Improving regulatory framework for business development

It has been noted that, in Italy, the absence of government involvement in the development of SMEs (other than recent legislative measures to reduce restrictions on small firms), together with a policy of not actively levying taxes and payments of national insurance contributions on such firms, has created a considerable degree of independence and self-reliance among SMEs and fostered rather than hindered their development.

"Regulatory failure" may also help to explain why many micro-enterprises are associated with the informal sector and why the informal sector, rather than receding, is in fact growing in some countries, such as Brazil. Understanding the reasons, and in particular the role played by the leg and regulatory framework, can help to shape policies that can assist micro-enterprises in the informal sector to grow or to graduate to the formal sector without destroying their important economic and social role, including the empowering of women in the process of development or worse still forcing them into illegal activities, while recognizing that not all such enterprise wish to grow or to join the formal sector. Various kinds of measures may be taken for th purpose, including providing finance and physical facilities, as well as simplifying registration procedures and reducing the cost of administrative compliance. The creation of physical facilities for micro-enterprises in the informal sector can help to formalize their operations as well; provide them with stability and the type of environment which facilitates their access to credit ar productive assets. In the final analysis, programmes to promote basic education and to raise ski levels may be the most effective way of helping them to be integrated with the formal sector investment in such programmes can bring long-term benefits in terms of strengthening entrepreneurship, increasing competition and enlarging tax receipts.