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Government Policies Can Help or Hinder Entrepreneurs

  • Barry Wood

Many countries, knowingly or unwittingly, maintain policies that make it hard for entrepreneurs to build new businesses. Some entrepreneurs complain that they have to pay bribes to get business permits. Others struggle with endless red tape. But things are changing, as VOA's Barry Wood reports. (Part 4 of 5)

For San Francisco entrepreneur Craig Newmark, going into business was easy. A decade ago, without a permit or official approval, he simply built a website for his online bulletin board.

Today, craigslist.org is one of the world's most popular Internet destinations, with bulletin boards for over 500 cities.

"Basically we provide a very simple website, where people can find a job or a place to live. It's like a flea market. It works. Part of our success is getting out of the way," said Newmark.

Problems of Corruption

But many governments are unwilling to get out of the way. In Russia, businesses routinely pay bribes to obtain needed permits.

Chemical company executive Yana Yakovleva spent seven months in jail because she refused to be blackmailed by a bureaucrat. She says unlawful conduct persists because Russia's judicial system is corrupt.

"It's not the prosecutor's function to investigate. His function is to demonstrate effectiveness. And effectiveness happens to be the number of cases brought to trial and the number of guilty verdicts obtained," said Yakovleva.

Yakovleva's business partner, Alexei Protsky, complains about needless regulations and reporting requirements. "For a manager, excessive paperwork means a loss of time and reduction of labor productivity," he said.

Problems of Bureaucracy

In Venezuela, Caracas food distributor Santiago Alvarez says the bureaucracy there is formidable and hostile to business. "There are overwhelming steps and rules and things you have to get in order to do business. I have known people to go out of business just facing the bureaucracy," he said.

In Islamabad, restauranteur Ashar Hafeez says restrictions on business have eased in recent years, but they are still a burden. "Definitely, in this business we have to handle [red tape] in a lot of departments - social security, taxes, the local government. It is a difficult job here in Pakistan," he said.

World Bank Business Score Card

The World Bank puts out an annual scorecard ranking countries on the ease of starting a business.

Ten categories are covered, such as getting licenses, registering property, getting credit, paying taxes and enforcing contracts.

World Bank specialist Dahlia Khalifa says the trend is towards assisting the private sector. "And I think that is what governments are recognizing, their role as regulators and providing the enabling environment, and within that context they're doing exactly that" said Khalifa. "They are reforming. They are changing laws that have been on the books for decades that are no longer functioning in today's world."

Egypt was judged the top reformer last year, followed by Croatia, Ghana, Macedonia and Georgia.

Egypt cut the capital required to start a business, says the bank. It reduced fees for registering property and eased the bureaucracy that stalls construction permits.

But entrepreneurs say if progress has been made, more is needed.

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