A failed Bruneian SME is one too many (Conclusion)

Conclusion

WHAT does an entrepreneur do when he spots the perfect location for his upcoming business before he gets his licence approved? He books the shop, pays rent and earns nothing while waiting for government approvals.

For some entrepreneurs who have had to put up with this kind of red tape, managing the initial working capital can deplete their limited coffers.

This concern has to be fixed for more young Brunei entrepreneurs to succeed in their attempts at managing their own businesses, said Dr Kamaruddin Dato Seri Paduka Talib, deputy president of the National Chamber of Commerce Industry Brunei Darussalam. A startup has to do its homework before taking the plunge into the world of business, but the environment within which it operates has to be prepared as well to help the newbie clear hurdles.

Curbing business failures "does not rest on (one person's) shoulders", Dr Kamaruddin said in an interview with The Brunei Times. The government and banks also have a role to play.

Creating a lead agency comprising of various agencies and ministries to come up with a programme to nurture potential businesses will help as "a single effort cannot change the whole thing", said Dr Habrizah Hussin, an expert on entrepreneurship and SME development from Universiti Brunei Darussalam.

Alongside allocating more funds for the development of local businesses in Brunei, the government must also be more efficient and progressive on the issue of cutting red tape, Dr Kamaruddin said.

"Though the government has done quite a bit to enhance SME activities, the nation traditionally is still primarily a government-driven economy. This implies that government practice needs to be more efficient in the short term to facilitate the growth of the economy."

Moreover, Dr Kamaruddin cited as an example an intervention by Bank Negara Malaysia, which the Malaysian government directed to form credit counselling and debt management agencies.

"It would help people facing financial difficulties ... They can go there for consultation, advice and how to extricate themselves from their financial difficulties" in the process helping prevent bankruptcies, he said.

Under this concept, a government can choose which ventures to nurse based on viability, business reputation and management skills. Those selected can then have access to government funds.

Dr Habrizah acknowledged that there are efforts to develop local businesses, but a lot of areas can be improved such as elimination of red tape and access to information on how to start a business. "Information needs to be readily available, a person needs to find out how long the procedures are, the relevant processes and the availability of proper (government) forms," she said.

Ongoing e-government initiatives should help speed up the process, she added. Many countries are competing and upgrading their procedure processing systems to not only encourage local business people but to attract foreign investors.

"The government agencies in charge of handling local businesses also need to maintain a close relationship with them as SME counsellors," Dr Habrizah said.

Banks, likewise, are key actors in setting the stage for more viable SMEs, said Dr Kamaruddin.

"Banks and financial institutions should align their services in such a manner that business entities would be encouraged to expand their businesses as well as play the role of educators in terms of financial and cash flow management," he said. This could be a "win-win solution" for both creditors and debtors, he added.

The structure of loan facilities should be reconsidered further with the end view of redesigning it to take into account common deficiencies seen in various industrial sectors, he explained.

"If the structure is too rigid it would force the business into bankruptcy. Another vital issue is the pricing structure of the loan facility offered to the various economic sectors," he said, noting all government agencies and banks should keep communication lines open to help find solutions, said Dr Kamaruddin.

Dr Habrizah commented that bankers can suggest to borrowers areas for improvement on the part of the entrepreneur or changes to spending patterns.

Some banks have already put in place mechanisms for early detection of oncoming financial woes, as well as remedies that include putting a delinquent SME-borrower under "intensive care" until such time the repayment pattern approaches normal levels.

"With the government becoming a facilitator to induce timely economic activity it would help (bring about) a drop in bankruptcy. Simultaneously, businesses need to revamp their management practices," said Dr Kamaruddin.

And entrepreneurs have got to stop fretting over Brunei's market size.

While the size of the population can play a part in the viability of a business venture, entrepreneurs with foresight should know better than limiting their horizon to the domestic market.

"Bruneians just have to think beyond their boundaries for example, thinking as far as catering to the Bimp-Eaga (Brunei, Indonesia, Malaysia, the Philippines-East Asean Growth Area)," said Dr Habrizah.

The Brunei Times