The buzzing South East Asian hub of Bangkok is currently ranked the top city for digital nomads to live and work in by Nomadlist.com, ahead of Barcelona and Berlin.
Faster internet, cheaper flights and the changing nature of work are driving thousands of people to leave their jobs and move to exotic locations to work independently - as digital nomads. Many are coming to Thailand.
In recent years authorities there have attempted to address the growing problem of digital freelancers and entrepreneurs that work illegally, by tightening requirements for education visas or by introducing stricter measures to prevent border runs.
In a new move in August the Thai cabinet endorsed a smart visa for skilled professionals and investors (including start-ups) valid for up to four years in fields deemed helpful to advancing Thailand’s high-tech development.
The measure follows the introduction in 2014 by Estonia of its e-Residents Visa, which allows those based in other countries to register a company in Estonia and continue operating outside of the Baltic state, while taking advantage of the country’s EU status to enter the European market.
A once-off fee of €100 ($118) is levied for the visa. By early this month over 27,000 such visas had been issued to people from 143 countries. About 40% of applicants apply for the visa to set up and run a location-independent business. The remainder are base in Estonia (Tallinn, the capital is ranked 119 by Nomadlist).
Affordable stay, fast internet
In measuring a city's attractiveness for digital nomads, Nomadlist.com's ranking considers a range of indicators. These include everything from a city's quality of life to whether the city is female friendly. Crucial is affordability and internet speed.
For example Bangkok has at an average cost of $1,232 a month for foreigners who stay in affordable accommodation and with an internet speeds of 40 mbps.
To lure foreign entrepreneurs to freelancers it also helps for a city to have a good nightlife and to offer plenty of fun attractions. Bangkok, Berlin and Barcelona all do that.
Bangkok is also an easy place to start a business. It takes just five days in Thailand to do so, according to the World Bank's latest Doing Business rankings. This is faster than Germany's average of 11 days or Spain's 13 days.
While most cities in Africa and South America are ranked lower down, Taghazout in Morocco is at ninth place and Cape Town at 46. Panama City (33) is the top Latin American one, while Buenos Aires is at 64 and São Paulo at 118.
Make them stay, set up
It's not clear what the benefits are for a city to attract more digital nomads. On the one hand because most stay only a short while, few pay tax directly to their host countries (but contribute via tax levied on the goods and services they buy).
Yet there's always the chance that a good number of digital nomads will stay on. Allowing them easier access to visas may entice more to stay on and even set up a business.
If these firms are then able to bring new knowledge and ideas while creating jobs and contributing tax revenue, then authorities should be doing more to attract such people to their cities and ensuring that a good number stay.
For instance Chile in April launched a tech visa (see this post). Its capital Santiago may host one of the world's top government accelerators (Start-Up Chile) and is only little bit more expensive than Bangkok (at $1,326) - yet it is at 405 spot in Nomad List's rankings.
It remains to be seen whether the new visa will make the city more attractive for what are often effectively travellers looking to combine work with a good time. Making one the continent's blandest capital's more fun might help more than just introducing special visas.
Best overall digital nomad cities according to Nomad List (with nomad cost)
1. Bangkok, Thailand ($1,232)
2. Barcelona, Spain ($2,154)
3. Berlin, Germany ($1,989)
4. Chiang Mai, Thailand ($907)
5. Canggu, Indonesia ($1,109)
6. Dallas, US ($2,190)
7.Budapest, Hungary ($1,343)
8. Miami, US ($2,902)
9. Taghazout, Morocco ($973)
10.Kuala Lumpur ($1,041)
Timm is a South African who writes on small business in emerging economies. Follow Small Business Insight on Twitter at @Smallbinsight and on Facebook.
Firms supported by Small Enterprise Development Agency's (Seda) incubators generated R825 million in revenue in 2016/17 - a 766% return on investment (ROE) on the R96.3m invested by the agency in its incubator network that year. But job creation remains low.
So reveals the agency's annual report for 2016/17, which was released earlier this month.
While the return on investment (see footer note) is up from 532% for the previous financial year, the number of jobs created by each supported enterprises remains at barely one per enterprise - a figure which has barely changed in the last eight years (see below graph).
Seda currently has 62 incubators. The 57 it had at the end of February supported 2,663 clients (including 497 new firms that it helped start).
In addition while the number of enterprises incubated has fallen from a high of 3,016 in 2014/15, the number of jobs created by such enterprises climbed from 1,963 in 2014/15 to 2,582 in 2016/17 over the same period.
Earlier this month Seda CEO Mandisa Tshikwatamba (pictured above) told the National Assembly’s portfolio committee on small business that the number of clients participating in incubation support programmes increased due to an improved framework on incubation centres that encouraged clients to maintain incubatees.
In other words the agency is inflating numbers by holding onto incubating clients for longer.
Meanwhile the agency added three new incubators in 2016/17, two of which are incubators aimed at the high-tech sector – a new focus of the agency’s.
The two are the French SA tech labs in Cape Town, which is a partnership between Seda and software development company Methys and Tuksnovation, which focuses on commercialising innovative technologies in the ICT and engineering sectors.
However Seda's technology programme (under which its incubators fall) carries out little in the way of sophisticated interventions.
For example among its interventions, just 161 entrepreneurs were assisted with certification readiness, standards guidelines and quality health checks. This, while just 25 were assisted with product testing and certification.
Too little sophisticated help
Seda in 2016/17 supported 12,215 enterprises – the highest number since 2010/11 when 15,391 were assisted.
Encouragingly despite the slow down in the economy, Seda reported that the percentage of clients supported who reported having seen their turnover and number of employees increase had risen in the last year.
For example 77% of those enterprises supported reported taking on more employees, versus 74% in 2015/16 and 63% in 2014/15.
Despite this the agency notes that it has not made a material impact on the small business sector and adds that it needs more resources and better reach to rural areas and townships if it is to make a difference.
On figure is perhaps telling: just 75 clients in the last financial year grew their firms from fewer than 20 employees to more than 20 employees (just 0.6 of its clients).
Perhaps it shows that the agency needs to focus more on interventions on technology and quality standards and do more to seek out and back job-creating firms rather than aim the bulk of its service on the thousands of micro entrepreneurs that create few jobs.
Timm is a South African who writes on small business. Click here to sign up for the monthly Small Business Insight newsletter.
*Seda CEO Mandisa Tshikwatamba subsequently responded to Small Business Insight as follows on job creation: On average 40 to 45% of the clients in the portfolio in any given period are not at job creation stage, they are in the first year of operation, they are building the business ie (in the) final stages of product development or launching product to market. It's mostly companies in the second and third year that create most jobs.
We also don’t report on jobs sustained as Seda, this would take care of the fact that companies at this stage of their business do not create new jobs every year during their three-year incubation cycle.
If one company created five jobs in year two, they might create just one job in year three or none. This indicates that a snap shot in one year doesn’t provide full picture for researchers to draw conclusions. You need to follow a company over a three-year period of time to make correct deductions.
In the coming 2018/19 period we will include jobs sustained.
**Return on investment is defined by Seda in this instance as revenue generated by firms incubated by the agency. Small Business Insight however notes that a more accurate measure would be for Seda to include the tax paid by firms and collected by the fiscus.
A since defunct five-year long incentive to encourage private sector organisations to roll out incubators helped develop almost 4,000 small businesses, the Department of Trade and Industry revealed in a recently published report.
Since 2012/13 the department’s Incubation Support Programme (ISP), which was suspended in November last year, covered between 40% and 60% of the costs for private organisations and companies to set up an incubator.
In this time the ISP supported 53 incubation projects with R911 million in grants, to develop 3,908 small businesses.
The department has previously claimed that in the first year of the programme it supported 30 incubators to launch with funding of R817m, helping to create 19,546 jobs. This suggests that each firm created at least five jobs.
This is markedly more than the number of jobs the average firm supported by Small Enterprise Development Agency (Seda’s) incubators created in the same time period.
Over this time Seda incubators assisted about 2,500 entrepreneurs or businesses a year, creating about one job per business assisted (data is drawn from Seda annual reports). The Seda programme currently has 62 incubators.
However in November last year the Minister of Trade and Industry Rob Davies (pictured above) suspended the programme and replaced it with new the Strategic Partnership Programme.
The new incentive’s main focus is to strengthen supplier development and inclusion of black suppliers in the value chain.
The change comes after the department in 2015 said it had to reject a large number of applications because many applicants had failed to understand the criteria needed to qualify for the incentive. In some cases people had failed to bring on board an industry partner or wanted funding for things that were not deemed as incubators.
The department at the time launched an incubation handbook to offer applicants clearer guidance on what constituted an incubator.
The figures from the department suggest that it's incentive programme -- which helped big companies and organisations to support small businesses -- has been arguably way more successful in creating jobs than Seda's incubation programme.
The private sector then may be far more successful in incubating small firms than the government. This should leave the state with something to think about.
Timm is a South African who writes on small business. Click here to sign up for the monthly Small Business Insight newsletter.
Peru isn’t exactly a hotbed of innovation. But a new start-ups programme could just be the answer.
The country spends barely 0.15% of gross domestic product (GDP) on research and development (R&D) – miniscule compared to even its lack lustre neighbours (Chile spends 0.38% of GDP on R&D).
Yet since 2013 the government has committed 20 million soles ($6.1m) to backing 287 tech start-ups through StartUp Peru (drawn from over 3,000 applications in five rounds of the programme), Peru’s economic minster Pedro Olaechea (pictured above) said on Thursday.
Of this 11 million soles has been disbursed so far. A further 3.3 million soles has been committed by the start-ups themselves.
Those firms backed so far include a communication app, an online artist network, a supplier of renewable energy to buildings, an online platform for reporting and handling emergencies, an online clothing store and a household cleaning detergents manufacturer.
Olaechae said every year the number of applications increases at an average rate of 35%. In the current cohort 106 start-ups have been selected.
The programme at times runs various themed challenges. Currently it is running at 7m soles challenge aimed at dealing with disasters in Peru. The present call closes on Tuesday (June 20).
The programme was launched in December 2013 initially as a $20-million programme aimed at financing and supporting 200 high-impact entrepreneurs over five years. Subsequently the ministry was able to secure a further 52 million soles, which could enable the initiative to run a total of 10 calls.
Inspired by Start-Up Chile
Peruvian government officials were inspired by the early impact that neighbour Chile made with Start-Up Chile after launching in 2010. In putting together the programmme, Peru’s Ministry of Production also drew on input from entrepreneurs, incubators, accelerators, investors, universities and consultants from several international organisations.
Entrepreneurs that qualify for seed funding are eligible for support from local business incubators (also backed by government funding) for up to 18 months.
There are two funding channels. One funds offers grants up to 137,000 soles to fund high-impact and dynamic enterprises that are no older than five years to develop innovative products or services. Another provides grants of up to 50,000 soles for the development and validation of business models, developed by innovative entrepreneurs.
Foreign entrepreneurs can also apply for support, but are required to open a branch of their business in Peru before are can receive funding.
Seven times return
The programme is expected to produce significant returns for the government, as for each sole that the state invests in an innovative firm, it will be able to get a seven soles return in taxes, estimates StartUp Peru’s head Alejandro Bernaola.
If these come off, Peru would be in for a bonus. Olaechea seems confident it will. In October last year he estimated that the number of start-ups in Peru would rise by 50% in 2017 over 2016.
In the current economic climate it's much needed - the economy is expected to grow at a moderate 2.8% this year before accelerating to 4.2% next year, its central bank said this month.
Yet while Peru remains one of the most entrepreneurial countries in the world (ranked sixth out of 65 economies by the Global Entrepreneurship Monitor in 2016), too much of this is accounted for by unsophisticated micro enterprises, which in 2015 made up 95% of the country's 1.7 million registered businesses, according to a report.
Indeed while the World Economic Forum's (WEF) 2016/17 Competitiveness Report ranks Peru at a favourable 67 place overall, it put it at 119 for innovation.
What the country now needs is more entrepreneurs developing innovative and novel ideas or adapting innovations from other countries to work in local conditions. Betting on tech start-ups might just be the right thing to do.
Timm is a South African who writes on small business. He has not visited Peru yet. Click here to sign up for the monthly Small Business Insight newsletter.
Stephen Timm is a