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Business environment and the crisis

Ryan Hahn's picture

Could a good business environment help countries cope with the crisis? Razia Khan, Regional Head of Research for Africa at Standard Chartered Bank, seems to think so:

The crisis has already hit formal sector employment in Africa, especially in resource economies. Mine closures (some temporary, others not) have become more common. Increasingly, many in the labour force are opening their own businesses just to get by. There is still pronounced growth in the SME sector which is known for its resilience. In many cases, SMEs are doing better than their larger local corporate counterparts, who had greater access to formal financing, and have been more heavily impacted by the withdrawal of foreign bank lending. The picture is not entirely negative – whereas in the past companies may have preferred to do business with larger suppliers, new opportunities have been opened up for SMEs...

...Governments have done well to preserve macro economic stability. Equally, there should be a focus on improving the business climate. Although resource-constrained in many ways, the fixes that are likely to be required cost little. The payback, at a difficult time, is likely to be immense.


Hmm, I don't know. There is nothing wrong with suggesting that governments should - as well as preserving macro economic stability - also keep on reforming business regulation. But I wonder: is a time of economic crisis the right time to do so? I don't want to answer on this one, just wondering about what we know about how and when reforms are most likely to succeed? "...fixes that are likely to be required cost little. The payback, at a difficult time, is likely to be immense." What kind of fixes don't cost a lot? What kind of immense payback can there be? Is expected payback higher growth of SMEs, increasing tax revenue, jobs? I see some possible causal links but remain sceptical.

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