ENTREPRENEURS, FIRMS AND BUSINESSS MEMBERSHIP ORGANIZATIONS

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1 ENTREPRENEURS, FIRMS AND BUSINESSS MEMBERSHIP ORGANIZATIONS THEIR ROLE IN POLITICS AND DEVELOPMENT International Alumni and Students Symposium Co-organised by the SEPT Programme / Universität Leipzig, Technische Universität Dresden, Ruhr Universität Bochum, MIDE, DAAD, BMZ, 29 to 31 December 2014, Universität Leipzig, Germany 1 DIASPORA ENTREPRENEURS HOW CAN THEY SUPPORT SOCIAL ECONOMIC DEVELOPMENT? By Prof. Francis Shasha Matambalya, The Nordic Africa Institute, Uppsala, SWEDEN 1: Francis.matambalya@nai.uu.se 2: yahoo.com 2 1

2 Outline 1. Context Entrepreneurship and development Diaspora communities and entrepreneurship 2. Diaspora Entrepreneurship (DE) and development Understanding Diaspora Entrepreneurs (DEs) DEs and the development of their Country of Ancestry (CoA): some concepts DEs and the development of their CoA: some empirics Drivers of contemporary Transnational Diaspora Entrepreneurship (TDE) 3. How DEs can support development in their CoA 4. Way forward 3 1. CONTEXT International Alumni & Students Symposium / Prof. F. Shasha Matambalya 4 2

3 Entrepreneurship and development (1) The essentiality of enterprises and entrepreneurial capacities is underscored by the central role they play in a market economy along the entire value chain: Investments Production Trade At each stage Entrepreneurs Mobilise and deploy Non- Financial Resource (FiR) capacities Mobilise and deploy Non- Financial Resource (NFiR) capacities 5 Entrepreneurship and development (2) Entrepreneurs contribute to development in many ways Mobilise and channel resources into economic production Are responsible for entrepreneurial growth (as opposed to natural growth) Contribute to integration of the national economy into the global economy, etc. 6 3

4 Diaspora communities and entrepreneurship (1) Creation of diaspora communities 7 Diaspora communities and entrepreneurship (2) Dynamics of African diaspora populations All destinations All destinations 100,0% 100,0% Oceania ,648 Oceania 2,0% 2,2% Asia LAC 2258,6 3108, Asia LAC 0,1% 0,1% 0,0% 0,0% Northern America Europe , , , ,76 Northern America Europe 4,8% 7,9% 93,1% 89,8% 0,0% 50,0% 100,0% Figure 1: Regional distribution of adult migrants with less than tertiary education from Africa in numbers (left ) and as a % of total (right) 8 4

5 Diaspora communities and entrepreneurship (3) Dynamics of African diaspora populations contd. All destinations Oceania 63887, , All destinations ,966 Oceania 9,8% 7,6% 100,0% 100,0% Asia 651, ,966 Asia 0,1% 0,1% LAC 651, ,966 LAC 0,1% 0,1% Northern America , ,87 Northern America 43,2% 44,5% Europe , ,748 Europe 46,8% 47,8% 0,0% 20,0% 40,0% 60,0% 80,0% 100,0% Figure 2: Regional distribution of adult migrants with tertiary education from Africa in numbers (left ) and as a % of total (right) 9 Diaspora communities and entrepreneurship (4) Dynamics of African diaspora populations - conc. Sweden Slovak Republic Norway New Zealand Mexico Ireland Hungary Greece Finland Denmark Czech Republic Canada Sweden Slovak Republic Norway New Zealand Mexico Ireland Hungary Greece Finland Denmark Czech Republic Canada 3,6% 0,01% 1,6% 4,3% 0,1% 3,4% 0,2% 3,4% 0,3% 2,1% 0,2% 61,2% Australia 6518 Australia 18,6% Austria 397 Austria 1,1% ,0% 10,0% 20,0% 30,0% 40,0% 50,0% 60,0% 70,0% Figure 3: African scientists resident in OECD countries, 2000 (OECD.stat) 10 5

6 Diaspora communities and entrepreneurship (5) Hypothesis about diaspora populations The global Diaspora population is growing and will continue to grow for a foreseeable future The average qualification of the Diaspora tend to be higher than the national average in their CoA The Diaspora community is relatively financially better-off than the population in their CoA The Diaspora population is engaged in business Many DEs are transnational in character, i.e., they are engaged in Transnational Diaspora Entrepreneurship TDE If properly leveraged, the Diaspora can contribute substantially to socio-economic development DE AND DEVELOPMENT 12 6

7 Understanding DEs (1) Social capital leverage They tend to have ample connections in both their CoA and their CoR Knowledge leverage They tend to have superior knowledge of the investment markets in both their CoA and CoR Their transnational cultural exposure influence the way business is done in their CoA How do they invest? Some invest in their CoA Others invest in both their CoA and CoR Others invest in their CoR 13 Understanding DEs (2) Their investment decisions are likely to be influenced by their emotional ties to both their CoA and their CoR They are less likely to engage in foot-lose investments in their CoA, typical of Foreign Investments (FDI) o Foreign Direct Investments (FDI) o Foreign Portfolio Investments (FPI) They are less likely to engage in enclave economic activities, typical of FDI 14 7

8 DE and the development of their CoA: some postulations (1) Postulations based on world system theory Individual societies or nation states cannot be understood without reference to the world-system in which they are embedded (cf. Wallerstein 1976): othe structural positioning of countries and the diaspora communities in the world system determines opportunities and capabilities accruing to them. This in turn, determines the extent to which the Diaspora: Can be leveraged by their CoA (cf. Patterson 2006; Xing and Opoku- Mensah 2010:109). Position they occupy, in their CoR. Can contribute to the development of their CoA(cf. Patterson 2006; Xing and Opoku-Mensah 2010:109). o Diaspora are de facto, informal representatives of their CoA in their CoR. Their usefulness to the CoA depends on the: The achievement attained in their CoR. 15 DE and the development of their CoA: some postulations (2) Postulations based on the dynamics of globalisation Globalization (driven by inter alia, international economic policy convergence; and advances in information, communications, and transport technologies) enhances international connections. This facilitates the development of strong links between the Diaspora and their CoA. o Concretely: globalization facilitates the transfer of ideas and knowledge, as well as Financial Resources (through remittances) to their CoA. Postulations based on the modernisation theory The degree to which the governments' institutions are developed and capable of harnessing meaningfully the potential of their Diaspora communities for development determines the role played by the DEs in socio-economic development 16 8

9 DE and the development of their CoA: some postulations (3) Which general lessons can we derive from theory? For a given CoA, the prospects for utilising its DE for development relies on: o How its Diaspora community was created (see table on slide 7) o Socio-economic positioning of its Diaspora community in the CoR o Ability of government in the CoA to create the necessary conditions for harnessing the potentiality of DE and other investors for development: Appropriate governance framework FiR capacities (see figure 4) Ideology Development vision NFiR capacities (see figure 4) Policies Laws and regulations Concrete strategies to implement policies 17 DE and the development of their CoA: some empirics (1) Historical evidence of contributions of DEs to their CoA Greeks in the Ottoman empire European Diaspora in the new world European Diaspora in the colonies Turkish Diaspora in Europe, particularly after WW II African Diaspora in Europe and North America Remittances of economic nature Financial o Diaspora Direct Investments (DDIs) remittances o Diaspora Portfolio Investments (DPIs) o Livelihood and welfare support 18 9

10 DE and the development of their CoA: some empirics (2) 2005 Africa Survey: 58% remit for sustenance 33% remit for investments Tanzania Survey: 70% remit for sustenance 34% remit for investments 19 DE and the development of their CoA: some empirics (3) Remittances of economic nature contd. Non- financial remittances o Channelling the expertise of the DE in developing NFiR capacities Greek DE in Ottoman empire developing stock exchange DE in West African establishing financial institutions, etc. DE contributing ideas to policy, etc. Non-economic remittances DEs connections o Institutionalised Diaspora networks o Informal Diaspora networks DEs Transnational cultural exposure 20 10

11 3. HOW DEs CAN SUPPORT DEVELOPMENT IN THEIR CoA 21 Contextualizing Africa s development question (1) Three key hypotheses A country s development depends on its productive capacities Developing countries face serious productive capacity gaps DEs can crucial play a role in addressing some of these gaps 22 11

12 Contextualizing Africa s development question (2) Figure 4: Required resource capacities Contextualizing Africa s development question (3) By contributing to FiR and NFiR capacities, DEs can boost the competitiveness of their CoA Figure 5: The Flow from FiR capacities and NFiR capacities to sustainable competitiveness 24 12

13 Complementing the FiR capacities of their CoA (1) Measures dedicated to DEs citizenship and ownership issues DEs as citizens DEs dual citizens Through other arrangements? Measures dedicated to banks Provide safeguards for security of deposits in banks Observe international standards in registration of banks Observe international standards in maintaining A/C in banks Measures dedicated to NBFIs Observe international standards in the registration of NBFIs 25 Complementing the FiR capacities of their CoA (2) Measures broadly dedicated to financial markets Special financial instruments Diaspora bonds Other arrangements? Measures dedicated to portfolio investments Provide safeguards for security of portfolio investments in companies 26 13

14 Avail their expertise to their CoA Innovate and institutionalise mechanisms for leveraging: Entrepreneurial knowledge and skills of DEs Management knowledge and skills of DEs Avail their social capital to their CoA Ease the integration of their CoA into the global economy, etc WAY FORWARD 28 14

15 Considerations for the architecture of a strategy to harness DEs for socio-economic development Analogous with the general relationship between entrepreneurship and development, countries with higher levels of TDE have better prospects for development Many developing countries do not yet have formal frameworks to guide efforts in harnessing the potentiality of TDE Viable strategies should seek to eliminate the inhibitors of TDE, while emulating the best practices from the existing initiatives 29 Enhance research to inform decisions on leveraging DEs Empirical research needed on impact of the Diaspora Entrepreneurs on a country s FiR capacities: Financial institutions Financing instruments Empirical research also needed on impact of the Diaspora Entrepreneurs on a country s NFiR capacities: Contribution to knowledge and skills development Contribution to the development of technological capacities Contribution to the development of infrastructure Contribution to the development institutions (organisations) 30 15

16 THANK YOU FOR YOUR ATTENTION! 31 16