Lebanon as having the by far highest rates of total early-stage entrepreneurial activity of the eight participating MENA countries in GEM 2018, and fourth highest of 48 countries globally. In terms of both the share of the adult population running a new business (18 percent), and the share running an established business (22 percent), Lebanon ranked second globally. This is despite an entrepreneurial environment that can be unwelcoming in terms of a lack of government business support, poor physical infrastructure and the high cost of entering existing markets or creating new ones.
Four consecutive years of GEM Reports have shown that the Lebanese are enthusiastic entrepreneurs, in a society where entrepreneurship is well regarded, entrepreneurs are held in high esteem and more than two-thirds of adults in 2018 considered they had the skills, knowledge, and experience to run their own business. Fewer than a quarter of those seeing good opportunities to start a new business would be deterred by fear of failure.
However, the majority of those starting or running new businesses in 2018 expected to employ no-one but themselves in five years time, while just one in twenty-five anticipated employing six people or more, by far the lowest of the MENA countries and ranking Lebanon 45th out of 48 globally. This may reflect the sector composition of new businesses, with almost four out of five in Lebanon being in Wholesale, Retail or Consumer Services.
The proportion of Lebanese adults starting a new business has now fallen for four years in a row. The proportion of those from the lowest household incomes starting or running a new business has also declined, to the extent that the likelihood of an individual starting or running a new business in Lebanon now rises with household income.
Overall it is clear that the seed corn represented by four consecutive years of high rates of Total early-stage Entrepreneurial Activity in Lebanon has not yet led to a flowering of new job opportunities or a blossoming of new incomes in Lebanon. It is difficult to avoid the conclusion that many of the new businesses being started in Lebanon are likely to be informal, rarely employing anyone but the owner, fighting for shares of existing consumer spending and marginal in terms of economic impact.
At the same time, it is important to recognize that there are a growing number of technology start-ups in Lebanon with considerable potential for economic impact, encouraged and enabled by imaginative schemes incentivizing financial institutions to take equity stakes,. As always in Lebanon, there is wide variation and endless variety: in start-ups as much as anything else.
Recommendations: Using enterprise to promote prosperity in Lebanon.
1. Focus limited resources on those start-ups with the most potential. This focus could be sector based, perhaps in line with the recent Economic Vision for Lebanon, or gender-based, since in Lebanon women are roughly half as likely as men to be starting or running a new business.
2. Reduce the cost and complexity of registering and running a business, encouraging more of the self-employed to formalize their businesses.
3. Extend the reach of financial initiatives beyond the technology sector.
4. There is an urgent need for effective Anti-Trust laws to encourage entry into currently restricted or uncompetitive markets, perhaps starting with telecommunications. This would not only encourage start-ups but could potentially mean lower prices for both businesses and consumers.
5. Provide short-term incentives for start-ups to employ more people.
6. Help more low-income household to start their own businesses, perhaps coupled with hands-on training and mentoring.
7. Encourage Universities in Lebanon to better engage with research and open up this research to commercial exploitation. At the same time, students should be encouraged to start their own businesses. These measures could address both the weaknesses of R&D transfers and the relative shortage in entrepreneurial activity in the youngest age groups.
Lebanon needs new jobs and new incomes. Encouraging entrepreneurs to register and grow their businesses can make an important contribution to growing those jobs and incomes.
This article was written by Professor Stephen Hill, GEM Expert, and UK Lebanon Tech Hub Consultant. The GEM report has been published by the UK Lebanon Tech Hub with the support and funding of the British Embassy in Beirut.
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