Step 3: Mapping and assessment of the policy, legal and regulatory framework

The mapping of policy, legal and regulatory instruments involves a detailed description of existing policies, laws and regulations. Before any assessment or synthesis can occur, it is important that you scan the policy, legal, and regulatory framework and summarise its main features. This will provide the material on which your later assessments and conclusions can be based.

Depending on the government and legal system in the country under study, the responsibilities for design and implementation in these policy, legal, and regulatory instruments are shared in different ways between the national, provincial, district, and local levels of government. Therefore, you should distinguish between the roles and responsibilities of these levels of government wherever possible.

While it is important to be as comprehensive as possible when mapping the policies, laws, and regulations, you will find that some prioritization will be necessary. Some laws and regulations, for example, deal with very minor, sometimes subsector concerns in the overall policy and legal framework. It is best to start with the major policies, laws, and regulations that affect the overall landscape in which enterprises operate. Then, you can move into the more narrowly focused policies, laws, and regulations. At some point in this second layer of narrower concerns you will reach a point where it is best to stop. This point will be reached when it is clear that the policies, laws or regulations in this layer are relevant to a very small proportion of enterprises. You might find that asking some professional advisers in business policy and law (e.g., taxation agents, accountants, lawyers, business advisers, and bankers) will help you to determine those policies, laws, and regulations that affect most enterprises and those that affect only a very tiny proportion of small enterprises.

The following tables (see Box 4 and Box 5) identify the issues you should address when mapping and reviewing the policy and legal framework.

Box 4: Issues for the mapping of the policy, legal, and regulatory framework
You may use the headlines of this table to structure your analysis of each of the policies, laws, and regulations you are mapping.

Main policies, laws and regulations [Title and year adopted]
What are the most relevant policies, laws and regulations?

Objectives or purpose
State the objectives of the policy or law. In some cases, these will be better phrased as the main purpose of the law or regulation.

Coverage
What coverage does this policy, law ,or regulation have in the enterprise sector (e.g., applies to only medium-sized enterprises, or to all enterprises)?

What coverage does this policy, law, or regulation have across the enterprise sector (e.g., applies only to manufacturing enterprises)?

What coverage does this policy, law, or regulation have across the country (e.g., applies only to urban areas, to specified provinces, or to Export Processing Zones)?

Main provisions
Briefly summarize the content of each policy, law or regulation paying particular attention to:

The definitions applied and criteria used to identify micro, small and medium-sized businesses

References made to employment issues

Any gender equity considerations

Implementing agencies
Which government institutions are responsible for the implementation of policies, laws, and regulations?

Are there mechanisms for the coordination of policies and laws affecting the enterprise sector?

What are the processes for review and monitoring?

Role for stakeholders
What role in enterprise development does the policy assign to:

  • Government agencies (national, provincial, district/local)?
  • Business membership organizations, specifically employer organizations.
  • Civil society organizations

 

Box 5: Possible format for mapping policies, laws, and regulations
Policy domain:
Policy, act or regulation (Name, Year) Objectives or purpose Coverage Main provisions Implementing agencies Role for stakeholders
           
           
           
           
           
           

 

Choosing policy, legal and regulatory domains to map and assess

There are sure to be many different kinds of policies, laws, and regulations that can be mapped and assessed in this step. Therefore, it is important to focus your assessment on those issues that are of most relevance to the EESE assessment and to the interests of the Employers’ Organization.

Some of the most common domains selected for assessment include the following:

  • Business registration and licensing
  • Small enterprise promotion policies
  • Finance and credit policies, laws, and regulations
  • Labour laws and regulations
  • Property rights
  • Trade and export policies, laws, and regulations:
  • Education policies
  • Enabling and innovation policies
  • Environmental policies, laws, and regulations

The first three domains listed above are presented in more detail below to provide you with an example of the approach you can take to mapping and then assessing the policy, legal, and regulatory framework.

Business registration and licensing

These are the laws and regulations governing the formal establishment and operation of private businesses. It is important to distinguish between the requirements for business registration and the various licenses businesses require. Business registration procedures can vary widely across countries. However, registration has three core functions common to all: (1) checking for uniqueness of business name, (2) inscription in a public commercial registry, and (3) registration with tax authorities. However, beyond this, businesses are often also required to register with a range of other agencies, including for example:

  • Labour department or employment fund;
  • Statistical office;
  • Tax authority;
  • Department of trade and industry;
  • Local government.

All private businesses are required to register with the government in one form or another. Your mapping and assessment should ensure these are fully covered.

Business licenses (and permits) differ from business registration. They are usually specific to a particular industry sector or subsector; they include licenses or permits that deal with health, safety, and the environment, especially for high-risk businesses.

Registration and licensing can be undertaken by national government agencies, as well as sub-national government agencies. For example, local governments may issue licenses for the use of business premises. Thus, a national assessment of business registration and licensing should accommodate national and sub-national registration and licensing issues.

The mapping and assessment of business registration and licensing should include the procedures for obtaining all necessary licenses and permits and completing any required notifications, verifications, or inscriptions with relevant authorities.

When mapping this field of legal and regulatory concern you should:

  1. Identify the various legal instruments that govern business registration and licensing;
  2. determine the registration and reporting requirements of enterprises within these instruments;
  3. determine the purposes (i.e., the use of) registration and reporting information provided;
  4. assess administrative mechanisms and the average estimated cost of compliance;
  5. consider the effectiveness of service delivery mechanisms (e.g., centralisation versus decentralisation), including the delineation of national and local regulations;
  6. consider the relevance of bankruptcy law to small enterprises and the various procedures that are required--this should include an understanding of the period of obligations placed upon the bankrupt once she or he has been freed of debts.

Small enterprise promotion policies

These are the official government policies that have been formulated to promote the development of small enterprises. They express the government’s interest in the value and importance of small enterprises and the way these enterprises will be promoted. In addition to general enterprise promotion policies, specific attention could be given to policies that have been developed to promote women’s entrepreneurship; however, ensure that this assessment focuses on the policy and legal framework and not specific promotional programmes. The policy and legal framework is part of the business environment, whereas promotional programmes are not.
When mapping these policies, you should pay particular attention to:

  1. Definitions applied and criteria used to identify micro, small and medium-sized businesses;
  2. purpose and objectives;
  3. government organizations responsible for the design and implementation of the policy (identify these organizations);
  4. segmentation of micro and small businesses within the policy;
  5. specific references made to small enterprises that are owned and managed by women;
  6. employment elements contained within the policy;
  7. special provisions for small enterprises (e.g., incentives, and exemptions) and the effect this is intended to have;
  8. role of the State in enterprise development;
  9. role of organizations that can represent small enterprises;
  10. monitoring and review mechanisms.

In addition, you will need to consider whether there are any sub-national policies or laws that have been formulated to promote small enterprises.

It may also be useful to examine sectoral promotion policies: in most countries there are specific policies and strategies designed to address the needs of particular sectors of the economy. This may include specially-tailored policies and programmes of support, which involve the government in direct interventions. This policy area may include, for example industrial development policies, agricultural development policies, rural or regional development policies, human resource development policies, and income distribution policies.

Sector policies need to be assessed in terms of their impact on small enterprises.  It is easy, for example, for an industrial development policy to focus on attracting foreign owned companies and investments and to overlook the issues related to indigenous small enterprise development, and their role in industrial development (e.g., as suppliers, sub-contractors, etc.)

Finance and credit policies, laws and regulations

This refers to the policy, legal, and regulatory instruments that affect the access enterprises have to capital, such as government incentives to finance providers to help them improve their coverage of small enterprises, depreciation facilities, and so on. It does not include specific programmes run by private institutions. Typically, small enterprises have trouble obtaining access to finance. While much of these problems are a result of the practices of private banks and credit providers, governments may decide to promote a policy framework to facilitate, or even directly provide access to credit for the small enterprise sector. Thus, you will need to determine the policy, legal, and regulatory instruments that affect enterprises and their access to finance. You should also identify any measures that have been specifically designed to address the needs of small enterprises. Finally, you should review the laws and regulations concerning bankruptcy of enterprises.

Do not get distracted by those laws and regulations that regulate the establishment of a commercial bank or some other financial institution. This is usually beyond the scope of an assessment of this kind.