Overcoming obstacles in implementing business climate reforms
A common feature for many countries is that they are building their economic development and poverty reduction strategies by focussing efforts on expediting and expanding reforms to improve their business climate environments. Given the complexity of prevailing situations and established practices, such broad reforms can be difficult to implement in a sustainable way across the entire public administration in the medium and long term. Even some of the most successful countries which have carried out business climate reforms are encountering challenges in maintaining the improved business environment but still making their way ahead. Very often, the implementation of reforms are highly tributary to the people, the team and leaders involved in the process.
Reforms often encounter massive resistance, both passive and organised, that delay implementation or undermine their objectives.
Appropriate strategies and resources used to carry out change are often insufficient. Even if a government decides to move forward, weak political leadership, lack of vision, poor coordination, fragmented policy jurisdictions, low skill levels, and limited accountability make successful reform extremely difficult. As a result, reformers often tackle the easiest or most isolated issues, with marginal, short term and unsustainable results.
For these reasons many attempts at reform have been disappointing. Results have usually failed to match expectations, leaving reformers exhausted and disillusioned.
Reformers often underestimate or are intimidated by the scale of problems. Isolated, one-off reforms usually do not produce lasting benefits for the private sector.
In countries with legacies of instability, rent-seeking behaviours, excessive government intervention and weak public institutions, the efficiency of the private sector requires better performance of the public sector also. The way through which the government relates to the private sector through its legal and regulatory functions also impacts on the private sector’s performance.
Reforms often face technical and administrative constraints at all levels of government, especially state and local administrations (usually strong bureaucratic power bases) which carry the burden of implementation.
Implementing reforms therefore require new leadership, as existing managers often find it difficult to reinvent themselves, are resistant to proposed changes or suffer from a lack of credibility with stakeholders.
Business climate reforms usually cut across different agencies and levels of government and, as a result suffer from lack of oversight and coordination. The lower-level organizations and their officials responsible for implementing reforms tend to have interests and objectives that differ from those of the policymakers who designed the reforms. Local governments and civil servants who generally have weak capacity to carry out reforms often revert to old practices once the political pressure for change has subsided.
In order to succeed, reforms must overcome vested interests, resistance to change and change related complexities/uncertainties in dynamic economic and social environments.
Success factors to reforms:
• Active support and management of the reform process are essential, primarily through dedicated, day-to-day leadership in the public administration. Governments that have strengthened capacities for promoting, monitoring, encouraging, and assisting reforms across the entire administration have been more successful in implementing and sustaining business climate change.
• It is imperative to identify and implement strategies that will maximise the chances for continued success in environments hostile to reforms. Successful implementation is also dependent on making timely and appropriate changes.
• Transformation of the public sector goes beyond changing policies and legal mechanisms, because the role and style of regulation in each country are deeply embedded in traditions, capacities, interests, and the distribution of power. Making extensive change to the regulatory function stretches from legal instruments to government institutions, processes, and capacities—and even further, to the rule of law and changing relationships between government, markets, and society.
Governments that have managed to effect meaningful reforms have reaped the benefits. Countries that have succeeded in managing broad reform programs over several years, even over several administrations, have shown the fastest changes and greatest gains in economic development.