Column - Drop unnecessary rules on businesses
Last updated on 8 March 2017 - 09:26pm
RECENTLY, the government banned the Dego Ride motorcycle service, which is hailed using a smartphone application (like Grab and Uber). The deputy transport minister said in response that "so far, no licences have been issued for motorcycle taxi riders, and if they conduct such a business, it is illegal."
It was also reported that drivers under Grab and Uber will be required to get a drivers' card, which will have to be renewed annually starting this year, but this will first require a detailed inspection and vetting process. It was also reported that these vehicles would have to pass mandatory road worthiness inspections.
Any business, small or big, traditional or using new technologies, know that to run a profitable and efficient enterprise, they will need to be rapidly responding to the needs of their customers.
This includes keeping up with trends, modifying their business model if need be, to eventually find the best fit possible and a solution that satisfies both buyer and seller.
Sometimes, government regulations can get in the way, which places an unnecessary burden on businesses that in fact contribute to the healthy growth of the country's enterprise and economy, wealth and employment.
The government itself recognised this to be a problem previously. Under the 10th Malaysia Plan, this was identified as an issue to be dealt with. As a result, the Malaysian Productivity Corporation (MPC) has developed an excellent Regulatory Review Framework, which aims at modernising business regulations to create a more favourable business environment.
According to what is called the "regulatory impact analysis" (RIA), all new legislation is required to have a cost-benefit analysis to ensure the approval of good quality written regulation, and all existing regulation need to be reviewed so that what is written and administered and enforced, with a view to remove unnecessary rules and compliance costs. Perhaps MPC had already started its job by going from ministry to ministry, to get their cooperation to review existing regulation.
But one does wonder whether this process is stringently followed for new legislation or policies that emerge out of the various government ministries and agencies, and whether the impact on earnest enterprises are in fact considered at all when these new policies are introduced.
The principles guiding regulatory assessment are sound, among which are the need to ensure all written regulations are consistent and that regulators interpret and apply them consistently. There should not be overlap or duplication of regulations and regulators.
Second is a transparency criterion, which is extremely important: interested parties need to be regularly consulted so it is clear to businesses what their legal obligations are, and these regulations should be easily accessible to everyone.
Finally, there must be accountability so businesses can seek explanations of decisions made by regulators, as well as appeal them.
All the above principles are part of a guide that MPC would presumably have been circulated to the ministries, but changing the culture is often challenging. Government officials must be encouraged to be transparent and consult the appropriate parties in a genuine manner.
For instance, perhaps honestly seeking out the challenges facing business and whether there is an unnecessary regulatory burden placed on them – when in fact the government policy objective could be achieved through another route.
MPC seems to have conducted reviews in certain industries, such as construction, logistics and in the medical profession, based on what is available on their website.
However, the economy is made up of a whole host of other sectors, and it would be interesting to see a review of the regulatory burden on these others, such as fast-moving consumer goods, manufacturing, food and beverages, household goods, and of course the sharing economy, among others.
We know that the government loses as much as 4% of annual GDP a year in opportunity costs on cumbersome business regulations, which amounts to about RM48 billion a year. What we do not know is how much more each of these sectors could have gained, were it not for unnecessary regulations imposed on them.
Government does have a role to play to regulate the market, but this should only be done to the extent that it does not instead stifle or suffocate it.
The political economy we live in requires that there ought to be a constant negotiation of where this line is drawn, and it is a conversation that we must have together – among all stakeholders, including civil society, the private sector, consumer groups and the policymakers.
The danger of not having this dialogue is that laws, policies, tax rates and rules are crafted without insight into the actual implications, sometimes negative, on the ground.
The country's economy ultimately depends on the thriving enterprise and success of these on-the-ground businesses, small, medium and large.