Effective State Business Relations When Does it Happen And Why Does it Matter Draft Policy Messages

Benefits Intensity of state business relations – relationships and interaction between governments and business - have been demonstrated to be significantly beneficial for economic growth

Channels Leading to Benefits Ease of doing business – regulations, infrastructure, processing of applications etc. Such interaction when sufficiently close and intense can lead to a meeting of minds between government and business in identifying crucial constraints restricting sectoral development and results in optimal use of scarce resources

Channels Leading to Benefits Moreover, the above interaction when formal blunts the significance of informal interactions between business (mostly large) and government associated with socially wasteful collusion and corruption.

Criteria Determining Effectiveness of SBRs a) Effective internal organisation of private sector associations Transparency and inclusiveness as evidenced by useful and updated publications and websites Adequate endowments to carry out their activities b) The readiness of the government to engage in dialogue with business associations c) The attitude of the state government towards business reflected in appropriate flexibility of labour laws and tax regimes that do not drastically affect incentives for business expansion

Comments on Criteria Positive correlation between (a) and (b) which can be suitably exploited (c) is relatively exogenous in the short run and influences (b) and to an extent (a) But persistent improvements in (a) can bring about changes in (c) The political class and business can turn to the media for helping facilitate changes in SBRs as the interaction among the three is crucial for the evolution of SBRs