Offered but Not Taken: Why Are Businesses Not Using Government Support?

Economic development policies in Southeast Asia face a conundrum. It is now well recognised that emerging businesses need advice and support, and governments are spending considerable amounts of money providing this. But a range of recent studies show that new entrepreneurs, and most of the region’s 70+ million micro-, small- and medium-sized businesses (MSMEs, also known as SMEs), aren’t using these services. In fact, government advice often ranks lowest of all. What’s going on, and what can we do about it?

Over the last thirty years, it’s become clear that knowledge is a valuable commodity in the business start-up process. As the ADB recently noted, new businesses tend to thrive in transparent markets where information is accessible to every entrepreneur.  

However, researchers around the globe have also found that many SMEs and new entrepreneurs don’t always work in a purely logical manner. The information they gather and use to run their businesses is often collected in a highly subjective, personalised manner. Data is often assembled on a just-in-time basis, using the closest sources at hand.

There are also significant size obstacles. The smaller your business, the less likely you are to have full knowledge of your environment. In general, new and small entrepreneurs tend to know less about the central issues that affect their business viability, such as current industry conditions, legal and financial rights, and government support programmes. This increases the prospects of them failing. And much of the financial and other support being provided from the public purse actually ends up instead with larger businesses, because they know when, where and how to find it.  

Trying to overcome the information and knowledge gap has therefore become an important issue for entrepreneurship, SME and economic development policy in general. 

Since the 1990s, governments across Southeast Asia have spent considerable efforts creating formal support agencies. These have included SPRING Singapore (founded in 1996), Thailand’s Office of Small and Medium Enterprises Promotion (2000), Viet Nam’s SME Development Agency (2001, now known as the Agency for Enterprise Development), the National Small & Medium Sized Enterprise Office in Lao PDR (2004), and Malaysia’s SME Corporation (2009). ASEAN itself became more involved in SME policy issues through initiatives such as the ASEAN Strategic Action Plan for SME Development 2016-2025.

Many of these national agencies have included advisory and information services as part of their mission. For example, in Singapore, some eleven SME Centres have been created to provide information on legal, financial and trade issues for start-ups, often co-located with industry associations, such as the Singapore Indian Chamber of Commerce and Industry. Indonesia has a range of somewhat similar satu pintu one-stop shops, while the Philippines has a network of local regional Negosyo Centres and Malaysia’s SME Corporation offers a “Hub on Wheels” for regional businesses. Thailand operates more than 30 SME One-Stop Service Centre offices; Viet Nam’s AED runs three similar bodies, known as Technical Assistance Centres. 

However, the data show that these are not being utilised. CPA Australia’s latest Asia-Pacific SME survey, for example, found that businesses in the region were most likely to turn to family and friends for advice, while government sources were one of the least used. Accountants, banks and consultants were all rated more highly than publicly-funded assistance. 

Time and again, surveys show that SME owner-operators prefer to get their information from peers, friends, family and local business organisations. This is followed by third-party professional advisers. Governments usually come last. 

Why is the public sector so rarely relied upon? The answer seems to lie in a complex mix of factors.

In part, it may simply be due to individual behavioural biases. We tend to trust the views of people we know – friends, peers and family – rather than strangers. Another causal factor may be the highly formalistic, technical language that government often uses in its messaging and information. 

In some countries, especially those with weak public institutions and high levels of corruption, there may be a trust deficit. In parts of Southeast Asia, this means many SME owners still choose to keep their businesses informal and avoid any dealings with government advisors – which may also avert the attention of tax authorities. 

One step is for government bodies to spend more time understanding how entrepreneurs think and work. They could also begin to modify their communications, and start talking in the language of business.

Business owners may have had bad experiences with government agencies, but it is more likely that they have had no prior contact. Governments can be simply hard to reach. Public agencies are now delivering much of their education and engagement through online channels, but not everyone has easy access. Likewise, entrepreneurs in rural and regional communities often find that most advice centres are based in capital cities or large metropolitan areas. Indeed, last year the OECD urged governments to begin providing more regionally-based SME advisory centres, as well as using more mobile information services. 

Occasionally, different parts of government are not coordinated. The information provided to businesses from different agencies and ministries may be conflicting or differently presented, making it hard for businesses to navigate. Or it may not be relevant to the real needs of entrepreneurs and start-up ventures.

Finally, the OECD has pointed out that business support and advice is often an “experience good” – small businesses who have already tried these services are more likely to utilise them further or recommend them to others. The challenge is to get started. Governments need to spend more time raising awareness of their existence across the SME sector.

How do we overcome these issues? One step is for government bodies to spend more time understanding how entrepreneurs think and work. They could also begin to modify their communications, and start talking in the language of business. Perhaps they must pair up more frequently with industry groups, accountants and business chambers to spread and customise their message. And they need to promote the existence of their advice services better; a link on a webpage is not enough.

Ultimately, the value of any message lies in how much the audience desires it. So now might be a good time to ask SME owner-operators about the support they actually need.

2022/223