Compliance with government regulations is part of business operations. But when compliance becomes a substantial operational activity, regulators need to examine whether regulatory procedures are necessary or overly cumbersome, and check whether enforcement personnel execute the procedures appropriately. Prior studies have indicated that compliance cost is inversely correlated to firm size. That is, it is more burdensome to small firms than to larger ones. Therefore, to promote SME development, it is important to create an environment in which regulatory rules and procedures are simple and compliance costs are reasonable and minimal.
The Regulatory Costs Sub-index aims to measure the amount of time firms spend on bureaucratic compliance and waiting periods, as well as how often firms must undergo inspections by local regulatory agencies and the duration of inspections.
The higher overall index score along with the individual scores for sub-indices always refer to a better performance within the context of the BEI.