A successful small and medium enterprise sector can only thrive under the right regulations, reports Sherine Nasr Representatives of major donor agencies gathered in Cairo last week to discuss the most appropriate means of reforming the business environment in developing countries. The four- day International Conference on Reforming the Business Environment brought together more than 350 experts from around the world to share their experiences and discuss how a more business-friendly environment might be created that would positively impact on small enterprises and, by extension, the national economies of developing countries. "Improving the business environment is absent from the reform programmes of the majority of countries though it is the primary means to boost economic growth and reduce poverty," said Martin Clemensson, chairman of the Business Environment Working Group affiliated to the Committee of Donor Agencies for Small Enterprise Development. "We are coming together as donor agencies, governments and the private sector to call attention to how critical it is that small businesses find a supportive environment and attitude among their government officials and to identify better ways to unleash the potential of small enterprises to contribute to new jobs, better business and less poverty," he said. The committee, established in 1979, is an umbrella grouping of 38 agencies and provides a platform for representatives of bilateral and multilateral donor organisations to exchange information and experience of development programmes. In 2001 the committee established the Business Environment Working Group to commission research into the role donor agencies play in promoting a positive business environment. Recent reports have focussed on current practice in 10 countries, including Egypt. In the last five years, researchers say, there has been a shift from direct and subsidised support of enterprises -- in terms of management training, grants, marketing advice etc -- towards supporting governments as they attempt to remove the barriers that make it difficult for small businesses to start up and grow. The Working Group carried out two surveys among donor agencies in order to identify the role they play in promoting a business-friendly environment. "The results were interesting and, in some respects, alarming," said Simon White, Technical Consultant to the Business Environment Working Group. White underlined that many donor agencies know little about the actual impact their business environment reform programmes have on the ground, and that seeking to improve the business environment is an area in which few donors have any experience. "It is an ill-defined area and the capabilities donors bring to this work are unclear," said White, who stressed that the political character of the programmes involved further complicates the field, "because business environment reforms require agencies to work at a higher political level, the challenges to collaborate are at once greater and more crucial than ever." During the conference experts drew a clear link between poor business environments and the extent of the informal economy. "While efforts to develop the informal economy have tended to focus on helping informal enterprises do better there is now growing recognition of the importance of improving the business environment to reduce informality," said Darren Welch, principal consultant at Bannock Consulting in London. A better business environment, says Welch, makes it easier and more desirable for enterprises to comply with legal and regulatory requirements. One of the most effective means to promote a healthier business environment is to overhaul tax laws. Small businesses tend to view the tax system as an obstacle to their development and the overall tax burden as too high. "As a matter of fact, small business operators continue to be confronted with a large number of tax obligations and high compliance costs," said White. Other issues discussed included ways to sharpen the competitive edge of small enterprises, reduce the regulatory burden on businesses and improve the monitoring and evaluation of reform programmes. A draft document on best practices in business environment reform, said Clemensson, will be the subject of extensive field consultation during 2006 "as the committee seeks to define for its members and for the governments round the world how best to go about improving a business environment".
