Business-Climate Reforms Must Be Large Enough to Influence Growth Part II

“Let’s start small. One measure that could go a long way is to reduce the number of days and procedures required to start a new business. Since Belize was first included in the Doing Business Report ten years ago to present, those two factors have remained virtually unchanged. Maybe that is a useful starting point to see if the empirical work can truly lead to an augmented level of entrepreneurs entering the formal sector and helping to boost the economy and provide additional revenues that could help reduce the very thing that started this conversation: the public debt”—from Business Perspective Column (BP) for January 7th, 2018.

As any avid follower of the BP series would have noticed by now, these pieces are themed as an ongoing conversation. This is done intentionally so as to reflect the dialogic nature of business reforms, whereby both private and public sectors must remain actively engaged. It is on account of this need to embrace, support and promote this channel of communication between both the former and the latter. In light of this, the Belize Chamber of Commerce and Industry (BCCI) has openly applauded the institutionalization of bodies such as the Economic Development Council (EDC). Actually, it was as early as the second BP article that we wrote:

“It goes without saying that the Belize Chamber of Commerce and Industry (BCCI) supports the institutionalization of the EDC, which serves as an advisory body on matters affecting the business climate to the Office of the Prime Minister (OPM). The BCCI’s support stems from the fact that the school has been out for some time now on the fact that development requires a collaborative effort of both private- and public-sectors.”

Now, this brings us to the opening quote above, which was the concluding statement from last week’s BP article. That conversation was focused on empirical economic research that revealed that reforms—if they are going to be effective—ought to meet or surpass a particular threshold. And one useful reform area is the number of procedures and/or number of days for starting a new business.

While it’s always tricky to compare diverse economies, let us take Jamaica, for instance. Between the Doing Business Index (DBI) Reports for 2017 and 2018, Jamaica, among other things, reduced the number of days it takes to complete the procedures for starting a business from ten to three days; thereby, moving up in the “Starting Business” rank from twelfth to fifth.

In terms of that threshold we spoke about last week, it is noteworthy that such a change surpasses the cutoff identified by Klapper and Love (2010), especially seeing as how it was implemented simultaneously or sequentially with other measures under their overarching reform strategy that was part of their reform commitments, which are supported under the International Monetary Fund (IMF)’s Standby Arrangement. These sort of examples somewhat reinforce the point made by empirical economic research. Consequently, it is not any surprise then that the World Bank was able to state: “The reform programme being implemented in Jamaica is beginning to bear fruit: Institutional reforms and measures to improve the investment climate have started to restore confidence in the Jamaican economy”.

Now, this brings us back to the EDC and its Secretariat, the Department of Public-Private Sector Dialogue (DPPD), that are tasked with the daunting duty of “translating” the needs of the private sector to the relevant government agencies and into legislative or regulatory reality. And, like Jamaica, the EDC/DPPD has begun to work towards measures that could for example, reduce the number of procedures and days it takes to register a new business. A specific such effort is via a new project entitled: “Leveraging Technological Innovation for Reducing the Cost of Doing Business in Belize”.

As explained by the DPPD’s Executive Director Ishmael Quiroz, the project, which is being implemented with the technical assistance of Compete Caribbean of the IDB Group, “proposes to identify and implement technological solutions that reduce the number of steps, time, and costs of doing business as it relates to the business processes of (i) starting a business, (ii) paying Trade License and (iii) securing construction permits.”

Speaking to Belize’s position on DBI and the benefits of the project, Compete Caribbean has explained: “As the second lowest ranked indicator on the Doing Business Index, the potential benefits of improving the systems of the company’s registry and trade license within the ‘starting a business’ process include increased formalization of businesses leading to positive spillovers of increased entry of SMEs into the formal sector, job creation and economic growth.”
Quiroz added: “Overall the project will benefit Belize through fostering entrepreneurship, enabling lower levels of corruption as a result of increased transparency, expanding the tax base, and promoting consumer protection.” We could not agree more.

Of course, reform and change take time and political will. In addition, many changes are constrained by a lack of a shared comprehension of the need for business-friendly updates and/or overhaul to the legal, regulatory and institutional systems. In Jamaica’s case, as was noted by the IMF: “Strong domestic ownership of the reform agenda, across two different governments and the broader society, has helped entrench macroeconomic stability and fiscal discipline. The authorities’ sustained commitment coupled with the ongoing program monitoring by civil society has paved the way for reforms to be increasingly domestically-owned, and executed.”
A key factor in the rate change is the ownership by the broader society and across-the-board commitments to their implementation. Fundamentally, for the Belizean private sector and the EDC/DPPD to see substantial and meaningful reform at the levels and the speed prescribed by empirical works, the vision of an improved investment climate needs to be shared by all stakeholders.

Ideally, projects like the EDC/DPPD’s digitization project is on the right track and it should be in every stakeholder’s best interest to ensure that it is completed and implemented as soon as possible. It is noteworthy that this project directly complements the Government of Belize’s eGovernment Strategy as being led by the Central Information Technology Office (CITO). The initial objective is to place more public services online, within easier reach of the citizenry in general, but the potential for positive impacts on the private sector and business climate are tremendous and deserving of support, buy-in and continuous monitoring to ensure timely delivery of secure and well-governed digitized platforms that are business-friendly.

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