Capacity Building Guide for Good Regulatory Practices: Considerations for Development Practitioners

In developing countries, incoherent regulatory environments can undermine economic growth by impeding competition and innovation, discouraging business development, and precluding trade and investment opportunities. Small and medium enterprises (SMEs) require a regulatory environment that provides certainty and the rule of law for investors while allowing entrepreneurs and established businesses to innovate, expand their domestic and international markets, improve productivity, and generate profits. However, in many economies, outdated and poorly designed administrative procedures remain, implying high compliance costs for businesses, particularly SMEs. Lengthy and cumbersome procedures impede innovation, establish barriers to entry, and create unnecessary barriers to trade, investment, and economic efficiency. Most often, governments do not create these conditions intentionally, and they recognize the need for reforms but lack the resources and capacity to execute them.