Business Government Relationship | Role of the government towards the business sector | Role of the business towards the Government

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Business Government Relationship | Role of the government towards the business sector | Role of the business towards the Government

Business Government Relationship

Government has a lot in common with business. In particular, are Keen to promote prosperity and growth. The congenial relationship between the government and business creates a number of opportunities for the overall development of a country. The government efforts are directed towards the development of favorable conditions in the country for the development of trade and Industry. For this, the government formulates a number of policies and regulations for the prosperity of business. Similarly,  the government provides infrastructures for development. Furthermore, it provides peace and security to the business. The business also has a lot to do for the government like pay tax, comply the laws, create employment, and Involve in corporate social responsibility. The government intends corporate citizenship from the business sector. The relationship between the government and business may be explained through the following points.

Role of the Government towards the Business Sector

The roles of the government towards the business are mentioned below.

1. Infrastructure and manpower development: 

The government develops fundamental infrastructures for the development Of trade and industry in the country. They are transportation, electricity, communication, water, and security. They are the basic things for the development of business sectors in a country. The establishment of industrial estates is an attempt of the government to provide basic infrastructures needed for the development of industries. The government ensures that the education and training system is geared towards the needs of the economy, with a strong emphasis on providing technical and professional manpower.

2 Formulation and enactment of regulations and policies: 

It is the responsibility of the government to formulate necessary regulations for the development and smooth operation of the business sector in the country. Regulations protect the rights of businesses as well as consumers. They also encourage the business to follow ethical practices. The different business-related regulations in Nepal are;

  • Private Firm Registration Act
  • Partnership Act
  • Company Act
  • Industrial Enterprise Act
  • Labour Act
  • Trade Union Act
  • Foreign Employment Act
  • Foreign Investment and Technology Transfer Act
  • Foreign Exchange Regulation Act
  • Income Tax Act
  • Value Added Tax Act
  • Black Market and other Social Crime Punishment Act
  • Food Act
  • Nepal Standard Act
  • Consumer Protection Act

Likewise, there are a number of policies which are brought for the development of different sectors of the business. Some of them are;

  • Monetary policy 
  • Fiscal policy
  • Industrial policy
  • Trade policy
  • Privatization policy

3. Provide a stable environment: 

Through fiscal policy, the government supports the private sector as the engine of growth and ensures that the macroenvironment is stable. Similarly, monetary policy is geared towards keeping inflation low and stable for long-term competitiveness. The government also sets clear and transparent rules to make the market competitive.

4. Source of information: 

Government acts as the source of information for the business sector. Government is the largest organization in the country, It has abundant information which is used by the business. The government assists the business by providing such information.

5. Financial assistance: 

The government provides financial assistance to the business sector through government owed banks as well as other financial institutions. Such assistance normally takes the form of a loan at a low-interest rate. For example, Nepal Airlines took a loan from the Employee Provident Fund for the purchase of new planes through a government guarantee. Nepal Rastra Bank has the provision of providing soft loans to financial institutions with the crisis.

6. Subsidies, incentives and grants: 

Government supports the business sector by providing different incentives. They take the form of tax deduction, excise duty rebate, duty drawback, bonded warehouse facility, etc. It also supports the business sector by providing grants. For example, Agriculture Development Bank conducts various programs through government grants.

the government also provides a subsidy to businesses dealing with essential goods and services. It helps the businesses operate smoothly and get their objectives. Likewise, a subsidy is provided to sick industries. The government also subsidises specific businesses to provide goods and services to the people at low cost.

7. Security: 

The government also provides security to the businesses and protects them from political risk factors such as extortion, bandh, unrest etc. Similarly, it provides security to intellectual property right through proper rules and laws.

8. Promotion of business: 

Government organises different trade and industrial shows, conferences and seminars at local and international levels for the promotion of the business sector in the country. It also conducts advertising campaigns to promote indigenous businesses. For example, advertisements encouraging tourists to visit the country.

9. Training: 

Government sets up different agencies to provide business related training. It is essential to build technical and managerial skills for the operation and growth of the business.

Role of the Business towards the Government

As mentioned above, the government performs a number of activities to support the business sector. Business organizations also have some important roles to play to support the government as mentioned below.

1. Tax payment: 

Business organizations pay tax to the government. It is the main source of revenue for the government. They pay tax on their revenue profit, sales, inputs, and capital gain to the local and national government. The business also helps the government to collect the tax by deducting at source such as salary, wages etc. Hence, it is the responsibility of the business organizations to pay tax in the right amount and time.

2. Execution of contracts: 

Different development projects of government are undertaken by the business organizations. Businesses should complete them within the given time, cost and quality. They also supply necessary goods and services to the government.

3. Rendering of advice: 

The rules and policies formulated by the government have a direct impact on the growth and development of business. The business sector should work together with the government on such issues. Hence, they support the government by providing advice to make policies, solve their problems and overcome weaknesses.

4. Source of information: 

Businesses and their associations help the government in making policies and rules by providing necessary and relevant information. They provide information to the policymaker to assist effective government decision. The different private sector, business houses, Federations of Nepalese Chamber of Commerce and Industries (FNCCI) and Nepalese Chamber of Commerce (NCC) are the major information providers in Nepal.

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