SMEs need elbow room, not government crutches

PUBLISHED : Monday, 28 April, 2003, 12:00am
UPDATED : Monday, 28 April, 2003, 12:00am

SOMETIMES A SIMPLE thought can be very revealing of how the thinker sees the larger picture and sometimes this can set a whole train of thought going in your own mind, sometimes travelling the other way.

What I have in mind here is a question and answer interview published on The Informer page of our Business section on Friday with barrister Daniel Fung Wah-kin who has taken on many public service roles and was particularly concerned on this occasion with development of the Pearl River Delta.

'Companies aren't equal,' he said. 'Just as people aren't born equal in terms of being endowed with an equal amount of brain and brawn. If we translate this to corporate genetics, companies aren't equal.

'The bulk of businesses aren't multinationals. We know SMEs [small and medium enterprises] are here to stay. My perception is that Hong Kong and the Pearl River Delta are choc-a-bloc full of SMEs and it's really SMEs that are imbued with entrepreneurial zeal. We know SMEs don't have the same access as Microsoft, so they need help.'

Now, first of all, I am far from ready to accept that people are not born equal. They may not be in terms of the circumstances conferred on them by their parents but when Mr Fung says they are not born with an equal amount of brain or brawn, I would like a medical opinion on differences in the cranial capacity and muscular structure of healthy newborn infants. I doubt there is as much difference as Mr Fung seems to believe.

And I certainly think there is even less difference among newborn companies. Microsoft was started in a garage and did not have the capital for anything better at the time. It was the archetypal SME and government funding did not get it to where it is now.

If Microsoft is to be used as an example of anything then it should be of how SMEs can prosper mightily on their own, which is the exact opposite of the finding to which Mr Fung comes.

But let us say that government funding and support of the kind he would like to see in the Pearl River Delta existed in the United States during the 1970s when Microsoft got its start.

First, it would have been unlikely to find its way to Microsoft's birthplace, Seattle, particularly if it was already earmarked for a geographic location as these proposals for the Pearl River Delta support have been. In the United States this would have been San Francisco or Boston but not Seattle. Seattle was aircraft, timber and rain.

Secondly, it would have been very unlikely to go to a pimply long-haired nerd with the idea of buying someone else's software code for an operating system and jobbing it on to a third party. That was Microsoft founder Bill Gates, far from an ideal candidate for research and development subsidy, either in person or idea.

The money would much more likely have gone to someone a little more swish and less buccaneering, who promised to write his own code. The result probably would have been Bill Gates elbowed out of the way at a critical stage by someone given advantages not available to him and we would not have a Microsoft today.

Call that a blessing, in some ways I certainly would, but there is easily more curse than blessing to this sort of thing. Subsidies to SMEs in the Pearl River Delta, when not subject to the full rigours of the market, and they would not be, are as likely to stifle as encourage the real versions of Bill Gates across the border, more likely to stifle in my view. Governments tamper with these things at the peril of the entrepreneurial success they seek to achieve.

And if Microsoft now happens to be a giant, there is a place for giants as well as midgets. What the world needed was a common computer operating system, recognised and familiar everywhere. It got it with Windows, clean of the multiplicity of systems that still plague television and mobile phones, all thanks to a pimply nerd who cleared the other wannabes out of the way like a cannonball going through their ranks.

To achieve that and to keep the system at the leading edge of technology while protecting it with code innovation and an army of lawyers from that one great weakness of it being so easy to copy, takes money and muscle and Bill Gates had built that up when he needed it. There can be only one Microsoft.

But there is plenty of room for the midgets too. Manufacturers in China produced 2.17 million microcomputers last month alone. Ten years earlier that figure was fewer than 6,000. Microsoft is not competing in this field. It has become a speciality of China and, more than that, of thousands of small enterprises, all contributing their own small share of this output in a seamless system of trade.

You have it wrong, Mr Fung. Those SMEs in the Pearl River Delta already have plenty of brain and brawn. Together they are the equal of Microsoft, providing the hardware on which Microsoft's software runs, and they do it best as they do it now.

What they need most from you now is that you just let them get on with the job.