The six states of the Gulf Cooperation Council (GCC) have over five million migrant workers — one of the highest concentrations of migrant workers in the world, according to the World Migration Report (2003). This influx of migrant workers began majorly due to discovery of oil in the early 20th century in this region. Moreover, the sudden increase in international oil prices post 1973 led to rapid expansion of Arab economies, resulting to an exodus of expatriate workers from populous countries viz. India, Pakistan, Bangladesh and Sri Lanka. However, in the past ten years the region experienced major overhaul due to financial crisis followed by continuous fall in international crude oil prices. These factors not only influenced the economic aspects in GCC countries, but also influenced their social and political aspects. The fall in oil prices have triggered the possibility of economic slowdown hitting maximum on rise in unemployment in the region. To counter this issue, the governments of the region have adopted nationalization policy.
Sultanate of Oman (hereafter referred as Oman), under the realm of His Majesty Sultan Qaboos has also initiated nationalization policy. Omanization is a policy sanctioned by the government of Oman in 1988 directed at replacing expatriate workers with trained Omani Personnel. Oman sets quotas for various industries to reach in terms of the percentage of Omani to foreign workers. His Majesty himself has proclaimed percentages of Omanization to be met in various areas of the public and private sector. However, it is anticipated that due to development of technology and massive use of alternative fuels, crude oil prices are likely to remain at lower levels for long term. This would affect the income of all the oil exporting economies including Oman. Hence, with an objective to achieve sustainable economic and social prosperity, Sultanate has recognized the need to reduce the dependency on oil revenues through diversification of economy. The diversification will strengthen private sector and empower the local population to contribute in the development thereby achieving the Omanization goal.
Despite the efforts aimed at Omanization, generating gainful employment has become a mammoth task. Moreover, historically Omanis have extensively travelled for business and trading. The unique geographical location has gainfully supported the business pursuits of citizens of Oman. Today, government of Oman is comprehensively promoting entrepreneurship initiatives among its citizens another way to empower people is to motivate them to be entrepreneur and start their own business. Moreover, entrepreneurship creates jobs and generates economic growth which promotes a stable and civil society. However, to develop a sustainable environment which promotes entrepreneurship within Oman, an effective ecosystem needs to be developed.
Entrepreneurship Ecosystem
The term ecosystem was first used in 1935 in a publication by British ecologist Arthur Tansley (Willis, 1997). Tansley developed the concept to draw attention to the significance of transfers of materials between organisms and their environment. He later refined the term, describing it as "The whole system, including not only the organism-complex, but also the whole complex of physical factors forming what we call the environment" (Tansley, 1935). Later, this concept was diluted and extended to various applied and social sciences, not limiting the discussion up to life sciences. It was also applied in business studies giving rise to business ecosystem, innovation ecosystem, entrepreneur ecosystem, and knowledge ecosystem concepts. These concepts today have implicated significance ascendency in the business world and numerous studies have been undertaken giving theoretical and empirical justifications.
Initial development stage – research first contributed the evolution of entrepreneurial ecosystem concept. “The market-based ecosystem allows private sector and social actors, often with different traditions and motivations, ad of different sizes and areas of influence, to act together and create wealth in symbiotic relationship. Such an ecosystem consists of wide variety of institutions coexisting and complementing each other.” (Prahalad, 2005, p. 65). He was first to apply this concept to entrepreneurship and further stressed on building economic wealth and prosperity of future generation. “The entrepreneurship ecosystem consists of a set of individual elements—such as leadership, culture, capital markets, and open-minded customers—that combine in complex ways” (Isenberg, 2010, p. 4). Isenberg focused in his findings on government’s efforts in building a sustainable entrepreneurship and related environment through direct or indirect policy interventions. Moreover, he stressed further that in spite of dynamic challenges, viz legal framework or cultural biases, entrepreneurial ecosystem has contributed phenomenally in developing and emerging economies. In these economies, the poorest socioeconomic section has been the most active in developing innovative business models and starting new ventures – bottom of pyramid (BoP) (Prahalad & Ramaswamy, 2004).
It can be further inferred from the above definitions that an entrepreneurial ecosystem is a unique type of ecosystem which combines various stakeholders, individuals, firms and supporting organizations which in spite of their fundamental differences in their objectives collectively contribute to economic growth (Suresh & Ramraj, 2012). Significant research has been undertaken in contribution and expansion of the ecosystem concept in business studies. Today there are four ecosystems particularly influencing entire ecosystem taxonomy viz, Business Ecosystem (Moore, 1996), Innovation Ecosystem (Adner, 2006), Entrepreneurial Ecosystem (Prahalad, 2005) and Knowledge Ecosystem (Clarysse et al., 2014). As there are multiple ecosystems, it becomes important to classify the invariant characteristics influencing particularly entrepreneurship ecosystem. The following diagram will help in better understanding of factors influencing and the outcome derived through effective implementation of entrepreneurship ecosystem in any economy.
It is an ecosystem that is purposeful in collaborating network of dynamic interacting systems and subsystems that have an ever-changing set of dependencies within a given context (Matthews CH, 2015). Nascent entrepreneurs who are individuals in the process of launching a new venture, are at the heart of this system. These entrepreneurs represent a sub-set of the adult population in a given country. The attitudes that prevail within the wider population influence who chooses to become an entrepreneur. The nascent entrepreneurs are characterized by varying degrees of ability and entrepreneurial aspirations. These entrepreneurs usually start their entrepreneurial ventures as Small and Medium Enterprises (SMEs) and the success in their initial ventures, motivate them to move further.
In recent years, many models have been developed to gain a better understanding of development of entrepreneurship ecosystems, notable among them are Isenberg (2011) and Stam (2015) framework. This study shall concentrate towards Isenberg’s model of entrepreneurship ecosystem as represented in figure 2.
As can be seen from the above figure, the Isenberg (2011) framework, suggests that the entrepreneurship ecosystem must include six key dimensions with twelve elements incorporated together. These are:
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Policy (leadership, government);
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Finance (financial capital);
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Culture (success stories, societal norms);
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Supports (infrastructure, support professions);
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Human capital (labour, educational institutions); and
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Markets (early customers, networks) (Isenberg 2011)
Governments have the enormous task of fostering an enabling environment for entrepreneurs and SMEs. Government’s role is not restricted to provision of credit for the SMEs but also to provide policy directive measures that resonate with the multiple stakeholders who nurture and promote the growth of entrepreneurship ecosystems. The policies enacted by governments deal with institutions, financial support, regulatory framework incentives, research institutes and venture friendly legislation.
The government in its institutional role strives to develop, foster and monitor regulatory framework which influences the development of new businesses and expand the existing business.
In this study, an assessment with regards to policy framework which results into regulatory framework for the SMEs shall be undertaken with regards to Oman.
Ease of Doing Business
Ease of Doing Business (hereafter referred as Doing Business (DB) is a measure of the regulatory framework existing for SMEs in a country. This index developed by the World Bank measures the following areas pertaining to SMEs in a country, right from starting a business to resolving insolvency. The following figure depicts the areas measured by DB
The details of these eleven areas of business regulation as measured by DB are as shown in the following Table 1:
Table 1
Indicator sets and Areas measured by DB
|
Indicator Set
|
Areas measured
|
|
Starting a business
|
Procedures, time, cost and paid-in minimum capital to start a limited
liability company for men and women
|
|
Dealing with construction permits
|
Procedures, time and cost to complete all formalities to build a
warehouse and the quality control and safety mechanisms in the
construction permitting system
|
|
Getting electricity
|
Procedures, time and cost to get connected to the electrical grid, the reliability of the electricity supply and the transparency of tariffs
|
|
Registering property
|
Procedures, time and cost to transfer a property and the quality of
the land administration system for men and women
|
|
Getting credit
|
Movable collateral laws and credit information systems
|
|
Protecting minority investors
|
Minority shareholders’ rights in related-party transactions and in
corporate governance
|
|
Paying taxes
|
Payments, time and total tax and contribution rate for a firm to
comply with all tax regulations as well as post filing processes
|
|
Trading across borders
|
Time and cost to export the product of comparative advantage and
import auto parts
|
|
Enforcing contracts
|
Time and cost to resolve a commercial dispute and the quality of
judicial processes for men and women
|
|
Resolving insolvency
|
Time, cost, outcome and recovery rate for a commercial insolvency
and the strength of the legal framework for insolvency
|
|
Labor market regulation
|
Flexibility in employment regulation and aspects of job quality
|
| Source: Report on Doing Business 2019: Training for Reform |
At present, DB provides quantitative indicators on regulating business related to only the first ten areas. The last area of labour market regulation, though studied under DB is not included while quantifying the ease of DB.
Since its inception in 2003, this index assesses regulatory and institutional framework for SMEs of a country which leads to its inclusive and sustainable economic growth .These variables represent the various factors important for the functioning of SMEs that lead to their success. DB comprises of two measures –score and rank. The ease of DB score reflects the gap of each economy from the best regulatory performance observed on each of the indicators across all economies in the sample since 2005. This score is reflected on a scale from Zero to One Hundred, where Zero represents the lowest and One Hundred represents the best performance. Similarly, the ease of DB ranking ranges from One to One Hundred and Ninety (Doing Business, 2019).