Thursday 23 April 2015

Giving a voice to the informal economy is vital to PNG


INFORMAL economy is defined as that part of an economy that is not taxed, monitored by government or included in gross national product (GNP).

Informal activities occur outside the bureaucracy and may transgress its rules. They may avoid certain obligations but also forgo some of the benefits of conformity with the requirements of bureaucracy.

The informal economy plays a critical role in income and employment generation and mitigating poverty in developing economies. Without the informal economy, it is likely that socio-economic pressures will drive many people to destitution.

Despite the contribution of informal and subsistence agriculture to the PNG economy by way of providing employment and income to almost 85% of the population, especially women, very little has been done to promote it.

A survey that looked at the PNG informal economy found that, in addition to agriculture’s dominance, 14% of respondents were in production and manufacturing while 4% were in personal services.

Where activities involved small-scale trading, most people were selling the same things (local produce, betel nut, cigarettes, second hand clothes, bilums, handicrafts) and competition was very intense, seriously affecting already meagre incomes. The informal economy is continuously beset by these and other problems that hinder its development and growth.

The Consultative Implementation and Monitoring Council (CIMC) is concerned that there is insufficient information available to guide government policy action to support this important part of the economy.

The National Informal Economy Policy 2011-2015 was designed to offer concrete guidelines for achieving the aspirations of the Informal Sector Act.  It was the product of wide and thorough consultation at all three levels of government and with private sector, NGOs, civil society organisations and development partners.
It was informed by studies on the PNG informal sector as well as experience from abroad. A host of activities have been identified and captured in the policy and currently CIMC is developing an implementation plan.

The idea of creating a “voice” for the informal economy would enhance the influence of interest groups involved in and affected by it. The “voice” mechanism would ensure that issues such as consumer protection were taken into account.

Underpinning this planning activity, though, is the fact that the PNG informal economy is negatively perceived by both government and public. Coupled with this, people do not really understand what the informal economy is. Most have a narrow perception centered around the notion that informal economy is mainly to do with the sale of betel nut and cigarettes.

The ‘2008 Feeding Port Moresby’ study, revealed that nearly 90% of fresh food supplied to the city each year is sourced almost entirely from the local informal economy.  Despite such figures, a survey commissioned by the CIMC found that the informal economy has been long neglected: 95% of respondents said they had never received any form of assistance.

The rapid growth of the informal economy in PNG has been driven by three economic factors including reductions in statutory minimum wages, the floating of the kina and the doubling of the population to seven million people over 30 years. That the informal economy has been able to sustain the needs of the majority of Papua New Guineans without any form of assistance from government is a great achievement. 

Giving voice to informal economy participants is very important for a country like PNG. It can be likened to achieving much of what the Constitution seeks in “development [taking] place primarily through the use of Papua New Guinean forms of social and political organisation”.

The establishment of a “voice” mechanism, perhaps modeled upon the Chamber of Commerce concept, is vital as most of vendors see the importance of being organised to get assistance from the government, sharing information with members and protecting members’ rights.

In Cambodia the establishment of Micro Vendors Association led to a more responsible informal economy. In Zimbabwe the establishment of the Zimbabwe Chamber of Informal Economy Association resulted in many benefits for informal economy workers.

There is a danger that a mechanism such as a Chamber would come to be dominated by big operators whose interests conflict with those of small operators. This is something that will require consistent feedback from members. It is an area requiring further research to ensure that the Chamber is fair and equitable.

A recent National Urbanisation Forum recommended that the Office of the Urbanisation be upgraded to a department to give more prominence to urbanisation in PNG. Yet the practical challenge is huge with a limited amount of alienated land available for urban development and increasing demand from foreign investors.

Given the governments’ priority to drive the PNG economy through stimulating growth in the formal sector, the informal economy may be pushed further and further away from the planning process.

This is where the proposed Chamber of Informal Economy would try to ensure that the interests of the informal economy were explicitly captured in planning. Establishing a voice will bridge the communication gap and provide a medium for informal economy participants to be heard and given adequate support and attention.

In addition, the informal economy will become more a partner rather than a competitor with the formal sector.

In light of PNG’s massive resources projects, it is even more important for government to heed the 85% of its population in the informal economy. The spillover effects from external investment - rising cost of living, lifestyle changes, escalating migration of people to urban areas - may make most Papua New Guineans merely spectators in their own country.

A “voice” mechanism, representing the bulk of the low income population, will ensure that more effort is put into making the informal economy a “distributional focal point” so revenue from the mineral sector is diffused more equitably to the majority of the people. 

Stakeholders such as town planners, city authorities, business councils and formal sector Chambers of Commerce would be invited to be part of this new Chamber of Informal Economy.

With its establishment, information relating to the vendors will be captured in a database to facilitate estimates of income and levels of activity and support the sector's claims for political attention.

Without such data providing an evidential base, it may be difficult for the Chamber to advocate changes to policy or legislation.

In the longer term, it is envisaged that the informal economy’s voice mechanism will be built into the governance structure at ward and local government levels and that informal economic activities will link with the formal sector of the economy. In this way, informal economy participants can play an active role in resolving issues which affect them.

So the overall objective of the proposed Chamber of Informal Economy will be to give a “voice” to the informal economy for the sake of dialogue and consultation with key stakeholders and by this means deal systematically with the problems, issues and challenges affecting informal economy participants.

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