Academic journal article Competition Forum

The Impact of Regulations on the Formation of Small/Intermediate Businesses in Egypt: The Gap between the Intended and the Implemented Application

Academic journal article Competition Forum

The Impact of Regulations on the Formation of Small/Intermediate Businesses in Egypt: The Gap between the Intended and the Implemented Application

Article excerpt


The aim of this study is to examine whether legislation being implemented, as displayed in the Egyptian law of investment in the articles serving the area of small business formation, is actually being practiced in the investment culture, the impact of the implementation of legislation on the actual formation and continuity of business in reality and the degree by which legislation facilitates the quality of investment and lets it flourish.

It has been seen for a long time now that there is a huge unemployment rate, about 13%, in Egyptian society. Egyptian society is a young society where youths make up half of it. To reduce the unemployment rate and to find a way to make a living for themselves, they shifted towards forming small businesses.

All around the world, especially in the developing countries with a population like Egypt and even larger, small businesses are the backbone of economic reform. In southeast Asia, and some countries in Europe, the adaptation of strong, well implemented legislative procedures have helped their easy formation, ensured the continuity of small business processes, helped build a strong economy and contributed to reform.


Why We Need Regulations

Small businesses are the new trend in governmental endorsements all over the world. In the latest world economic reform forum, it has been the center of all the buzz. Yet many countries still focus on legislative protocol to regulate the act of business formulation to ensure the conformance with the countries' laws and rules.

According to Rutherford and Campbell (2006), young entrepreneurs generate large amounts of jobs and appear to provide an innovative spirit to the market, yet small businesses never utilize the regulations in order to raise external capital.

Economic wisdom states that it is crucial for a country to invest in small businesses, for the welfare and the stability it addresses on both the social and the economical levels (van Edel et al., 2006).

According to Dean and Tusten (2003), SMEs provide the driver for countries from an unemployment aspect, as they fight poverty and have high-labor absorption capacity.

The Role of Regulations

According to the Treasury Board Canada Secretariat (2009, pp. 4, 19), "When regulation stems from a good faith effort to advance the public interest, those desired outcomes will be improvements in problematic conditions in the world. A regulation ^works when it solves, or at least reduces or ameliorates, the problem or problems that prompted government to adopt it in the first place." Davis and Pillay (2006) define regulations as "legislation that is designed to alter the way in which markets operate in the provincial or local context." This is achieved through setting rules that regulate certain prices in the market, boundaries by which businesses have to work within and minimum standards that they have to follow (Davis & Pillay, 2006). Sharp (2003) stated that those regulations are needed to protect the public interest in the form of safety regulations, the environment, as well as the public order. According to Chalera (2006), regulations are important in the process of protecting the stakeholders from the consequences of investing in small businesses. According to Nieuwenhuizen and Kroon (2002), regulations are impowered by the goernment and thus enforces the minimum scope of order and code of practice. Coglianese (2012) stated that evaluation of regulations is extremely essential and it falls in a spectrum between two categories: individual rules and collective rules.

By observing the above table and according to proven research, regulations tend to have an effect on 7 axes or steps in the following order:

* Step A: Regulatory Institutions

* Step B: Regulatory Policy

* Step C: Regulation

* Step D: Implementation

* Step E: Behavior Change

* Step F: Intermediate outcomes

* Step G: Ultimate outcomes

What must be taken into consideration is not only the effect of the ultimate outcome, but also individual regulations in their discrete sense and the effect upon them, which if disregarded might lead to regulatory problems (Coglianese, 2012). …

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