As prepared for delivery
I appreciate the opportunity to speak to you today, and I would like to thank Warisan Global and UniRazak College for organizing this exciting event. Thank you to the Deputy Minister of Higher Education, Dato’ Saifuddin Abdullah, and Deputy President Professor Dato’ Dr. Mohamed Mahyuddin for hosting me today.
I’d also like to recognize Warisan Global’s CEO, Mr. Dhakshinamoorthy “Dash” Balakrishnan. Your leadership on this topic has been extraordinary – from your participation at the U.S. Presidential Summit on Entrepreneurship to your success in supporting Global Entrepreneurship Week, you are truly putting Malaysian entrepreneurs on the global map.
It’s my first trip to Malaysia, and I’m very pleased to be here to further our economic partnership and dialogue, and talk to you today about entrepreneurship and innovation. I am not an entrepreneur, but I have long experience in the private sector as a business lawyer, where I have seen what entrepreneurs can do to contribute to their economies – not just for personal gain, but for the payoff of seeing their ideas become reality, and of improving lives in their communities.
This is something that I take very personally in my role as Assistant Secretary for the Bureau of Economic, Energy and Business Affairs at the State Department. I think there is much to be gained from the interplay between promoting economic development and fostering an environment in which business can do well – or, what I call, “doing well by doing good.” One of the best examples of this concept is entrepreneurship. I am proud to say that my Bureau is highlighting entrepreneurship as one of our key priorities in the coming year.
Entrepreneurs, and the new businesses they create, are the engines of economic growth and job creation, which in turn, are the underpinnings of political stability and the growth of civil society. As an illustration, from 1980-2005, firms less than 5 years old accounted for all net job growth in the United States.
Entrepreneurship and the innovation it engenders will be an essential element to restoring growth to our economy, creating job opportunities, and leading the way to technologies that address 21st century challenges in climate change, public health, education, and food security, among others.
In the U.S., we feel so strongly about entrepreneurship as a key part of what makes for a free and prosperous society, that we make it part of our engagement with other countries. We see this engagement as a true partnership, a sharing of ideas, and way to build security and opportunity worldwide.
We can certainly learn from each other. As a country with a rich trading history, Malaysia has many examples of risk takers and small businesses that have achieved great success through the vision and hard work of talented entrepreneurs. For example, everyone is inspired by the success that Malaysia’s own Tony Fernandes has enjoyed in taking AirAsia, then a failing, state-owned airline and turning it into what has become the new benchmark in the low-cost airline business.
I’d like to focus today on our work to encourage entrepreneurship, which includes an array of programs around the world deigned to foster and support development. I also want to touch on the importance of sound policy framework to support innovation and entrepreneurship.
Commitment to Fostering Entrepreneurship
President’s Obama’s Summit on Entrepreneurship held at the end of April was a result of specific commitments he made during his June 2009 Cairo speech on engaging Muslim communities. Entrepreneurship as a topic for discussion was very important, but perhaps more significant, the summit was about bringing individual entrepreneurs together. This was not a summit for policy makers or government leaders. It was a chance for entrepreneurs to get together to share experiences, build networks, and look toward nurturing the next generation.
In emerging markets like Malaysia, there is a growing youth demographic brimming with intellectual energy and capabilities who are seeking new market opportunities. Unfortunately, challenges - such as a lack of mentors, networks, resources and information - often impede their success.
Through efforts such as the newly launched Global Entrepreneurship Program, the State Department aims to provide synergies for your entrepreneurs and ours by ensuring that there is a coordinated, holistic approach to supporting entrepreneurs by assembling domestic and international partners, to provide support in six key areas of activity. These six areas include: identifying promising entrepreneurs; training them; connecting them to each other and sustaining their efforts and enterprises; guiding them to sources of capital; advocating for supportive policies and regulations; and celebrating their successes.
By establishing an ecosystem that supports the efforts of entrepreneurs, small and medium business owners have the opportunity to vastly improve the economic conditions of their country while creating jobs for their fellow citizens. In the region, Indonesia plans to host an entrepreneurship summit for ASEAN countries next year. This conference will bring together entrepreneurs from the ASEAN region as well as high-level U.S. Government and private sector representatives. It will support the commitment made by President Obama in Cairo.
On a global scale, the State Department is supporting entrepreneurs with initiatives like the E-Mentor Corps, announced by Secretary Clinton at the Presidential Summit on Entrepreneurship. E-Mentor Corps aims to connect mentors in the U.S. business community with aspiring entrepreneurs from developing countries around the world, creating a truly global network of entrepreneurs. This tool can also be used to connect successful local entrepreneurs to up-and-coming entrepreneurs to give advice on local markets and emerging challenges and how to overcome them. I urge you to check it out at http://www.imagine-network.org.
We have tried to take as broad a definition of “entrepreneur” as we can in moving ahead with our plans. Thus, entrepreneurs include people who start businesses and produce innovative products and services for profit, but they also include what we call “social entrepreneurs,” people who see needs in society and organize efforts to address them, by creating not-for-profit charitable organizations, advocacy groups, or educational institutions.
I’m particularly proud of the partnerships that have blossomed between the U.S. Embassy here in Kuala Lumpur and local entrepreneurs like Dash and his team. I’ve heard rave reviews of the monthly “Sembang Sembang” program which is helping to empower Malaysian women entrepreneurs.
And I’m inspired to hear of a recent MOU between some of our youth exchange program alumni and Warisan Global to introduce social entrepreneurship principles in local schools. A special thanks goes to Dato Saifuddin who personally facilitated this initiative. Clearly, there is a lot going on in Malaysia and I’m happy to be a small part of it this afternoon.
Fundamentally, I see entrepreneurs as agents of change – bringing needed products and services to your communities and the global marketplace. And I wish you much success in your enterprises.
Policy Framework for Innovation
A key aspect for nurturing entrepreneurs is to foster a conducive policy framework that encourages innovation, including open investment policies, measures that make it easy to start up and wind-down businesses, and a strong intellectual property regime. I know Malaysia’s leaders are very cognizant of the importance of moving toward a more innovative economy as the country aspires toward the goal of becoming an advanced economy by 2020. I also understand this is a key part of the New Economic Model and the Economic Transformation Program. An impressive amount of work has gone into defining specific areas for focus, with clear goals and measurable results.
One important element is shifting the economy so that it is increasingly driven by domestic demand. As the government recognizes, this will require significantly increased private investment, both domestic and foreign direct investment. It will also require a smaller government role in business. Efforts to revise or eliminate investment restrictions and to better target other programs will be critical to the success of the government’s objectives.
I do want to note that while mobilizing greater private domestic investment is critical, foreign direct investment (FDI) flows will remain vital to Malaysia’s economic growth and prosperity. As I mentioned before, our most daunting challenges are global, and greater levels of foreign investment will be necessary to overcome many of them: achieving global food security, mitigating climate change, and defeating violent extremism are just a few areas where innovation and open investment can make a great impact.
Both the United Nations Committee on Trade and Development (UNCTAD) and the Organization for Economic Cooperation and Development (OECD), the two key international organizations focused on investment policy, strongly advocate the benefits of opening economic sectors to foreign investment, fair and equitable treatment for foreign investors, and reforms that result in predictable regulatory and legal environments for investors.
It is easier to attract and keep private investment when foreign and domestic firms can compete on an equal basis and when the legal system protects and rewards innovation and creativity. In this regard, Malaysia is taking an important step in putting into place a new competition law. To be most effective, such a competition regime should avoid exempting specific sectors. Malaysia has also made notable progress in constructing a regime for protecting innovation and creativity, a key competitive advantage that I hope Malaysia can continue to strengthen and reinforce.
As I’m sure I don’t need to tell you, creative people successfully build old ideas into new ones, put them into practice, and build on them again. However, creative people need to be assured that they will be able to reap the benefits of their creativity. That is the role of intellectual property rights and enforcement. The primary value of IPR is giving creators the ability to benefit from original ideas, thereby creating incentives to innovate. The creation of intellectual property is a key factor in sustaining economic growth and achieving high living standards.
Governments need to strengthen patent systems, since weak patent systems can be detrimental to innovation and technology transfer. Moreover, strengthening patent systems, notably enforcement, has been correlated with expanding innovative activities. The United States recently announced a national innovation strategy, joining a growing group of countries seeking to harness innovation to serve their national interest.
Supporting entrepreneurship and innovation is a key priority for me, as well as the entire State Department. As Secretary Clinton said at the Presidential Summit, “Entrepreneurship is a way of looking at the world and seeing not just obstacles, but opportunities; not just the world as it is, but the world as it could be, and then having the confidence, the determination, and the resources to move those worlds closer together.”
We are working to move our world closer together, by building meaningful partnerships with all of you. Thank you so much for your attention, and I look forward to your questions.