In developing policy priorities, EOs need to start from the premise that governments face administrative and political limitations, and have limited policy-making capital to spend. Even if governments were utterly committed to growth-enhancing strategies, they can only do so much. Providing them with a long list of reforms will lead to frustration and delay –and ultimately and most seriously– major limitations on businesses not getting the policy attention they deserve.
EO strategies require a sense of priorities: the approach is to then focus on a limited bundle of real constraints on the enterprise sector (i.e., not everything) that can realistically be addressed within a specific period of time.
This approach 'the binding constraint framework'(1) is predicated on identifying the most significant bottlenecks in the economy at a given point in time, and focusing efforts on alleviating those few constraints within the EO's capacity and remit.
This framework(2) is based on the notion that the basic set of principles such as respect for property rights, sound macroeconomic framework, investor protection and so on, combined with country-specific growth strategies are more likely to be successful in creating the environment for sustainable enterprise creation, development, and inclusive growth.
1.1 Why does the focused approach to advocacy make sense?
Successful growth polices along with the necessary economic, political, and regulatory institutions to support them, occur over an extensive period of time.
Consider a modern financial system: its functioning depends on a host of categories of people and institutions that, in the aggregate, should enable the efficient allocation of capital and the dispersal of risk. A non-exhaustive list would include securities and corporate lawyers, regulatory institutions, disclosure laws to deal with the informational gaps and asymmetries in many financial markets, securities laws, investment and commercial bankers and banks, portfolio managers, traders, analysts, brokerage firms, risk managers, private equity entities and professionals, government debt markets and traders, and a competent and independent central bank. These institutions and frameworks are created over the course of economic growth and development and takes decades to achieve.(3)
Simply suggesting that developing countries should try and replicate what is done in developed countries, in a compressed time frame and across policy domains has been shown to not work. The effort and political capital required are just too large for what are often very limited political administrations.
The "do-it-all" approach is just too ambitious a reform agenda; moreover, it does not signal to policy-makers "where to start", often resulting in policy effort being spread too thinly over too many different areas and has also led to sloppy and unsustainable reforms. Practice and legislation from long standing developed countries is lazily put in place with little consideration for its practical application, actual cost, or most importantly, sustainability.(4)
There will always be issues that crop up unexpectedly and which require immediate attention. But EOs need to resist taking on too many issues at the same time. The danger is that none will get the attention that they deserve and most will fail. Pursuing an issue through to policy formulation and advocacy requires major effort and resources in undertaking research, and in preparing compelling policy proposals, not to mention the effort required to meet and influence public officials and politicians. That is not to say that the EO should drop all other issues as this would also be a grave mistake: the EO still needs to respond to day to day issues. It still needs to address its members' immediate needs; and also needs to take a longer term policy view and the EESE will help the EO with this. Above all the EO needs focus in order to achieve policy results.
1.2 Prioritizing Efforts
The EO needs to focus on the most pressing regulations and legislation, and only target proposals expected to have the largest impact on businesses.
The EO should focus on assessing the nature and the size of the problem that is intended to be solved by the regulation or policy action. This involves identifying:
- Which sector(s) will be most affected?
- Will it impact more on smaller or larger enterprises?
- What is the nature of the impact on each sector?
Will it impact more on women-owned enterprises?
- How large are these effects?
- How long will these effects persist?
(1) This Framework is adapted from work by Dani Rodrik, Ricardo Hausmann and Andres Velasco John F. Kennedy School of Government, Harvard University: http://www.hks.harvard.edu/fs/drodrik/GrowthStrategies.pdf
(2) Outlined in the ILO/ACTEMP Publication: Role of the EO in Growth and sustainable enterprise promotion, 2010.
(3) Mohamed El-Erian and Michael Spence: Growth Strategies and Dynamics: Insights from country experiences, Washington, D.C., Commission on Growth and Development, 2008.
(4) Ricardo Hausmann, Bailey Klinger, Rodrigo Wagner: Doing growth diagnostics in practice: A mindbook, Center for International Development, Harvard University, September, 2008.