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Conducive climate for startups should be gov’t priority, not funding

GOVERNMENT SUPPORT for startups should focus on creating a positive regulatory environment for private investment, rather than trying to “do it all” by funding the sector itself, experts said at an Asian Development Bank (ADB) webinar.

Developing economies can help develop startups more effectively by paying more attention to improving governance rather than providing capital themselves, according to Nitin Pangarkar, an associate professor at National University of Singapore.

“The mistake that many governments make is they try to do it all… They cannot replicate the incentives that these private providers of capital have,” Mr. Pangarkar said.

“Some of the governments in the region are trying too hard to provide the funding themselves. I think that’s not the solution. The solution is to provide a conducive environment to attract providers of capital and let the market magic work its thing,” he added.

He said governments should focus on promoting ease of doing business so investors can set up shop painlessly, as well as building quality infrastructure, particularly internet connectivity.

Governments also need to avoid overtaxing the private sector, support immigration to improve access to global talent, and improve the quality of education.

“It’s a journey. It cannot be done 1-2 years but will take a long time. Even Singapore took a long time, but it can be done,” added Mr. Pangarkar.

Paul Vandenberg, a senior economist at ADB’s Economic Research and Operational Support Division, said clear regulation, tax and bankruptcy procedures, and efficient courts are attractive to the venture capital (VC) that bets on startups.

In the Philippines, VC funding for startups lags the region because of risk aversion in the Philippine investment community, according to Katrina R. Chan, director at startup platform QBO Innovation Hub Philippines.

Ms. Chan said there is enough money available for funding but the money is not reaching companies because of bottlenecks.

“There is also a lack of mature founders, very few success stories. How do we break that cycle? How do we get actual risk capital flowing into companies to get that momentum going and have enough pipeline that companies can mature,” she added.

Winston Damarillo, the chief strategy officer of regulatory technology startup UNAWA, said Filipinos overseas should be tapped to provide funding.

“(The issue is) how do you organize that diaspora capital and how do you repatriate them both in terms of skills and money?” Mr. Damarillo said. — Beatrice M. Laforga

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