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Dr Gjalt de Jong: ‘Reduce the regulatory burden that’s making the Northern economy so vulnerable’

07 September 2011

The local and regional governments of the three northern provinces must immediately stop enacting laws and issuing rules and regulations for business and try their hardest to reduce the regulatory burden. University of Groningen economist Dr Gjalt de Jong bases this statement on large-scale research. In the rest of the Netherlands an average 3.6 percent of earned money is spent on administrative charges, but here in the North it’s nearly 5 percent of the Gross Regional Product. De Jong: ‘The regulatory burden in the North is a serious problem. It hampers small and medium-sized enterprises from growing into the bigger companies that the region is so in need of.’

One cabinet after another makes the same promises – the regulatory burden for entrepreneurs is really going to be reduced. In practice, however, little or nothing actually happens, as revealed by research De Jong conducted among over 2300 companies in all sectors and municipalities in the northern Netherlands. The entrepreneurs have noticed nothing of a reduced tax and premium burden, it appears. Every year, bureaucracy costs the northern companies EUR 2.34 billion, or 3.8% of the Gross Regional Product (GRP). Gjalt de Jong: ‘If you ignore the natural gas revenues, which most of the official calculations rightly do, then that is nearly 5 percent of GRP – as opposed to an average 3.6 percent in the Netherlands as a whole. In other words, the North has a serious problem which we should quickly do something about.’

Enough is enough

Although his message is very alarming, De Jong warns about putting too liberal a slant on it. ‘It goes without saying that laws and regulations are necessary. Entrepreneurs are just as aware of that as anybody – they are not cowboys who want to live in the Wild West. But enough is enough. There are more than enough rules to organize society in such a way that we can all live together.’ As far as De Jong is concerned, northern authorities should immediately freeze their regulatory behaviour and look for ways to significantly reduce the regulatory burden. ‘The rules governing pesticides, for example, are constantly changing. Farmers can barely keep up. Every municipality confronts construction companies with different conditions. And sometimes not even the Tax and Customs Administration knows how much tax a company should pay. There are too many rules – the system has become too complex.’

Fragile economy

Medium-sized enterprises, with between 6 and 20 staff, are particularly hampered by legislation and regulation, the research has revealed. De Jong finds this a worrying observation, given that SME are amply represented in the North. About 80 percent of the business world falls into this sector. De Jong: ‘The northern economy must not continue to depend on family businesses, to formulate it in a slightly disrespectful way. These companies must be able to grow into the larger companies that the region needs so badly. Otherwise the economy will remain too vulnerable.’

Business-like debate

Municipalities with well-organized service provision are often given a higher score for the tax and premium burden by entrepreneurs. The research has also revealed that companies perform above average if the procedures are clear and officials make their decisions in time. De Jong: ‘It was high time for academic research in this field; the topic has hung around for too long as pub chat and media perception. Our research has produced a good instrument that has clearly charted the impact of bureaucracy. A business-like debate can now be held, based on facts.’

Curriculum Vitae

Dr Gjalt de Jong (Oentsjerk, 1968) is associate professor of entrepreneurship and public management at the University of Groningen, where he also studied and gained his PhD. His research is conducted within the SOM Research School, and as a guest researcher at the University of Antwerp. De Jong’s specializations include over-regulation, bureaucracy, corruption and innovation. He conducted his research into the administrative burden and the quality of municipal service provision in the North of the Netherlands together with Prof. Arjen van Witteloostuijn of the University of Antwerp, at the request of the North Netherlands Chamber of Commerce and in cooperation with VNO-NCW Noord (Confederation of Netherlands Industry and Employers) and the Noord section of the Royal Association MKB-Nederland.

Last modified:15 September 2017 3.10 p.m.
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