DIMAS FATHURRAHMAN

29119477
YP 62B
The Role of Law in Business Development

Law and Development

The "rule of law," sometimes called the "supremacy of law," has been understood to generally
indicate that decisions should be made by the application of known principles or laws without
the intervention of discretion in their application. The establishment of the rule of law can:
1. Attracts private investment
2. It creates a climate of stability and predictability, where business risks may be rationally
assessed
3. Property rights protected
4. Contractual obligations honored.
The quality of institutions can be preserved through the establishment and maintenance of an
appropriate and workable legal framework. In this case, protecting the environment and natural
resources - which are a fundamental element in sustainable development - is critical. Frequently,
in order to achieving more profit, institutions or even countries often deplete their natural
resources and produce a negative impact on the process and results of its processing.
Environmentally sustainable development, however, may be achieved through:
1. Enactment of rigorous regulatory regimes,
2. The clarification of property rights,
3. The establishment of monitoring institutions staffed with well-trained professionals,
4. The building up of appropriate international law regimes.
Typically, reform, which aims at developing a business-friendly legal framework at the national
level, addresses two fundamental processes. The first process is the review of legal rules, starting
with the constitution and including legislation, administrative decrees, and orders. This process
must include every aspects of social needs such as reflect a pre-existing or emerging public
opinion based on adequate data and studies. The second is the enforcement of legal rules,
regardless of their content.
If either of these processes is flawed, it will be give negative impacts. Here are examples of some
major problems that can be happened in the absence of appropriate and enforced legal rules:
a. The effects on contracts
b. The effects on property rights
c. Effect on ongoing legislation and regulation
d. Effect on the extent of criminal offenses in the economic sphere.

Legal Framework
The legal framework can be defined in terms of a system based on three pillars.
a. The legally binding rules
b. Appropriate processes through which such rules are made, and through which they are
either enforced in practice or are deviated from when necessary.
c. Well-functioning public institutions that are staffed by trained and motivated individuals,
are transparent and accountable to citizens, are bound by and adhere to regulations, and
apply such regulations without arbitrariness or corruption.
In such situations, formal law may be readily replaced by informal rules which receive greater
compliance in practice. Reform of the legal framework cannot therefore serve its purpose if it
does not pay adequate attention to the issues of enforcement, compliance, and effectiveness.

Legislative Policy
Legislative policy must be consistent with economic and social policies. Its role is to translate
these policies into rules and procedures and to ensure their consistency and efficiency in serving
their targets. The presumption of permissibility based can lead to successful of policy
implementation.
The principle of permissiveness not only produce good economics, but also make good laws. In
addition, respect for human dignity. By keeping boundaries to a reasonable level determined by
the urgency of what is really in the public interest, the state reduces opportunities for corruption
and ensures the effectiveness of the limits it introduces.
However, a permissive assumption does not mean that business transactions and the provision of
public services by private companies must be left unregulated. This can only lead to intense
competition and will allow monopoly power to exploit markets and consumers. If regulation is
done right, competition would in fact be its first beneficiary. This clearly requires a large amount
of participation in rule making and high capacity to implement the rules, and the most
importantly, in any situation the law must maintain its stability, be impartial and consistent.

World Bank Efforts

 Through its adjustment loans, the Bank supports borrowing countries in their efforts to
improve their macro-economic and micro-economic frameworks, to liberalize their trade
and investment regimes, to privatize public enterprises, and to strengthen their financial
sectors, including in particular, banking institutions and the capital market.
 The Bank offers loans to finance legal and judicial reform projects and has even given
grants for the initial studies needed for this purpose.