Need for dialogue to improve competitiveness

Sub-saharan Africa has seen economic growth rates averaging more than 5 per cent for the last 15 years. However, economies are largely agrarian bolstered by extractive resources and usually with a large informal economy, which largely focuses on local trading. The Africa Competitiveness Report 2015 makes the assumption that increased competitiveness is a critical driver of structural transformation and broad based growth. However, as we learn from WEF’s Global Competitiveness Index, most countries in Africa are not competitive. Indeed, the move by many from agriculture to services rather than to manufacturing suggests that their current growth is unsustainable. But, WEF suggests, to support manufacturing and to become more sustainable, they need better infrastructure – energy, roads, ports, irrigation – as well as improved education, and a more conducive business enabling environment. In particular, WEF sees a need for reduced barriers to trade a strengthened regulatory framework (especially for rules of origin, competition policy, intellectual property rights and dispute resolution). They argue for the removal of both tariff and non-tariff barriers and improved access to finance. They suggest that the “success of reform agenda will also depend on active dialogue among key stakeholders” (p82) between countries, not least to promote knowledge sharing and peer learning, but I would argue that more dialogue is needed between public and private sectors as well.

Advocacy and transparency

There is increasing activity all round the world by interest groups aiming to influence government. There is much criticism of interest groups – indeed even the description of them as interest groups is somewhat pejorative – but they fulfil an extremely valuable function and should be encouraged. I work particularly with business associations, but these comments would apply equally to other interest groups, whether membership organisations or single issue lobby groups.

Interest groups undertake research, either directly or by commissioning researchers, and this provides objective data to all stakerholders, at least if it is undertaken rigorously. In many countries, and especially in developing countries, there is a lack of evidence so the work of interest groups is an essential contribution to the policy debate.

We all, as citizens in democracies, have a right to lobby government and persuade it of our point of view. This is not just confined to election time – and in any event, we may not accept all the contents of a manifesto – but is appropriate at any time. As individuals, we are likely to struggle to get our voice heard – which is why so many people organise themselves into groups so that they have more chance of  having their voice heard. Businesses are the same. They worry about the impositions through regulation and taxation all of which increase the cost of doing business. Business recognises that being responsible members of society means that they have to pay tehir share of tax and need to conduct themselves in a way that does not put people or the planet at risk, but nevertheless they want to minimise the burden. So they too form associations – to advocate on their behalf.

Associations working with government on regulation and legislation builds legitimacy and buy-in. There is good evidence that where business has been consulted and involved, then the final policy is better; certainly there are less likely to be unforeseen consequences. If businesses recognise the need for regulation and if they perceive that the private sector has influenced the final shape of the policy and regulation then they will be much more likely to accept it and abide by it.

There are concerns however that too much lobbying is opaque; that lobbying serves narrow vested interests rather than the wider private sector or better still society at large; and that influence is bought rather than based on evidence and compelling argument. That is why some governments have legislated to regualte the lobbyists. The US introduced a code of conduct as early as 1946 though it was revised in 1995. Germany introduced a code in 1951. Australia introduced a code in 1983, then abolished in 1996, but reintroduced one in 2008. Canada introduced a code in 1989. Often there is a need to register as a lobby group and to record all interactions with government, which can be onerous. In many cases, these codes only apply to professional lobbyists and not to organisations, such as business associations, which have a wider role but also occasionally advocate on behalf of their members. The principles enshrined in the codes however could apply just as much to all interest groups and adopting them could help interest groups to build relationships with their stakeholders.

For many developing countries, regulating those who lobby is a long way down a list of priorities likely to include health, education, balancing the trade deficit, promoting trade, creating jobs etc. And indeed, it is on these very topics that many of the interest groups are lobbying. Interest groups could however be much transparent about their dealings with government.

So, here are some suggestions which could either be incorporated into an existing code of ethics or code of conduct or could form the basis of a lobbying code by which interest groups would voluntarily abide:

Principles

Integrity: We will undetake all our relationships with elected politicians, public officials and other stakeholders with integrity and honesty.

Transparency: We will be open and transparent about all of our lobbying activities whilst respecting confidentiality

Professionalism: We will observe the highest professional and ethical standards.

Rules

Accuracy: We will ensure, as far as possible, that all research evidence is accurate, unbiased and up to date. We shall now knowingly mislead and will aim not to do so inadvertently. We will publish all our research so that stakeholders can both see the results but also check it for accuracy.

Confidentiality: We will not divulge confidential information obtained through our advocacy activities.

Transparency: We will publish all our policy position statements so that stakeholders can see our position and our arguments.

Wider interests: We will aim as far as possible to balance the interests of different stakeholders in the development of our policy positions and will not seek advantage for a narrow goup of businesses if that has the effect of disadvantaging other businesses.

Integrity: We will base our arguments on evidence and argument and will not engage in corrupt practices to influence policy. We will neither offer nor accept gifts beyond token business mementoes.

Conflicts of interest: In the event that there are conflicts of interest, we shall declare them clearly.

Further reading

Economist: Germany’s Corporate Lobby: http://www.economist.com/news/business/21651270-corporate-lobbying-booms-stronger-regulation-needed-turning-american

Economist: Courting the State: http://www.economist.com/news/business/21651269-upside-professional-lobbying-courting-state

Transparency International: Lobbying in Europe: https://www.transparency.org/whatwedo/publication/lobbying_in_europe

Government of Australia: Lobbying Code of Conduct: http://lobbyists.pmc.gov.au/conduct_code.cfm

Government of Canada: Lobbyists’ Code of Conduct: http://www.ocl-cal.gc.ca/eic/site/012.nsf/eng/h_00013.html

European Union: Code of Conduct for Interest Representatives: http://www.euractiv.com/pa/commission-adopts-code-conduct-eu-lobbyists/article-172840

Cut VAT on tourism to boost growth

One of the big issues in Tanzania at the moment is whether the government will, as it proposes, levy VAT on tourism or whether the industry will persuade the government that this would be a retrograde step. As it happens, it has now been raised as a major issue in the UK as well.

CutTourismVAT, an alliance of two tourism trade associations and two large companies, on 30 July launched its new report on the impact of cutting VAT on tourism. The report argues that a cut in VAT from 20% to 5% on the tourism sector would lead to a £4 bn tax windfall for the Treasury and would lead to growth in GDP of £4 bn as well as creating 120,000 jobs. The report makes persuasive reading – though I don’t expect the politicians to be persuaded.

However, the report and accompanying fact sheet – in reality a policy position paper – are exemplars that other trade associations might like to emulate. The report, by Nevin Associates, is full of figures explaining the costs and the benefits, especially to government. It makes good use of ‘infographics’ to illustrate its key points. The policy position paper is just two pages long, yet manages to squeeze in all the relevant information and, again, makes excellent use of graphics to  illustrate its key arguments.

 

 

Big Results Now: regulations and regulatory reform

In October 2012, the Government of Tanzania resolved to establish a strong and effective system to oversee, monitor and evaluate implementation of its development plans and programmes – called ‘Big Results Now’. This was launched in the first half of 2013 and is being implemented through the Transformation and Delivery Council (TDC), the President’s Delivery Bureau (PDB) and Ministerial Delivery Units (MDUs).

The PDB has a primary objective to facilitate, monitor and evaluate the delivery of BRN initiatives in six national key priority areas: agriculture, water, energy, education, transport and resources mobilisation.

In December 2013, at a meeting of the Tanzania National Business Council chaired by President Kikwete, it was agreed that the PDB should also focus on constraints imposed on business by the enabling environment and recommend proposals to address those constraints.

The GoT recognises the need to improve Tanzania’s business enabling environment as one contributor to economic growth and is therefore organising a four week “lab” on business environment reform commencing 24 February 2014. The objective of the lab is to proposals with timescales, costs and key performance indicators. A planning meeting has agreed six priority areas to be addressed by the lab: regulations and regulatory institutions; access to land and security of tenure; taxation; corruption; labour law and skills; and contract enforcement, law & order.

I will be participating in the work stream looking at regulations and regulatory institutions. The pre-lab meeting identified seven basic issues that will need to be considered:

• Simplification and automation of processes and procedures in doing business;
• Harmonisation, consolidation and automation regulatory institutions;
• Separation of revenue generation objective and functions from regulatory functions – agencies funded from government budget;
• Regulation making should be participatory and transparent and reflect the spirit of underlying laws;
• Business registration and regulatory licensing is streamlined, simplified and modernised;
• Lead times for enforcement of regulations introduced; and
• Regulatory Impact Assessment (RIA) including participatory processes and consultations should become part of a mandatory process for development and gazetting of regulations.

Each lab will involve around 20 senior people drawn private and public sectors. The hope is that the participants will not only develop workable and acceptable proposals but also that they will feel sufficiently committed to success that they will do whatever is necessary when they return to their day job.

I would welcome feedback from anyone who would like to influence the work of the lab and will be blogging over the course of the time that I am participating

Making life easier for business

As momentum grows in countries like Rwanda and Burundi to bear down on red tape and improve the business enabling environment (see “Doing Business in the East African Community 2013: smarter regulations for small and medium size enterprises”) it seems that western governments are doing less to live up to their own rhetoric of making life easier for business. Over the last 8 years, the five countries of the East African Community have implemented 74 institutional or regulatory reforms to improve the enabling environment. To be fair, they have a long way to go: Rwanda has climbed to 52 out of the 185 countries now ranked annually whilst Burundi still languishes at 159.

But recent stories in the UK and US suggest that government enthusiasm to help business is waning. In the US, the National Federation of Independent Business, fed up with what they see as a tidal wave of regulation, has launched a new campaign, “Small Business for Sensible Regulation” to fight federal regulation that might stifle job creation not least because, they argue, it is small businesses that tend to drive job creation and economic growth. They say that complying with federal regulations is the most important problem facing small business today. Thomas Sternburg, founder of Staples which now employs more than 50,000 people, says that the level of red tape now would have meant that he would struggle to start his business today – and he argues in favour of the proposed Regulatory Improvement Act of 2013.

The Economist describes efforts by a group of US technology entrepreneurs to lobby for improvement in regulation in the US – FWD.US was launched in April to campaign for immigration reform. Its proposals have already passed through the Senate and it is now focusing on the House of Representatives. The key lesson from their efforts so far seems to be recognition that change in the law has to confer a wider public benefit than simply helping their businesses recruit the talent that they need (See Economist 24 Aug 2013: Mr Geek goes to Washington).

In the UK, a recent article in the Sunday Times (See Sunday Times, 18 Aug 2013: red tape bonfire fizzles out) reports on a review by the Government’s regulatory policy committee saying that the Government is adding to the regulatory (and financial) burden much more than it ought to be. The review asserts that government’s estimates of the cost to business of new regulation too low and that estimates of the benefits of removing old and redundant regulation are too high. The result is that costs to business increase at the rate of £80m per year. The review says that the net excess cost of regulation introduced since 2011 is more than £350m.

The Government now requires Departments to publish a six monthly “statement of new regulation”. When I first saw one of these, published by BIS (see BIS fifth statement of new regulation), I was rather impressed – but I have now spotted that this only covered regulation from BIS – and that other Departments are publishing their own statements. (See for example BIS sixth statement, DCLG sixth statement and DECC sixth statement)

It would be much better – and more likely to raise hackles and thus serious opposition from trade associations and others – if all these statements were amalgamated into a single report. And it would be better still if each six monthly report said what Departments planned to do generally to cut regulation rather than solely to respond to the need to eliminate old regulations in order to introduce new ones.

Influencing public policy on-line

Many organisations, and indeed individuals, use social media like Facebook and Twitter to rally their followers and encourage public action in support of their advocacy activities. But there are also now a number of on-line platforms springing up that allow people to come together to build mass movements, for whatever reason.

Recent campaigns (Global Zero, All Out (which now claims 1.3m members in 190 countries) and Meu Rio were all incubated by Purpose.com, based in New York and set up by Jeremy Heimans who previously launched Avaaz. I can see how the likes of Google, Audi and the Gates Foundation – all clients – can use a platform such as this but, at least so far, it is rather less obvious how an interest group, especially a trade association, might be able to use it to influence public policy. I have a suspicion that such platforms will only ever be relevant for salient and contentious issues. One way, perhaps, it can make a difference is in fund raising – but that makes it far more likely to be of use in the west than in the rather less developed countries of sub-Saharan Africa.

Read more on this in the Economist

Battling red tape – still

Governments need to keep focused on ensuring that regulation does not impose burdens on business that simply deter business from ‘doing business’ – but they also need to focus on the substance and not just keep ‘moving the deckchairs’. They also need to take extreme care to ensure that they think about the impact of regulation on small business. Big business can largely take care of itself, not least because they can afford to pay for people to deal with the red tape. But small businesses usually rely on the entrepreneur, who usually needs to devote his or her spare time, to deal with regulation. So thinking small first is immensely important.

The British Government announced on 28 June that it was appointing six business leaders to a red-tape task force, specifically to identify European regulations that need to be scrapped or reformed (see BBC news). The group includes Marc Bolland, CEO of Marks & Spencer, Paul Walsh, chairman of Compass, Ian Cheshire, CEO of Kingfisher, Glenn Cooper, MD of ATG Access, Louise Makin, CEO of BTG – and just one person who might be regarded as representing small business, Dale Murray, investor and entrepreneur.

I wonder, however, what difference this will make – for three reasons:
Firstly, large businesses do not think about red tape and regulation in the same way as mall businesses. Large businesses can deal much more easily with the requirements imposed. And they are much better placed to defend themselves if something goes wrong. But more importantly, there is tendency to think that provided they are happy, then everyone is happy, often not recognising that large companies use regulation as a competitive advantage. Much better to design regulatory policy and implementation requirements so that it is acceptable first to small business – and large businesses will then also be happy. So the task force is weighted the wrong way.

Secondly, the government is forever saying that it wants to do more to cut regulation, but most of the action seems to be on the organisation of the structures within government rather than on the regulation itself. After the re-election of the Tories in 1983, they initiated work on deregulation, subsequently launching the Enterprise and Deregulation Unit (within government) in 1986, and renaming it the Deregulation Unit in 1991. Their efforts were reinvigorated in 1992 and the Deregulation Task Force was launched in 1994. The first Blair administration was equally keen to demonstrate its friendliness to business but recognised both that a greater level of regulation was inevitable and that being careful about the way in which regulation was implemented could reduce the imposition on business. It consequently replaced the DTF with a Better Regulation Task Force (which quickly set out five principles of effective regulation) and replaced the Deregulation Unit with the Better Regulation Unit. The Government launched the Better Regulation Guide in 1998 which introduced the concept of Regulatory Impact Assessments. The Better Regulation Unit became the Regulatory Impact Unit in 1999. Up to 2005 the Cabinet Office took responsibility for better regulation. In 2005, the Regulatory Impact Unit was moved to BERR and renamed the Better Regulation Executive. The Better Regulation Task Force was renamed the Better Regulation Commission in 2006 and closed in 2008, with the Executive taking on the work, supported by a Regulatory Policy Committee set up in 2009. The Government also started to make efforts to improve local regulation, setting up the Local Better Regulation Office in 2009, based in Birmingham, but then bringing that back within BIS in 2012 and renaming it the Better Regulation Delivery Office. The Government has also launched the Red Tape Challenge website to encourage businesses and the public at large to tell it about regulation that is not fit for purpose. It is not even clear whether this new initiative replaces on the existing initiatives or is additional – or indeed why there should be a unit that focuses solely on EU legislation, when often the problem is not the EU legislation but the desire of civil servants to ‘gold-plate’ the directive on the grounds that this gives certainty to business (thus adding considerably, usually, to the complexity).

Thirdly, the best way to mitigate the impact of EU regulation is to ensure that we are there at the beginning, as ideas are being formulated. In the UK, we are still too used to adversarial politics – and a chance to argue about policy right to the last minute. But most of Europe, and certainly the Commission, takes a more consensual approach. This means that the real work needs to go on before a position is ever published by the Commission. And that, in turn, requires considerable effort by business associations and others to ensure that they are gathering market intelligence and doing something about it.