Business-friendly Orientation of Government
There is a whole set of elements if a local government wants to create a business-friendly setting. The relevance of these factors is hard to overestimate – they tend to be more relevant than any specific business promotion activities local government is pursuing (see transaction-cost analysis).
Agility in responding to solicitations
What companies tend to find particularly annoying is long delays when they ask government institutions about something. Indeed, long delays are sometimes bigger obstacles than restrictive regulations. They create an overall uncertainty and unpredictability, which can be disastrous for a company which wants to exploit a business opportunity which is just arising. It is important to see that companies and public administration are profoundly different in this respect: Public agencies tend to be in a routine, doing the same kind of work day in, day out. In the business sector, by contrast, it is often First come, first take, and often there are first-mover advantages which mean that a company which enters a given business or market belatedly is at a distinctive disadvantage vis-à-vis its competitors. If this delay is caused by inefficient or incompetent government agencies
Agility in dealing with permits
Things are similar when it comes to permits. A business will typically need all sorts of permits, e.g. building permits, health permits, tax permits, labor safety permits, etc. It is obvious that a company in location A which can get the necessary permits, say, to expand a plant within two months is at a distinctive advantage over a competitor in location B who has to wait for two years. Streamlining the permit process, and speeding-up the delivery of permits, has become one of the most, if not the most, relevant economic promotion measures in many industrialized countries.
First- and One-Stop Agencies
One of the reason for lengthy permit processes is the multitude of government agencies which have to emit them. A first step of dealing with this problem is the creation of first-stop agencies. They give an orientation to companies as to what kind of permits they need and where and how to get them. Taking this idea one step further is the concept of one-stop agencies. Here, the company is only dealing with one intermediary in obtaining the necessary permits. The next, and most difficult, step is the minimization of permits.
Effective support for firms in dealing with supervisory bodies
Even if local government succeeds in cutting red tape and permit requirements, there is still a lot of permit requirements which come from national and provincial governments. Supporting companies in dealing with them, i.e. explaining what kind of permits they need and how to obtain them, is a substantial business promotion activity.
Economic competence and hospitality of key actors (e.g. mayor)
Reading through the stories of huge investment projects, such as car assembly factories, there is a common theme: In the end, when the multitude of locational options had been cut down to a shortlist of very attractive locations, it was very often the behavior of key actors, in particular the mayor and other elected representatives, which made the difference. If high-ranking officials take a personal interest in attracting or keeping companies, this gives an important signal, not the least to employees in government agencies.
Friendly climate between public and private sector
The overall style of interaction between local government and local companies can be another distinctive factor in creating an attractive location. If relations are hostile, this often leads to lengthy permit processes or even random decisions of government on permits. It is also not rare to find that government officials display a high level of graft and corruption, and that government seeks to relax its financial constraints by harrassing companies with random tax hikes and unjustified fines. This kind of behavior is much more effective, in a negative way, than whatever image-building activities can be.
Permanent, constructive dialogue between public and private sector
Business-unfriendly behavior of local government is not necessarily a result of bad intentions. Quite often, it is the result of lack of communication. Even in democratic settings, the business community is only one among many communities, and often it is not a united one. One can often observe that the threshold level for the local business community to articulate systematic pressure regarding specific issues is very high. This may even be the case if business associations or chambers are present, since they often suffer from internal fragmentation, lack of articulation, or incompetence. Therefore, the fact that there are no massive complaints by the private sector need not mean that there is nothing to complain about. If a local government sets out to promote economic activities, seeking communication with the private sector, and with all segments of the private sectors, is the first thing it should do. There are several means of doing so: (1) Creating the institution of an Ombudsman, i.e. a person or office which is the addressee of companies‘ complaints.
(2) Sending out interviewers to evaluate the private sector’s perception of government.
(3) Organizing public events where businesspeople can, formally or informally, voice their opinions and complaints about the public sector.
next chapter: business networking
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