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Entrepreneurs without money (XVIII): El Salvador possible entrepreneurship journey with China. Institutional Policy Context.

Good morning to all! Let´s continue with our Entrepreneurs without money saga.

dt.common.streams.StreamServer.jpgWhen it comes to understanding the institutional policy context in the entrepreneurship journey, we have to land to the government sector. Why? Because as we have seen it in our blog publication from June 1st, 2018, when we stopped in Cardiff, England; the main role of a moral government (its agencies and institutions) is to act justly.  According to R. George, the government should treat its citizens as equals before or “in front of” the law, provide the conditions in which the citizens can interact safely and prevent gross injury (injury is defined as economic, physical, emotional, legal, environmental or social injury) by any individual or group against any other individual or group.

law enforcementHow does the government realize its main moral role? Through the law, public and institutional policies and a fair-ethical law-enforcement system. Ethically, this primary moral obligation of the government is more important than the moral obligation to provide for the welfare of its citizens (which is the second moral role of it).

The government or public sector with all its institutions (I will use both terms as the same thing), in order to accomplish its main moral role, has to set policies or institutional laws or guidelines. In addition, everything the public sector realizes has to be done with transparency. Two elements of good institutional policies are transparency and fair-ethical enforcement. The legislature, executive and judicial branches of government are examples of institutions that give policy legitimacy.

lego-versions-of-all-the-women-on-the-supreme-courtEl Salvador has its own developing process of establishing institutional policies, which inherently affect the private sector and individuals (regardless of its origin). The regulatory guidelines and public institutional policies affect not just the public entities but the individuals,  private and social institutions endeavors.  Our process of establishing clear rules of the society in terms of businesses, expressed in the law is a work in progress. Many areas of our regulatory frameworks are weak, and there are pending steps to design, create and launch in relation to our policies system. There are policies which we still don´t even know we have to do when it comes to contracts, property rights, labor, bankruptcy, tax benefits-incentives or something as simple as establishing research institutes for each Foreign Direct Investments initiative with impact in our society. We do not have all the required laws in place in many areas, particularly those related to international foreign actions in El Salvador when it comes to instruments of trade policies.

The whole idea of introducing laws and regulatory policies when it comes to international trade (regardless of China or any other country) is simply the mechanism in which the Government and its institutions fulfill its main moral role: To act justly and protect its citizens.

Please remember the government protects its citizens beyond the concept of physical hazards, but also to protect its citizen’s jobs, protect industries which are important to national security, regulate unfair foreign competition, protect consumers from dangerous products, protect the human rights of individuals and create a transparent law enforcement system.

Given the weakness of the El Salvador institutional policy system, is quite obvious to be worried about inviting China to invest in the country.  Of course, any Chinese investments may stimulate economic growth and job creation, but without a local solid and strong institutional policy system, we expect beforehand that new vulnerabilities will arise.

judicial review.jpgEl Salvador has a long roadmap to fulfill when it comes to laws and regulation. We are extremely vulnerable to abuse (internal and international), given the lack of law-regulatory frameworks related to commercial international participation in our country. When it comes to public sector institutions, we need public policies and law review. Thinking ahead for 100 years at least. Particularly in specific areas related to contract enforcement, property rights, labor, anti-corruption enforcement at all levels, venture legislation and justice enforcement. Of course, our institutional policies have improved a lot, and are much better now than when the war finished in 1992, but there is still a long way of improvement in the design, creation, and deployment of several public policies or laws to stop corruption, protection, and prevention of gross injuries-damages between its citizens and reduce vulnerabilities.

The Salvadoran government (regardless of its political ideology) has to ask the following questions in relation to an analysis of institutional policy context when it comes to China or other international agreements with other countries:

How is our current public sector institutional policy system when it comes to international FDI agreements? What needs to be done? What have we accomplished and needs improvement? Which are our pitfalls or weaknesses?

Ideally, what type of institutional policies have to be launched in order to regulate, control and complement our economic market?

Let me use a graph from the UN Human Development Report 2014. I will apply it to our Salvadoran weak institutional policy context when it comes to understanding our Government status in this domain.

human development report page 26.jpg

Before accepting a trade agreement or international commercial treaties with any country (it can be China or other countries), El Salvador movers and shakers must ask themselves:

  1. Which policies need to be designed, created and deployed in order to prevent future adversities or crisis or damages to our citizens? (primary moral role of the government in terms of preventing gross injury)
  2. Which policies need to be designed, created and deployed in order to protect our citizens? (primary moral role of the government in terms of offering safety-security)
  3. Which policies need to be designed, created and launched in order to promote our citizens?  (second moral role of the government in terms of promoting social welfare programs)

As we can observe, there is a lot of work to be done by Salvadoran legislators. The government legislation represents the citizen´s mandate for which was elected. And El Salvador legislators and the Judicial System have a lot to do, in terms of improvement when it comes to public institutional policies and its enforcement.

el salvador legislative

Salvadoran Legislative Assembly. Photo: UN

There are several tasks that our legislators, supreme court authorities and executive ministers as institutional policymakers must have to perform (P. Selznick) when it comes to commercial agreements such as this entrepreneurship journey with China:

  1. The definition of institutional mission and roles when it comes to commercial agreements
  2. The institutional embodiment of purpose
  3. The defense of the institutional integrity
  4. The ordering of internal conflicts

The organizational context is the next one. To be continued… Thank you.bee

Source References:

Disclaimer: All the presentation slides shown on this blog are prepared by Eleonora Escalante MBA-MEng. Nevertheless, all the pictures or videos shown on this blog are not mine.  I do not own any of the lovely photos or images posted unless otherwise stated.


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