In the field, some combination of traditional information gathering activities -- such as discussions with government officials, industry leaders and trade associations and collection of official statistics -- should be combined with in-depth interviews and more systematic firm level surveys.

Firm-Level Surveys PSAs involve direct empirical study of the problems of active entrepreneurs. Private flirms possess a wealth of information about the actual impact of policy in the particular institutional context of a country which cannot be obtained by traditional forms of policy analysis. Firm-level surveys question a sample of entrepreneurs in depth about constraints they face in doing business; which can help to distinguish urgent and binding constraints from others that, while important, may be addressed in the longer term. The results often differ from policy statements and statistics, in ways that are proving to be important in focusing and setting priorities for operational work. Table I summarizes the binding constraints identified in several recent finm-level surveys. Among the more interesting findings:

- In Brazil, the binding constraints on PSD were imposed by macroeconomic policy (inflation and high taxes) and political uncertainty. There was a clear second tier of problems imposed by tax bureaucracy, labor regulations and finance costs. Brazilian firms identified the regulations and enforcement surrounding federal taxes, the state value added tax and labor regulations as the most vexing of their regulatory burdens: they are required to pay over 50 federal, state and municipal taxes, each with distinct fl,ing and payment requirements, and some requiring monthly contributions. Compared with lightly regulated Chilean firms, the magnitude of the burden becomes clear: proprietors of small Brazilian firms spend 15% of their time on regulatory compliance activities and 4.9% of their employees' time, as opposed to 6% and 0.4% for their Chilean counterparts.

- Tanzanian firms identified the lack of access to finance as their leading constraint, followed by the costs imposed by regulations associated with sales and income taxes and local government licensing, and the lack of access to zoned industrial sites. For taxes and licensing, the primary difficulties were the time, uncertainty and side payments associated with repeated 'negotiations' with officials. Furthermore, the survey revealed that the smallest firms were disproportionately burdened by their lack of legal premises and the fact that their proprietors cannot delegate dealings with officials to employees.

- In Sri Lanka, the environment for private firms was significantly less restrictive than in may other countries studied, and no single constraint emerged as dominant (much like Chile). With one significant exception, Sri Lankan firms reported that compliance with regulations did not impose substantial costs. The exception was firms with the legal status of limited liability companies. By virtue both of their large size and a requiremen **t** hat they maintain audited accounts, limited liability companies had less room for manoeuvre than other firms in responding to Sri Lanka's relatively high level of formal business tax obligations. While in practice respondents from firms of all sizes and legal statuses conceded that they paid substantialy less than was formally mandated, higher visibility increased the probability of being targeted for enforcement

2