Business License Process – A detriment to economic growth

A young man recently lamented:

“I’m now going on 5+ months in my venture to form a company, and obtain a business license for a web-based business….”

He further states:

“It’s beyond frustrating. Every step is met with delays, bureaucracy, incompetency, and unnecessary paperwork. Not to mention the various government departments and agencies that have absolutely no idea what’s being requested or conveyed by their counterparts….”

He makes another point:

For a procedure that takes just minutes in other countries, we Bahamians spend months trying to navigate a web of outdated information, poorly trained (rude) bureaucrats, and endless red tape – all while start-up funding (& dreams) dwindle to zero.”

Open a time capsule from 1999 where it took a restaurant owner 10 months to receive the numerous permits and licenses to open a $350,000 investment delaying the hiring of 60 employees. Not to mention the other spending in the economy that would be necessary to conduct their ongoing business.

Potential Solutions 

Chamber as Advocate

The Bahamas Chamber of Commerce & Employers Confederation (The Chamber) can become a real advocate for business instead of continuing to operate in a form of collusion with Government.

The Chamber, should challenge these many procedures in court instead of trying to “negotiate” the best deal possible for its member firms and other businesses/entrepreneurs.

With a hat tip to Dr. Milton Friedman, we paraphrase some of his recommendations.

Use a Registration Process:

Registration requires individuals to list their names in some form of an official register, for a fee of course. There is no provision here to deny anyone the right to engage in an activity so long as his name is listed. Registration is also useful for things such as crime prevention and solution and of course taxation.

Use a Certification Process:

Certification is a little more difficult to justify because private enterprise can do this for itself, through agencies like Consumer Reports, Better Business Bureau’s, Good Housekeeping and Automotive Service Excellence etc. While an individual may have the experience and ability to complete a certain task, he can be denied the opportunity to perform this task by government regulation. It is interesting that we tend to believe government should certify us on the one hand yet technical schools, colleges and universities certify the quality of their graduates themselves.

Licensing, has become extremely difficult to justify because it goes furthest in the direction of trampling upon the rights of individuals to enter into voluntary contracts. Licensing tends to use political means to control entry and prevent “non-members” from competing within their market.

The undesirable aspects of “permits” are:

1. Those with permits have control over entry by others into their occupation – leading to a monopoly situation.
2. Trust is placed in government for protection and the individual is less reliant on his own judgement or ability to make good decisions. (One can cite numerous cases of licensing not protecting against poor quality of goods and or services.)
3. They lead to “rent seeking” with bribes becoming the way to do business.

Ongoing Licensing and Inspection

Then there is the annual inspections and processes to renew a business license.

Some businesses face numerous inspections and applications like hotels and restaurants for example causing waste of man-hours that people could be devoting to their business instead of catering to bureaucrats.

Surely some of these licenses and inspections can be eliminated and others amalgamated into one department.

If any Government is serious about economic growth and ease of doing business, the business licensing and renewal processes would be a good place to start.