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Local Entrepreneurship in Southeast Asia and Subsaharan Africa: Networks and Linkages to the Global Economy
For much of the past decade, the world has applauded the striking development performance of Indonesia, Malaysia and Thailand. Despite the setbacks caused by the present financial crisis in Asia, the rapid structural transformation and improvement in the standard of living in these three countries remains a powerful testament to the benefits of a strategy emphasizing industrial exports. African countries have tended to remain commodity exporters, and while Africa has remained largely untouched by the "Asian flu", the continent also missed out on the benefits of engagement with the global market.
Why has Southeast Asia developed such a dynamic industrial export sector, while Subsaharan Africa has not? Until the recent financial crisis, most analyses argued that Southeast Asia had "developmental states", while Subsaharan Africa largely did not. These developmental states were credited for putting in place the fundamentals of macroeconomic stability and investment in education, and orienting policy to favor exports, or at least to create a level playing field between exports and imports. They were said to have engaged their private sectors in high-level "deliberative councils", designing and implementing policies that encouraged productivity and efficiency. However, the financial crisis put this interpretation into question. In the aftermath of the crisis, the Southeast Asian states are now being castigated for their high levels of patronage, corruption, and business-state collusion.
It remains a little too soon to put nails in the coffin of the Southeast Asian developmental state. However, the Asian miracle always had a societal side, one that a state-centric focus largely missed. Many who wish to compare Southeast Asia and Subsaharan Africa point to the structural similarities between the two regions: similar commodity export histories, similar GNP/per capita in the 1960s, etc. Yet the differences between the two regions are significant, and particularly so in their experience of entrepreneurial development. This paper suggests that Southeast Asia's lead over Subsaharan Africa is not simply a response to good policies undertaken in the past two decades, but rather also reflects the different ways in which each area first engaged with the capitalist world, the paths indigenous and non-indigenous entrepreneurs were allowed to take and the experiences they were allowed to accumulate during the colonial period and after, and the subsequent depth and breadth of the business networks and global linkages that characterize the entrepreneurs of each region.
When seen historically, several striking differences emerge between Subsaharan Africa and Southeast Asia. First, Southeast Asia was well integrated into Asian and European maritime trading networks several centuries before maritime trade reached most of Subsaharan Africa. The lower cost and greater ease of maritime trade meant that traders in Southeast Asia could develop business skills, be exposed to outside innovations, and accumulate significant capital much earlier than was possible for many in Africa. As part of this maritime mobility, waves of Chinese immigrants settled in Southeast Asia and were to become significant elements in the area's economic development. Second, significant import-substitution industrialization began in Southeast Asia in the late 19th century, three or more decades before any significant modern industrial development occurred in Africa, giving Asian entrepreneurs and workers a longer history of experience with industrialization. Third, proximity to Japan served as a powerful catalyst for entrepreneurial development in Southeast Asia. Japanese firms appear to be much more likely to enter into joint ventures in manufacturing with domestic firms, and at a lower level of technology than western firms. African entrepreneurs had no similar, "appropriate" catalyst. Direct foreign investments in Africa are still much more likely to be in mining, petroleum, and other primary commodity extraction ventures.
This paper reviews the state of the knowledge about local entrepreneurship in Southeast Asia and Subsaharan Africa. It continues with a brief discussion of entrepreneurship and several related issues and questions. It then provides a short social history of entrepreneurial development in both regions. The fourth section reviews the enabling conditions and constraints facing local entrepreneurs in both regions, with examples from Thailand, Indonesia, Malaysia, Nigeria, Mauritius, and Kenya. The conclusion suggests some generalizable propositions, hypotheses, and areas for further research.
School of International Service
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