You see now, especially in the APEC region, many startups in new areas inspired by successful cases in Silicon Valley.
Enabling next generation startup growth and positioning emerging businesses in APEC member economies to capitalize on new, digitally-driven trade opportunities will be a top priority for the region’s Leaders and Ministers during their upcoming meetings in Da Nang.
In an interview with the APEC Bulletin, Nguyen Hoa Cuong, Chair of the APEC Small and Medium Enterprise Working Group, discussed startup trends, the impact of changes in technology and trade policy, and how APEC can open the door to the next Airbnb, Ofo, Rappler, Red Mart or Traveloka.
APEC Bulletin: What is the progress of startup development around the APEC region?
Nguyen Hoa Cuong: More and more startups are using high technology and new production processes. This includes new ways of marketing, for example. There is some risk during the process of doing business but it is actually expected to generate a lot more income than in the past.
You see now, especially in the APEC region, many startups in new areas inspired by successful cases in Silicon Valley. A lot of new business opportunities are opening up in many member economies such as Singapore, Malaysia, Thailand and Viet Nam.
It is important that policymakers and private sector groups pay attention to these startups and bring about the best support for them.
APEC Bulletin: Is the development of digital technology translating into increased startup growth and what about the survival rate of these new businesses?
Nguyen Hoa Cuong: We see more new businesses actually operating in new prospective sectors. In Viet Nam and in many other APEC member economies, we see new startups trying to imitate what Uber or Grab are doing, for example. Many startups are also thinking of ways to utilize existing resources to bring about benefits for their business owners and also to bring about cheaper costs for consumers.
In terms of the success and failure rates, this is an increasing challenge. Yesterday, I attended a symposium on innovative and dynamic small and medium enterprises and startups, and a participant asked if another dotcom bubble is on the horizon. This is something we need to pay attention to.
APEC Bulletin: Which sectors have the most new opportunities for innovative startups and small businesses, and what is the significance for trade among APEC economies?
Nguyen Hoa Cuong: There are many new areas, especially those related to the use and application of ICT. You see them now in transportation, in delivery services, and even in healthcare systems and a lot of bio-related sectors.
Now everyone is talking about big corporations like Apple. They charge fees for downloading and buying software. In fact, all that comes from some company in Ireland or some other small European countries. In Viet Nam now—and in many other APEC member economies—flows of goods and services, and cash, have changed. This is opening new opportunities for small businesses.
APEC Bulletin: How can a startup or small business fit into cross-border production and supply chains that underpin so much of trade today?
Nguyen Hoa Cuong: Global value chains are very fashionable. They denote a group of upstream-downstream enterprises and their connections and interlinkages. The big one is providing product output that acts as input for downstream enterprises.
For small and medium enterprises, they will never ever have a bigger, better opportunity to grow and learn that to join a global value chain.
In the past, small and medium enterprises exported products that were usually just a one off—lots of products going from one market to another. The more important thing now is how value is added to this process so that the product of one enterprise, one startup, can play a bigger role, adding value to other businesses and production, and thus, how this synergy can bring about much more value and efficiency.
APEC Bulletin: Most businesses are small businesses in APEC, but their participation in trade is relatively low. Is this trend changing and what are the implications for economies in the region?
Nguyen Hoa Cuong: The majority of the enterprises in any particular economy in the region are small businesses. In Japan, the level is 99.7 per cent. In Viet Nam, it is 98 per cent. In most of the APEC member economies, it’s between 97 and 99 per cent. But when we look at their contribution to trade and exports in the region, the figure is much, much lower.
There are different figures if we count all the different ways of calculating how much they participate in trade. For example, there are those who are direct exporters. In Viet Nam there are not so many. But if you count all those that participate in indirect exporting activities, that number can double or triple.
The role of governments here is that we have to clearly see the whole process so we can come up with proper policy measures to strengthen small and medium enterprises and startups’ roles in it.
APEC Bulletin: Small business participation in trade should also be important for jobs.
Nguyen Hoa Cuong: Yeah, absolutely.
APEC Bulletin: So what are the biggest hurdles to small business trade and how are they changing with new technologies and innovations emerging?
Nguyen Hoa Cuong: One of the most challenging hurdles is access to finance. Another is technical barriers to trade that keep changing and are getting more and more complicated. Small and medium enterprises need stronger coordination between government agencies to provide sufficient information and support measures to help small businesses and startups to overcome them.
APEC Bulletin: What are the barriers on the investment side? There are many startup opportunities around the APEC region but what’s holding investors back?
Nguyen Hoa Cuong: Investments in startups are increasing. Startups have a chance for support investment in exchange for shares in their companies. Of course there are difficulties when the startups themselves are not willing to relinquish control to investors. Many individuals, when they start to develop their business ideas, they feel a bit reluctant to give away part of their company.
The other difficulty startups often face is that they don’t have any collaterals. They are new to everything. They are new to intellectual property, to management of the enterprise. Also there is so much information. What would be the best option in terms of investors or funding out there? No one is there to tell them. This can be a very expensive lesson. A startup may have many good business ideas, but it is not easy to make them a reality. Bigger investors can actually take away that opportunity easily.
Efforts by governments to improve the accessibility of finance for small businesses and startups is rather new. For example, someone recently asked whether Viet Nam now has a regulatory framework for crowdfunding and I told them no. Even among developed economies such as the US, very few, less than ten, have some regulation on crowdfunding. Crowdfunding is what everyone is talking about but not every government knows exactly what to do about it to improve access to finance for startups.
APEC Bulletin: How is APEC seeking to bring startups, investors and policy people together to improve the financing landscape?
Nguyen Hoa Cuong: We are doing a lot of things on this in APEC, including holding startup accelerators and pitching sessions with investors. We are putting together all stakeholders—all the accelerators and mentors also interested in the investors as well. We are also introducing a lot of training activities, information consultancy and consulting activities in APEC to help startups to develop their ideas.
We are also trying to create a regulatory framework that can support small and medium enterprises, and startups specifically. This is a good time for all the APEC member economies to pay close attention to startups and put together all existing facilities and resources for the benefit of this sector.
APEC Bulletin: Can you describe any particular startups that you’ve worked with in APEC that you found impressive or inspiring?
Nguyen Hoa Cuong: In Ho Chi Minh City we have seen a lot of people and organizations which are really interested in supporting startups. We have a lot of co-working spaces and technical facilities. In Ha Noi also, we have so-called “beehives,” or working spaces for startups, as well as support facilities and a great deal of mentors.
We’ve never had so many initiatives going on in Viet Nam and around the region to support young people, especially students, who have opted to choose startup development as a real professional career instead of working for a big business, or working for the government.
APEC Bulletin: There are a lot of trade agreements in the APEC region and more in the pipeline that are potentially very big and complex. How prepared are small businesses to take advantage of these agreements and is that an area that APEC is working on?
Nguyen Hoa Cuong: In terms of the preparedness of small and medium enterprises for free trade agreements, it’s not that good, I have to admit. This is not only about the information. Small and medium enterprises often think that free trade agreements are relevant to big enterprises only. We may be exempted from the influence from these free trade agreements.
The question is how can governments convey information about free trade agreements to small and medium enterprises so they are aware of it? We can do this though websites, business association channels and also to those who can provide specific information about those particular markets.
If a small business is interested in some market, they need to know whether there are any existing free trade agreements that apply to them or any about to be approved or under negotiation that could have a very big influence on their cross-border activities.
APEC Bulletin: How is APEC addressing trade policy knowledge gaps among entrepreneurs?
Nguyen Hoa Cuong: APEC is setting up some quite innovative apps and information-sharing platforms. The internet is good in this regard but it can induce you to click farther and farther. This can drive small businesses away from the original subject that they may be interested in so it is important that APEC economies keep the online resources they deploy for them focused.
APEC Bulletin: What are your expectations for the small business sector in the region and the next generation startups driving it moving forward?
Nguyen Hoa Cuong: We must continue to work very actively in APEC to enhance the competitiveness and innovation of small and medium enterprises. With the arrival of the digital age, with increases in digital literacy, we have never seen stronger support from ICT-related tools. The key is to apply them efficiently and effectively to help small businesses and startups grow sustainably, in an innovative way.