Macedonian National Business Plan Competition: 2008

Prior to beginning my Fulbright Professorship in Macedonia to teach entrepreneurship and economics at the State University of Tetova, I wrote a proposal in search of financial support to conduct a national business plan competition for university students in Macedonia.

I could find no support in the US and tried also to find a US corporation with a presence in Macedonia who might be interested in supporting a Macedonian project. The US corporations in Macedonia were totally non-responsive. Not even the courtesy of a rejection letter!

The US Embassy let me know they had a grants program that might be able to support such a project as I envisioned, but there was a stipulation – the grant could not go to me or even the State University - it had to be to a Macedonian based NGO (non profit). So, I started researching NGOs in Macedonia, contacted a few and was fortunate to get an enthusiastic response from the Macedonian affiliate of the international organization Junior Achievement. The JA organization in Macedonia had a good history of sponsorship of entrepreneurship programs at the high school level and Ms. Jasmina Maneva, JA-Macedonia executive director, was very interested in expanding its programs into the universities.

So, together with Ms. Maneva, we wrote a proposal, submitted it to the Public Affairs Democracy Grants Program at the US Embassy and received an award of $18,200. The competition was to culminate in an awards dinner on November 21, 2008 – to coincide with the worldwide celebration of Global Entrerpreneurship Week, sponsored in part by the E M Kauffman Foundation in Kansas City, MO. My immediate hope was that we could get the Ambassador to be part of the awards ceremony. So I mentioned it to several Embassy staff and then directly to the ambassador when he appeared at an orientation meeting for Macedonian Fulbrighters at the Embassy. Most thought his attendance was a possibility, including the Ambassador. (As it turned out the Ambassador did attend to everyone’s delight!)

Work on the project began while I was still in the US as publicity materials, rules for the competition, and venues were considered and written in draft form. One complication was the need to have all materials available in three languages – English, Macedonian and Albanian. Through the hard work and competence of Ms. Maneva and the input and advice from my State University of Tetova colleague Mr. Blake Childs (Peace Corp volunteer) the materials were drafted, reviewed and disseminated first by email to all university faculties in the nation and then, in early October, printed materials including posters were distributed and hung in all universities,

It was my opinion that my personal appearance would be vital to garnering faculty and student interest in the competition. I was pleased to learn that most university programs included entrepreneurship and business planning in their formal curriculum and not just in the economics faculties but in other faculties like engineering and law. What this meant was that I would not have to spend a lot of time explaining what entrepreneurship and business plans were. So, as promised in our proposal, I spent half of the month of October traveling around the nation talking directly with students and professors about the role of business plans and competitions including some instruction in key business plans concepts like the value proposition and business model.

My visits to universities were made possible and coordinated by JA’s Ms. Maneva and this was not a trivial task. She had to make hundreds of phone calls, follow-up calls, return calls to people not in their offices, calls to people who did not return phone calls, wrong numbers and various other sundry insults. The problems were overcome through her persistence and hard work. She succeeded in arranging 12 different presentations in all of Macedonia’s major population and university centers. In all I spoke to more than 600 students and faculty in a 14 day period.

After that we sat back and waited to the plans to arrive. In the proposal we said we hoped for 30 but I would accept 20 as a measure of success. In the end when the submission deadline of November 7 rolled around we had 37 plans representing 10 universities from throughout the country. Quite a relief for all of us who put so much effort into this project!

With 37 plans in three different languages, the week of November 7-14 was quite hectic with doing translations into English and then meeting with a panel of judges to select the top 10 teams for the oral competitions a week later on November 21. We did it and then sat back to wait to see how the oral competitions would unfold.

The ten finalists and their academic mentors/advisors were invited all expenses paid to the State University of Tetova to present their plans orally to a distinguished panel of judges. The judges who appear in the group photo are from left to right: JUDGE Dr. Nasser Raimi, entrepreneurship text author and member of State University Economics Faculty; Dr. Bexheti, Rector, State University of Tetova, JUDGE Mr. Ilya Vuckov Mr. Ilya Vuckov, Entrepreneur, winner of Best Business Plan of Year, Macedonia 2007 and President and Founder, AGV Design, Skopje, MK, US Ambassador Philip Reeker, JUDGE Ms Jasmina Maneva, Executive Director JA- Macedonia and JUDGE Mr. Blerim Zlatku, President North-West Macedonia Chamber of Commerce. (JUDGE John Sumansky is not in the group photo. He is shown in the photo making remarks in front of event signage.)

The oral part of the competition began at 1:30 PM and was done by 4:30 PM. The judges worked from 4:30 to 5:30 and in that time selected the top five and then from that group named the first and second place winners. The first place team received $1,000 cash, second place got $500, three honorable mentions got $250 per team while the remaining five finalists each got $100. Faculty mentors also received cash prizes of $100.

The highlight of the day occurred when the US Ambassador Philip Reeker joined us in Tetova to make a brief speech on entrepreneurship and announce the winners! One of the photos in this blog the Ambassador making remarks at the awards ceremony. He made himself available for photos afterwards. Everyone in Tetova was most happy that the Ambassador would come to town to participate in this event.

This turned out to be a very successful event and as it turns out, for me, a great Fulbright experience. I met and had coffee with dozens of faculty at 10 universities, talked with hundreds of students, drove to and visited all of Macedonia’s major cities and together with JA and my colleague Blake Childs at State University of Tetova (SUT) orchestrated a national event that, because it took place at State University, helped increase the visibility and presence of one of the nation’s newest and least know higher education institution.

I’ll take this opportunity to thank everyone: Ambassador Reeker,. Embassy staff especially Gazmend Ilazi, Amy Storrow and Public Affairs Officer Ryan Rowlands, Ms. Jasmina Maneva, JA, Mr. Blake Childs, SUT Rector Dr. Bexheti, Ms. Maja Vucinic, translator and also Professor Senad Abduli, International Affairs Office, SUT. If I missed someone please forgive me because there were many others who made this event possible.

Entrepreneurship policy in a different context

By design, I have been fairly involved in entrepreneurship-related things during my visit here. I have spoken with government officials, entrepreneurs, NGO leaders, educators and private citizens and I have learned some things.

Among the more important things learned are that: 1. ) the role of entrepreneurship as public policy for economic growth needs to be broadened and 2,) the context of economies in transition influence a great deal how we assess especially the longer term impacts of entrepreneurship promotion programs.

The broadening of the role of entrepreneurship programs as economic development policy
The argument used to support government intervention to generate more entrepreneurial activity is founded in the thinking that entrepreneurship per se generates not only direct economic benefits like jobs and income but it also produces positive economic externalities. And, economic theory suggests that when the production of something generates positive externalities, market solutions result in too little of that activity being produced – to the detriment of society.

When applied to entrepreneurs, externalities theory tells us that the market is not likely to produce enough entrepreneurs, the assumption being of course that entrepreneurs generate economic growth. Getting more entrepreneurs requires some market intervention like government programs and other incentives to get more than what the market alone would produce. This is the realm of public policy.

Entrepreneurship as public policy also has gained favor stemming from the pragmatic needs of policy makers to have some policy alternative they can use to grow regional and local economies. Old regional growth policies aimed at attracting existing businesses from elsewhere through elaborate and generous tax incentives are proving to be not successful.

Policy makers around the world have become increasingly aware that not every region in every state is going to get that next Toyota or Volkswagen plant - no matter what the size of tax incentives a region or nation is willing to offer. Regions are not likely to be able to use incentives to grow jobs in a region by importing them. Consequently, to grow, regions may have to rely on growth from within through entrepreneurship, small business growth, jobs and income expansion.

The above text is pretty much orthodox thinking as it relates to places like Northeast Pennsylvania. Entrepreneurship policy and programs in Macedonia presents us with a different context in which to look at policies and programs related to entrepreneurship and economic growth.

Macedonian Context: Economy in Transition
Macedonia falls into a category of a developing transitional economy and as such I suggest that in a developing, transitional economy any entrepreneurial activity is good. Entrepreneurship literature might suggest that to have growth, a nation or region should allocate resources to activities that promote entrepreneurship of the kind that actually contributes to the growth of the regional or national economic pie. It is of the kind of entrepreneurship Professor Baumol labeled “productive”*.

To be sure, productive entrepreneurship is desirable and some evidence of it can be found in Macedonia. USAID support has produced a major study that has identified sectors where entrepreneurial activity could generate growth based on certain comparative advantages. The identified sectors are: Electro-mechanical (light manufacturing), Fashion industries (apparel, footwear and furniture) and Information and communication technology. And policy and program dollars are following this path as support is available to existing firms in these sectors. But the curious part of this effort is that there are no direct linkages between this work and the entrepreneurship support programs of the national government support. While they are no precluded from seeking support from other government programs, there is no direct support available that set aside as incentives to start up new ventures in these three sectors. At best this renders the policy incomplete.

Productive entrepreneurship while most desirable may be the most difficult to generate in an environment of ineffective government, poor education infrastructure, weak legal and financial systems, poor transport and postal systems and corruption, etc. It might be true that at certain stages of economic development, public policy aimed only at producing “productive” entrepreneurship may be unrealistic. The basic economic infrastructure may be insufficient to allow for productive entrepreneurship to drive economic growth.

Baumol also described a brand of entrepreneurship labeled “unproductive”. The label sounds pejorative and I think not wholly satisfactory in the context of under developed transition economy like Macedonia. In keeping with Baumol’s description, unproductive entrepreneurship is “less good” than productive because they only end up dividing up a constant economic pie and clearly are not growth engines. In an examination of the status of entrepreneurship in Macedonia most of entrepreneurship is of this kind. But, unlike what the term “unproductive” implies, the context of Macedonia in transition from command to market causes us to look at so called unproductive entrepreneurship in a more favorable light for two reasons: 1.) unproductive entrepreneurship can have use as employment policy and 2. ) unproductive entrepreneurship can build a business culture which has significant positive intergenerational effects.

Employment Programs. Unproductive entrepreneurship programs can be used to sop up excess talented labor. Indeed, the Macedonian Ministry of Economy has a specific program that provides 2500 Euros to unemployed people to help them cover the costs of registering and formalize their own businesses – any business. This program as of 2008 provided 530 grants to register new businesses and an additional 170 grants for formalizing plans.

In an economy that is not yet able to provide enough jobs for its skilled and educated people, entrepreneurship of ANY KIND appears to be a clever way to get people to use their talents as entrepreneurs and be self-employed. The annals of entrepreneurship in the US are filled with stories of people who used being fired or laid off or downsized as an opportunity to start their own business. Why not incentivize the unemployed in Macedonia to start their own businesses? In this sense, unproductive entrepreneurship may fall short as development policy but may be good as employment policy.

Business Culture. Programs that encourage, create and support private entrepreneurs create a business class that did not exist but which are vital to the future of transition economies. The transition from more than 50 years of command type systems to market systems with private ownership of business, can be made easier if there is an indigenous business class to draw upon. As in most transition economies in the post-command economy era, there are no few models and mentors for new entrepreneurs to draw upon and few children are able learn business from their parents. Foreign business advisors do not help. There are no locally grown and owned social or cultural or behavioral business models to pass on the next generation. So, government programs that increase the number of business owners – could be seen as laying a foundation in the form of a business class on which future generations can draw.

Overall, current entrepreneurship programs in Macedonia will surely help identify entrepreneurs who do have the potential for business activities that could generate growth – export sales, import substitution and locations for foreign investment. If Baumol is correct and there is a fixed amount of entrepreneurial talent available to Macedonia given its population, then Macedonia cannot afford to miss even one potential entrepreneur.

With this perspective based in the context of a transitional economy entrepreneurship takes on a much broader role as an engine of growth. This broader model is probably something worth much further investigation over the longer term- especially the intergenerational transfer of business culture. Also, to what extent is entrepreneurship as employment policy setting the stage for subsequent entrepreneurial activity that does produce economic growth, more jobs and more income wealth and prosperity? I don’t know that such a question has ever been addressed before.
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Note: In Baumol’s work, reference is made to a type of entrepreneurship labeled “destructive”. Destructive entrepreneurship refers to activities that might fall into the realm of illegal or corrupt or use of power for personal gain. This idea is elaborated upon in a paper by Desai and Acs which explores the extent of destructive entrepreneurship in developing economies where opportunities for profit outpace the evolution of institutions” [page 3]. While I agree with their observation that this kind of entrepreneurship may be a very large part of entrepreneurial activities in Macedonia, I do not have enough information about these kinds of activities to offer any comment but I did want to acknowledge their existence in Macedonia. Some estimates of the underground economy say that, if measured, it would add about thirty percent to the reported national GDP.

References
Baumol, William, J. (1990), “Entrepreneurship: Productive, Unproductive and Destructive”, Journal of Political Economy, 98(5), 893-921

Desai, Sameeksha and Zoltan Acs (2007) “A Theory of Destructive Entrepreneurship”,
JENA Economic Research Papers, 2007-085