Business Analysis: A good start on red tape

  • 2011-09-07
  • By Charles Cormack

As election time in Latvia approaches, it still seems too close to call. However, to a Brit who is used to their government all but closing down during an election campaign it is refreshing to see that the Latvian government continues to work, and in some cases push forward with the development of sensible and constructive policies.

The announcement a week or so ago of an action plan introduced by the Cabinet of Ministers to reduce the administrative burden on entrepreneurs and business is very welcome. Despite the claims often made by the development agency, Latvia can still seem bizarrely bureaucratic to a business person from Western Europe, and the UK in particular.
The love of official stamps and forms can seem bewildering, and the apparent lack of communication between different government agencies can lead to huge frustration, and in some cases lead to the decision by a foreign investor to look at new markets which are easier to work in. In fact, one of the first questions we are asked by companies interested in the Baltics is “how easy is it to work there?”

The action plan covers 25 key measures spread across a whole range of areas, but basically it seems that the aim is to improve transparency around tendering and procurement (very welcome) the digitization of form submission, and the increase in and more effective use of digital signatures, the lowering of the requirements for some formal qualification in certain sectors like food handling, and a toning down of regulations in areas like the fitting of safety equipment in business premises.
On the face of it, all sensible and useful actions, which should be of real benefit to business in Latvia. The government also stresses that they will continue to look at ways of cutting regulations and bureaucracy to support business and entrepreneurs, by using the offices of the slightly sinister sounding “Function audit on surveillance of entrepreneurs.”

But the campaign to cut red tape does seem to be a common thread across European governments. The government in the UK, and particularly the current coalition government, are also committed to cutting regulations, yet it does seem that whilst one part of the government is running around cutting red tape, there is another part that is creating it.

A lot of this red tape does in some way seem to come from the EU; now I am not anti-EU, but I do believe that some governments seem overly keen to implement, or over-interpret, EU regulations, as Raivis Dzintars, co-chairman of All for Latvia, put it last week: “If the EU states that meat and fish should be sold on separate tables, then the Latvian government will not only create regulations to ensure they are sold on separate tables, but also insist a wall is built between them.”

In my view, governments should create the least possible regulation; they have a responsibility to ensure there is a clear and fair legal framework for business to operate in, and that workers’ rights are protected, but apart from that they should keep well away. In fact, governments should announce a moratorium on new regulations, and any new regulations that are needed should be developed in consultation with business organizations like the Chamber of Commerce.

The EU also needs to take some responsibility for the number of directives it produces. In the past, when the economies were good, excessive regulation could be seen as an annoyance, but now as Europe and the EU fights for its economic survival Brussels must understand that every new regulation costs money and potentially puts EU businesses at a competitive disadvantage.

So, well done to the current Latvian government for recognizing the issues and for attempting to do something about it, and let’s hope that whoever takes power after the September poll continues to make the cutting of red tape a priority.