Presentation to the Info Dev Asia Pacific Incubator Workshop Hanoi, Vietnam 3-6 October 2007

1. Republic of the Fiji Islands Presentation to the InfoDev Asia Pacific Incubator Workshop Hanoi, Vietnam 3-6 October 2007

3. ESTABLISHMENT OF A NEW BUSINESS INCUBATOR A Project of the National Centre for Small and Micro Enterprises Development [NCSMED] Suva, Fiji

4. PLAN OUTLINE Fiji’s economic condition MSME Industry Project Rationale & Needs Objectives Proposed Solutions Possible Impacts Organizational Effects Conformity with National Policies Project Management & Organization Cost Benefit Analysis Risk Analysis Conclusion

5. Economic Conditions

6. MSME Fiji Definition • Micro enterprises – turnover less than $30,000 and employs fewer than 5 people • Small enterprises – turnover between $30,000 and $100,000 and employs between 6 to 20 people • Medium enterprises – turnover >$100,000 but < $1.0m and employs between 21 – 50 people

7. MSME Fiji Data • Number of MSMEs in Fiji - 11,558 (in 2001) with taxable income of $149.45m • Micro enterprises - 10,627 with taxable income of $71.14m • Small Enterprises – 779 with taxable income of $44.73m • Medium Enterprises – 152 with taxable income of $33.58m • 8,000 registered (in 2005) mostly Companies and approx 4,000 unregistered

8. Project Rationale & Needs • Over 80% of start up business collapsed even before reaching the establishment and growth phases. • Those that survived after start ups, they face multiple of problems which include high start up costs, poor financial planning and management, lack of working capital, inability to establish market outlets and others.

9. Project Rationale & Needs • Increasing unemployment and under-employment in the rural areas • Need for better coordination by the various Government agencies to develop the rural areas; • Lack of business management expertise by resource owners; • Lack of business creation ideas; • Lack of necessary start up capital; • The need to make productive use of un- utilized and abundant natural resources; • The need to explore and develop specific MSME niche market opportunities.

10. Project Rationale & Needs • Problems attributing to the identification of the priority and developmental needs of MSMEs: • Absence of data and information on MSMEs, especially in the informal sector; • Lack of knowledge and awareness by the support providers of the specific needs of MSMEs; • Limited coordination by the service providers of their respective development and support programmes for MSMEs; • The need for strategic directions of the MSME sector in terms of problems issues, growth areas and export development areas.

11. Challenges in the Business Incubator Project • Small size of the Fijian Economy and narrow economic base; • Lack of demand as the result of a depressed economic climate; • Lack of business incubator experience in Fiji; • Business Incubator operational management knowledge and skills not adequate; • Support from Government still considered weak and there is no policy direction in place; • Lack of Infrastructure development in rural areas and business incubator pre-conditions do not favor the setting up of Incubators in the rural areas.

12. Fiji Incubator Experience • Fiji Retail Enterprise Engine “ FREE Shop • Launched in December 2003 • Arts and Crafts as the business model • Had closed down this year – Incubatees not prepared to run on their own • NCSMED – Ra Business Incubation Center • Launched in April 2006 • Multi sector model adopted • Re-designed in July 2007 to adapt a single sector model (focus on Apiculture)

13. Project [Business Incubator] Objectives • Short term objective • to create an entrepreneurial environment and culture through provision of office space and other business support services in an attempt to reduce start up problems and failure rates of MSMEs. • Medium & Long term objectives • to develop and nurture MSMEs to provide regular income for self employed people; absorb school leavers into the industry and reduce unemployment; minimize urban migration; create livelihoods for disadvantaged groups and improve living standards

14. Project Solutions • Incubator Models • Pre-conditions for selecting a Fiji Model • Needs of the target groups; • Clear government policy; • Positive view and support for entrepreneurship; • Presence of big enterprises in the target area; • Adequate infrastructure; • Availability of capital; and • Close proximity of universities and research centers

15. Project Solutions Incubator Model - The most appropriate model would be a multi-sector one but the focus would be on two or three sectors in the initial phase and then build up capability to accept all types of businesses later on.

16. Project Solutions Location - Four Locations identified (Navua, Suva, Nausori and Korovou. A matrix was constructed and weighted scores given on key factors.

17. Project Solutions

18. Project Solutions • Target Group - the focus will be on these key areas: • Type of business – Existing enterprises with growth potentials. • Economic Sector – Sectors which has potential for export and the local market such as agriculture, fishing, forestry, eco-tourism and telecommunication. • Technological Transfer – small manufacturing and food processing would be viewed positively as it promotes technology transfer from highly developed and high growth economies.

19. Project Solutions Facilities & Services to Support the New BIC

20. Project Solutions Site Selection • When choosing the site and making the decision to use existing building, we need to consider these factors:- • Leasing arrangements and time constraints; • Internal space adaptation and expansion; • Premises and environmental constraints; • Image of the site and the premises; • Availability of other basic infrastructure; • Type of business incubator and its objectives Several sites have been identified and more on Office leasing arrangement.

21. Project Solutions Strategic Options – Option I Using FCOSS Micro Finance Platform Suva FLEA MARKET Tenants NCSMED FCOSS Microfinance Unit Identification of needs and business support services Provision of Support Services Currently, over 80% of tenants at the Suva Flea Market are clients of FCOSS Microfinance Unit. This will be the main target of this model. The Business Incubator concept will be introduced via provision of business support services and not so much through shared facilities.

22. Project Solutions Strategic Options – Option II Partnership with an NGO Incubator Board of Directors Incubator Trustees Project Development Team Incubator Manager Farm Production Marketing & Communication Finance & Administration Processing A multipurpose Incubator is planned receiving all types of business. The incubator will initially act as a facilitator linking with rural producers, buyers and market outlets.

23. Project Solutions Strategic Options – Option III Takeover of existing set up • Private Entrepreneur operating a big warehouse and sub letting space to small business entrepreneurs to reduce rental. • There are about 6 tenants already occupying the premises with shared facilities (conference room, electricity, water and rental). • The Principal Tenant [Lessor] provides financial guidance, mentoring services to tenants. • The building is in the heart of Suva and on a prime location with spacious customer parking • There is space for expansion as well as a big warehouse area for keeping stock

24. Possible Impacts • Existing Business Incubator. • Incubators outside Suva • NCSMED programs • MSME and Potential Entrepreneurs • The Principal Tenant [Lessor] provides financial guidance, mentoring services to tenants. • Other Stakeholders

25. Organizational Effects • Work processors • Training Needs • NCSMED programs • Job Content • Organization Structure

26. Conformity with National Policies National MSME Policies The creation of sustainable livelihoods through enterprise development is the ultimate objective of Government’s micro, small and medium enterprises policy. Strategic Development Plan (SDP) 2007 – 2011, Government has mapped out strategies that will create employment and self employment opportunities, increase rural production, raise investments and export earnings and alleviate poverty.

27. Conformity with National Policies NCSMED Mandate The functions of NCSMED are given on Section 5 (1) of NCSMED Act, 2002. Part (e) harmonizes with the business incubation project which states “to develop new business opportunities including running pilot projects or new business opportunities.” Other support services within the business incubator structure such as business consultancy services, provision of information, promotion of MSMEs and facilitate access to microfinance are also approved functions of the NCSMED.

28. Project Management & Organization Project Structure CEO NCSMED BIC Board Project Development Team Project Development Specialist Manager BIC Project Team BIC Board – 4 (including CEO, NCSMED) Project Development Team – 9 (Including Specialist, NCSMED) Manager Business Incubator – 1 Support Staff - 1 Support Staff

29. Project Management & Organization • Decision Making Process • Management qualification • Project Team Organization • Quality Assurance Strategies • Time Frame and Work Plan

30. Cost Benefit Analysis • Financial Assumptions • Expected Benefits • Expected Costs • Set Up Costs • Operating Costs • Business Incubator Development Costs • Sources of Funds • Cash Flow Analysis

31. Cost Benefit Analysis Financial Assumptions • Government Grant from 2007 will be at least $150,000 for the next three years; • Project will be launched towards the end of 2007 and Government funding is expected to be released at this time; • No new building or land will be acquired but leasing as this is the most viable option; • There will be no borrowing expected in the first three years; • Partnership arrangement and sponsorship requests will be made in Year 2 in anticipation of reduction of Government Grant; • The projection is based on a multi-sector and multi purpose business incubator and very conservative estimates;

32. Cost Benefit Analysis Expected Benefits

33. Cost Benefit Analysis Expected Costs • Three major cost components • Capital costs [set up] • Business Incubator Office Operational Costs • Business Incubator Development Costs

34. Cost Benefit Analysis

35. Cost Benefit Analysis

36. Cost Benefit Analysis

37. Cost Benefit Analysis

38. Cost Benefit Analysis Projected Cash Flow Analysis

39. Risk Analysis

40. Conclusion • Business Incubator is a very important economic tool to develop MSMEs and their rural economies. • Model for Fiji take into consideration local conditions, culture and availability of resources • It may be prudent to target existing and established MSMEs rather than the new start ups given Fiji’s political climate

41. Thank You National Centre for Small Micro Enterprises Development Unity House, 82 Robertson Road, Suva Phone: (679) 3312991 or 3312992 Fax: (679) 3302356 Email: info@ncsmed.org.fj Website: www.ncsmed.org.fj