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The government plays an important role in creating a conducive environment in which business people are able to start and sustain their business. Creation of an enabling environment encourages people to invest in the economy, a situation which creates employment opportunities for the youth. In this essay, I provide an in depth discussion of the role of the government in creating an enabling environment for businesses.
The government provides financial assistance to businesses in form of subsidies. This enables businesses to sell their products at lower prices. The government may subsidise operations of a business in order to reduce it’s running cost. This may be through the provision of cheap finance, technical assistance and manpower especially in top management ( Minniti, 2008).
Moreover, the government may provide incentives in order to encourage business activities in a given region. In order to encourage business people to invest, the government may offer various incentives. Such incentives include tax holidays, duty free privileges and favourable expatriate protection that safeguards the interests of foreigners who invest in the country ( Minniti, 2008).
Furthermore, the government plays an important role in the creation of an enabling environment through protecting local industries from foreign competition. When left on their own, business people may not be able to compete favourably with products from outside the country. This is because newly started local firms may have it’s costs of production higher than that of the imported products. To help such firms sustain themselves, the government may introduce import duties and quotas. Import duties have the effect of making imported goods expensive when compared to the locally manufactured goods. In this sense, the local people are unable to afford imported goods and hence go for the affordable local goods. Quotas on the other hand have the effect of reducing the quantity that can be imported (Minniti, 2008).
In addition, the government may act as a loan guarantor in an attempt to create an enabling environment. In some instances, lending international agencies may insist that for them to lend money to local business persons, the host government must act as a guarantor to help the local firm benefit from funds by offering the required guarantee.
In conclusion, the role of the government in the creation of an enabling environment is of great essence in enhancing the local business industry. It ensures that the local industries are well protected from external competition and also may in some instances act as a loan guarantor.
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