Regulatory Reform
What It Takes to Reform the Business EnvironmentWhy some countries are more successful and consistent than others in building and sustaining a sound economy is a complex question. According to the World Bank’s Growth Report, ”Sustained, high growth is not easy. If it were, the list of successful cases would be longer. Some countries struggle to start growth; others fail to sustain it. Some grow quickly, but reach a plateau when they reach middle-income. A fast-growing economy is a moving target.” [1]
The environment in which firms operate determines in large part whether they will thrive or wither, and that environment is directly influenced by government policies and institutions. While the quality of the overall investment climate depends on many factors (political stability, infrastructure, and the skills of the labor force, to name a few), the business enabling environment encompasses the laws, regulations, courts, and other institutional elements that affect business activities.
Some of the key business environment factors in the legal and regulatory framework for doing business include:
• Business entry, exit and licensing procedures
• Tax policies and administration
• Access to finance
• Labor laws and administration
• Access to land
• Customs administration and trade regulations
• Investor protection and risk mitigation
• Contract enforcement
Based on a 2007 survey of investor perceptions and the findings of successive editions of the World Bank’s Doing Business, regulations impose a significant cost and risk on businesses operating in South East Europe. Although the region has been among the top Doing Business reformers since 2005, there is still much to be done—and the financial crisis has multiplied the challenges that policymakers face in swaying investors’ decisions.
Reforms of the business environment—undertaken to promote the private investment that most economists view as an important engine of growth—are just one component of a broader growth strategy that should be built on country- and context-specific priorities. The agenda for reform of the business environment should reflect those priorities in the form of clear and actionable goals. It should also provide for regular measurement of results, not only to assess progress, but also to help build constituencies for reforms that often are difficult because they create short-term winners and losers along the path to greater prosperity for all
[1] "The Growth Report: Strategies for Sustained Growth and Inclusive Development"., World Bank, 2008.