Snipping off the red tape for business

Potential investors need to be given red carpet treatment rather than shackled by red tape. This is the message that the Government has sent when the Prime Minister announced a number of measures aimed at making it easier for entrepreneurs to set up new businesses in Malta.

The appointment of a Bureaucracy Commissioner by the end of May is the first step in this battle against excessive red tape. Petty bureaucracy and onerous rules can make life a nightmare for businesses especially the smaller ones.

It is interesting that the two countries that have often been acknowledged by the World Economic Forum as being the most successful in tackling bureaucracy are Singapore and Hong Kong – two small island states.

Some observers may be sceptical about this renewed commitment to tackle red tape. They argue that bureaucratic measures are difficult to measure and even more difficult to eliminate without risking a collapse of the necessary controls. But the Prime Minister was right to ask the rhetorical question: “How is it possible that a foreign entrepreneur willing to invest millions of euros is forced to queue up in the sun to obtain an ID card?”

Attempts were made in the past to introduce the concept and mechanism of a ‘one-stop-shop’ agency for businesses to obtain all the necessary administrative permits to start operating. It seems that this concept has still not been translated in an effective process that makes the life of businesses easier. So it is a positive development that the new administration has sent a clear political signal that it has the will and determination to snip off the red tape that shackles business.

The forms that bureaucracy can take know no limits. The issue of visas to expatriate staff who work for enterprises based in Malta is one of the first obstacles that a new investor faces. The rationale behind the onerous measures linked to the process of issuing visas is often not even known by those who operate these processes.

Civil servants often administer, rather than manage, processes that over time gathered layers of bureaucratic controls that may have made sense when they were introduced, but are today archaic and unnecessary.

A complete re-engineering of these processes is therefore necessary. When these processes are reviewed it is critically important that the interest of the ultimate customers is always at the centre of attention of the reviewers.

One of the toughest challenges facing our business community is the need to improve our competitiveness. In these tough economic times our competitors in different countries are working on all the elements that affect their competitiveness. Excessive bureaucratic processes are one major hindrance to improving competitiveness – a hindrance that can be addressed once there is the political will to do so.

Another debilitating effect of excessive bureaucracy is corruption. An article in The Economist states: “Wherever the red tape is thickest, the result is widespread informality. Many small firms operate under the radar of officialdom, dodging taxes and ignoring rules to survive. But they have to stay small, and thus contribute much less than they might otherwise to a country’s prosperity.”

Putting the issue of business red tape on the political agenda is significantly more important at a time when the local economy needs a boost to return to more vigorous growth. The success of this renewed battle against bureaucracy will depend on the ability of the new Bureaucracy Commissioner to overcome resistance, especially form dyed-in-the-wool bureaucrats.