A great deal is written about the need to reduce the administrative burden and to have a more efficient regulatory framework for businesses. Some of this is very pertinent. However, some of it is simply not the case. We still need a good regulatory framework that enables businesses to operate in an ethical environment within the parameters of the law.
Business regulation can take various forms. It could relate to legal restrictions enacted by government; to licensing requirements; to information provision.
The reasons why governments introduce business regulation could also be various. They could relate to the need to avoid or address a market failure; to ensuring professional conduct; to protect consumers; to take steps against any possible negative impact such as pollution; to protect employees; and more.
The areas affected by business regulation include health and safety, food safety, environmental protection, waste, employment, planning, construction, trading standards and consumer protection.
Moreover, it takes the shape of form-filling, applications for approval, inspections and investigations. Essentially business regulation forms part of the framework of the rule in the law for the business sector.
Some businesses may view such regulations as a hindrance. They would view it as additional work or as an unnecessary control on the part of the authorities.
We need to accept that some forms of business regulation have been applied in a very rigid manner
Some claim that it eats away at their competitiveness and subsequently at their profitability.
Some would even say that it is better to have self-regulation than state regulation and allow the market to regulate itself totally. However, we know that self-regulation has not always worked as businesses have abused of this. One of the causes of the financial crisis of 2008 was due to several banks not regulating themselves. Moreover, the market may regulate itself in most areas but certainly not in all areas.
We need to accept that some forms of business regulation have been applied in a very rigid manner.
We also need to recognise as a point of principle that regulation cannot be a one-size fits all approach. Some regulation that can be applied to medium and large businesses may not be applied to micro and small enterprises.
In Malta this is a particularly sensitive issue especially with regard to regulation enacted by the European Union structures. Businesses in Malta cannot have to face the same type of regulation faced by huge businesses located in the larger European economies.
Another fundamental principle that needs to be accepted is that it is useless to have business regulation if it cannot be enforced. This would penalise those virtuous businesses who seek to operate strictly within the parameters of the law. In such cases business regulation serves as an advantage to those who ignore it as they would know that it is not enforced.
The third element is that there needs to be certain regulations that must be applied to all, as they would tend to benefit society as a whole. For example, regulations that serve to promote ethical behaviour, to protect the environment, to protect the rights of the employees, to protect the rights of the consumers cannot be dependent on size or nature of the business or location of the business. They need to be applied across the board.
Enacting new regulations or repealing existing ones is always a very sensitive issue and represent a headache for governments. There could be one aspect that may serve as food for thought to legislators and regulators.
What common good does the regulation seek to serve? Can that common good be clearly identified? If the regulation does not serve a common good, then one needs to ask whether it should be there in the first place. If the regulation is just an exercise in form filling, with no use being made after the form is filled, then it should not exist.
I believe that what we need is not to have less business regulation but to restructure business regulation. This would necessitate our legislators and regulators to understand and embrace the common good.