Regulatory climate sets the stage

Oct 12 2012, 04:41 IST
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SummaryPolicies should let people try new business ideas and take on calculated risks.

target groups, need suitable regulation for their implementation.

The second step is to look at specific sectors and regions and assess whether specific licensing or administrative requirements are justified or not. Again, benchmarking such requirements against international experiences, or between regions or sectors, may be done.

The benchmarking has to be complemented with a third step: organisation of a public-private dialogue on the costs and benefits of regulations. Such a dialogue would convey the business communities' concerns about excessive regulations and let the regulators know the costs of regulation. This will help weed out useless regulations and refine the remaining ones.

Kenya has won kudos for such an exercise. It set up a Business Regulatory Reform Unit in 2006 to regularly keep track of all regulatory regimes and licensing, and to ensure that new regulations, licences, fees and charges do not create avoidable burdens on business and do meet international best. This unit also tracks the quality of new licensing regulations through a Regulatory Impact Assessment.

Even in India's neighbourhood, the Bangladesh Better Business Forum was set up in 2007 in response to low business confidence, regulatory uncertainty, bureaucratic bottlenecks and barriers to businesses. With 41 members (20 public and 21 private) and chaired by the prime minister, the forum has five working groups, including one on business entry and operations. The forum has so far proposed 249 recommendations, of which 113 were approved.

Unctad says in many developing countries a significant part of the economy remains in the informal sector, and the size of which is determined by the quality of the legal framework, more precisely company entry costs and regulatory burden, including corruption and financial constraints. Breaking down these hurdles promotes formal entrepreneurship.

Often, procedures for start-ups can be abolished without any negative side effects. Three measures have shown to be particularly successful in this regard: (i) systematic procedures to review and cut business start-up requirements in terms of number of licences, procedures, and administrative fees; (ii) the introduction of fast-track mechanisms and one-stop-shops to bundle procedures; and (iii) the introduction of ICT-based procedures for businesses registration and reporting.

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