A Pragmatic Policy Toolkit for Startup Ecosystems in Emerging Markets

CEE Staff
Nov 11
5 min read

Executive Summary

Emerging market governments are in a global race to build the next Silicon Valley, often launching ambitious, top-down initiatives that consume vast resources with little to show for it. This policy brief argues for a fundamental shift in approach. Instead of chasing grand, headline-grabbing projects, policymakers should focus on systematically removing the foundational barriers that entrepreneurs face daily. This toolkit provides a practical, action-oriented framework for mid-level government officials, moving beyond academic theory to offer concrete, proven policy levers.

It is organized around three core pillars: (1) Fixing Foundational Barriers, which focuses on radical regulatory simplification and reliable infrastructure; (2) Attracting and Retaining Talent, which covers targeted visa reforms and practical skills training; and (3) Catalyzing Smart Capital, which advocates for co-investment models over direct government grants. The brief concludes with a simple three-question litmus test for evaluating any new ecosystem initiative. The central message is that successful startup ecosystems are not built; they are cultivated by relentlessly solving the small, frustrating problems that prevent entrepreneurs from creating value.

Why Most Government-Led Ecosystems Fail

The desire to foster a vibrant startup ecosystem is a valid and critical goal for any emerging economy. Startups are engines of job creation, innovation, and economic diversification. According to the OECD, young firms account for nearly half of all new jobs created over time . However, the path to building a thriving ecosystem is littered with the expensive failures of well-intentioned government programs. The common mistake is focusing on the visible outputs of a successful ecosystem (tech parks, government venture funds, international conferences) while ignoring the invisible, foundational inputs.

Policymakers often fall into the trap of believing they can centrally plan an ecosystem into existence. They build infrastructure without consulting entrepreneurs, launch funds without understanding risk capital, and design programs that create more bureaucracy than businesses. The result is a “Potemkin ecosystem” that looks impressive from a distance but is hollow on the inside. The key to avoiding this fate is to invert the model: start with the entrepreneur’s daily frustrations and work backward from there.

A Pragmatic Policy Toolkit

This toolkit is designed for practical application. It focuses on high-leverage, low-cost policy actions that can be implemented incrementally to create a positive feedback loop of entrepreneurial activity.

Pillar 1: Fix Foundational Barriers First

Before any discussion of venture capital or AI labs, entrepreneurs need reliable electricity, fast internet, and a bureaucracy that gets out of their way. These are not glamorous issues, but they are the most critical.

Policy 1: Radically Simplify Business Registration. The single most powerful signal a government can send is that it is easy to start a business. The goal should be a “one-day, one-form, one-fee” online process. In Singapore, a global leader, registering a business takes just 1.5 days online . In contrast, many emerging markets require multiple in-person visits, extensive documentation, and significant upfront capital deposits. Your Monday Morning Action: Map out every single step an entrepreneur currently takes to register a business, from first form to final approval. Your mandate is to cut the number of steps and the total time by at least 75% within 12 months.
Actionable Policy 2: Ensure Infrastructure Reliability. Unreliable power grids and slow internet are silent killers of productivity and innovation. While building new national infrastructure is a long-term project, targeted interventions can create reliable zones for startups. Your Monday Morning Action: Partner with private utility and telecom providers to designate and guarantee 99.9% uptime for electricity and high-speed internet in specific, high-density urban zones or university districts. This creates pockets of excellence where startups can operate without disruption, serving as a magnet for talent and investment.

Pillar 2: Attract and Retain the Right People

A startup ecosystem is nothing more than a dense concentration of talented people. The saying “talent attracts capital” is a fundamental truth. Governments cannot create talent, but they can become magnets for it.

Policy 1: Launch a “Startup Visa” and a “Diaspora Pass.” The global war for talent is real. Your country must compete. Create a fast-track visa for foreign entrepreneurs who have secured funding from a recognized list of investors. Simultaneously, create a simple, low-cost, long-term residency permit for members of your country’s diaspora and their families. Estonia’s e-residency program is a powerful model for attracting global entrepreneurs digitally . Your Monday Morning Action: Assemble a small team from the immigration and commerce ministries with a single task: design and launch a startup visa application that can be completed online in under an hour, with a decision rendered in under 30 days.
Policy 2: Fund Practical Skills, Not Just Degrees. A university degree is not the same as possessing job-ready technical skills. Your Monday Morning Action: Instead of funding another university computer science building, launch a matching grant program for private coding bootcamps and digital trade schools. The grant is paid to the school only after a graduate secures a technical job with a verified salary above a certain threshold. This directly incentivizes the teaching of skills the market actually needs.

Pillar 3: Catalyze Smart Capital, Don’t Replace It

Government officials are not venture capitalists. Attempts by the state to directly pick winning startups almost always fail due to political pressure and a lack of market discipline. The proper role of government is to make it easier and less risky for private capital to do its job.

Policy 1: Implement a Co-Investment Fund. Instead of creating a large, state-run VC fund, establish a co-investment fund that automatically matches the investment of pre-qualified, reputable private VC firms. This leverages the due diligence and expertise of the private sector. Singapore’s success was built on this model, which signaled government commitment while ensuring market discipline . Your Monday Morning Action: Draft a one-page policy memo outlining a co-investment fund that requires a 1:1 match from a list of approved regional and international VC firms.
Policy 2: Create Radical Transparency. Private investors, especially foreign ones, are deterred by a lack of reliable data. Your Monday Morning Action: Mandate the creation of a publicly accessible, real-time database of all registered startups, including their sector, funding rounds, and employee count. This reduces due diligence costs for investors and creates visibility for local startups. The work of firms like Briter Bridges and VC4A in Africa shows the immense value of making ecosystem data public and reliable .

A 3-Question Framework for Policymakers

Before approving any new budget or program for your startup ecosystem, ask these three simple questions:

Who is the primary beneficiary? Is it the entrepreneur (solving a real problem) or a politician (a good photo opportunity)?
Does it remove a barrier or create a dependency? Does it make it easier for anyone to start a business, or does it force entrepreneurs to apply for a special government program?
How is success measured? Is it measured by a government metric (e.g., “number of startups trained”) or a market outcome (e.g., “total private capital raised,” “number of new jobs created”)?

If the answers point away from the entrepreneur and the market, the initiative should be rejected. The 2025 StartupBlink report shows that countries making the most significant progress are those implementing targeted policy reforms. Saudi Arabia’s dramatic ecosystem growth is directly tied to its Vision 2030 investment program, while Uzbekistan’s entry into the top 100 is a result of concrete digital economy reforms . These successes are not accidental; they are the result of focused, practical policy action.

Cultivating, Not Constructing, an Ecosystem

Ultimately, a government cannot build a startup ecosystem. It can only create the conditions for one to grow. The most effective path is not through large, centralized projects, but through the steady, incremental removal of barriers. The focus must shift from high-profile initiatives to the relentless improvement of the underlying operating environment. By making it easier to start a business, attract talent, and access capital, policymakers enable entrepreneurs to do what they do best: create value, solve problems, and drive economic growth from the ground up.