Wednesday, July 13, 2011

What makes a good business environment?

It seems there is a lack of knowledge in some Asian countries about what needs to be done to attract and keep investors. The "keep" part is the most important, since emerging economies always attract in the beginning a type of businesses who are looking for a fast and short term opportunity (and profit). They jump into the market, get the profit and move forward.
For a sustainable development there are some key factors.

1. Transparent laws
Laws need to be enforced equally for everyone. If a law is only applied to a certain type of businesses or a certain group of people, it will be considered unfair and a major obstacle for attracting investments.

2. Tax reduction, not increase
If you want attract businesses and investors, the tax issue is probably the biggest. Companies don't like taxes while governments rely on them as their main income. So there needs to be a balance, but in early economic development stages it is recommended to keep taxes for companies as low as possible.

3. Zero corruption
There is still no proof that corruption does anything good to a economy. It needs to be cleared in all levels of governance and businesses. That also leads then to

4. Market rules
If there is no justice for businesses, they will be scared away. In case of business disputes there needs to be a transparent judicial system to oversee them, based on laws.

5. First come, first serve leads the wrong way
It is not true (if ever told) that the first investor is the best because he is bringing money for sure. As we see in many cases in south east Asia, it is often wrong - they fail in the planning stage. So governments should be carefully analyzing investment proposal for the long term impact for the economy as well as for environment and social impacts.

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