Source: Asia Development Bank
The government should streamline business formalization and reduce entry costs for SMEs. To achieve this, the government should fully digitize the business registration process and ensure platforms are user-friendly and accessible to enterprises of all sizes. Registration procedures should be consolidated into a single step across all provinces, including for enterprises subject to additional regulatory oversight under the “control list.” In parallel, eliminating registered capital requirements and simplifying the fee structure, based on enterprise type rather than location or sector. would further lower barriers to entry and incentivize compliance.
Simplifying the tax system will reduce burdens and encourage formal participation. Abolishing the renewal requirement for tax TINs would eliminate an unnecessary administrative burden and reduce opportunities for informal payments. Tax reporting procedures, particularly for micro and small enterprises, should be simplified and adapted to reflect firms’ varying accounting capacities. The expansion of online tax filing systems and electronic bank transfer mechanisms would improve compliance and reduce transaction costs. Additionally, linking tax compliance to access to credit by using tax history as a basis for creditworthiness can incentivize more accurate income reporting and formal participation in the financial system.
Modernizing institutions and scaling up e-governance will improve regulatory transparency. To reduce discretionary enforcement and promote a predictable regulatory environment, the government should expand e-government platforms for approvals, licensing, and compliance reporting. Standardized digital procedures will enhance predictability and reduce reliance on informal networks. Ensuring the consistent application of national policies across provinces is essential to providing a level playing field for businesses and increasing confidence in public institutions.
Investments in infrastructure and skills are essential to strengthen the enabling environment. Improving the SME operating environment requires sustained investment in reliable electricity, roads, and telecommunications—especially in underserved or high-potential regions. Regulatory enforcement mechanisms should be used to ensure the quality and maintenance of infrastructure assets, such as enforcing vehicle weight limits to preserve roads. At the same time, labor market competitiveness should be addressed through wage policy reform and improved retention strategies, including vocational and on-the-job training programs that align more closely with private sector needs.
Targeted support for women entrepreneurs can unlock inclusive business growth. To increase women’s participation in the formal economy, it is important to recognize the impact of unpaid care responsibilities and promote family-friendly workplace policies. Introducing tax concessions for childcare expenses and expanding mobile-enabled platforms would enhance access to services and information for women entrepreneurs. Targeted training programs, combined with improved access to digital trade platforms, will help address gender-specific barriers in trade, formalization, and enterprise growth.