BUSA JEREMIAH WENOGO
THE enactment of the Informal Sector Development and Control Act 2004 brought into force a landmark law which attempted to regulate the unregulated segment of the economy.
The drafters of the Act, led by Dame Carol Kidu at the political level, undertook the difficult task of making it possible for the government to regulate the informal economy.
Guided by a ground-breaking study of 2000 that looked at constraints affecting the growth of the informal economy in PNG, the drafters meandered their way through a river of controversy to come up with this law.
They were able to generate a law that attempted to maintain a balance between controlling and developing the informal economy in PNG.
This is contrary to commonly held views that the law led to the uncontrolled spread of informal economic activities.
In fact the uncontrollable aspect of the informal economy can be attributed to the lack of enforcement by the urban authorities, provincial governments and local level governments who are the administering authorities.
However, the Act’s biggest flaw is that its applicability is very much restricted to the National Capital District and, to a lesser extent, other urban centres of PNG with minimal or no applicability to the rural informal economy.
So the law turned out to be urban-biased and ignored the existence of the rural informal economy which is dominated by the agriculture sector, the single biggest sector in terms of the proportion of the PNG population who are involved in it.
There are strong sentiments that provinces need to develop their own policies on the informal economy to reflect their unique challenges and issues. In other words informal economy issue in PNG should be dealt with on a case by case approach.
The challenge ahead for the government after the review phase of the Informal Sector Development & Control Act 2004 is monumental.
The government has made it clear that it aims to align the law with the National Informal Economy Policy 2011-2015. That means it will be compelled to promote financial inclusion as one of the key strategies to promoting the informal economy in PNG.
The government will have to closely work with the Bank of Papua New Guinea to address issues relating to the stringent policies of the commercial banks that have prevented most Papua New Guineans from opening simple bank accounts.
This will have to be complemented by establishing new and strengthening existing microfinance institutions.
The government should also graduate microfinance institutions into banks to provide competition to existing commercial banks.
The Bank of PNG must also realise that its jurisdiction cannot cover certain areas such as informal lending. While complaints of exorbitant interest rates have been a cause for concern, it is important to understand that these are determined by a social contract that exists within a community.
Therefore the government, through the Bank of PNG, should focus on establishing minimum standards that should not stifle the informal credit market but allow lenders to progress to a stage where they enter the formal financial sector.
The government will also have to broaden its horizon to include the agriculture sector and find ways of stimulating its growth.
In larger population centres it will need to see how best urban planning can enhance and protect the interests of the informal economy.
To complement this, the government will also need to create avenues where it can engage in dialogue with groupings of market vendors and mobile traders.
Within urban areas the government will need to address the huge increase in the number of informal squatter settlements popping up on state and customary land. Without formal titles, these settlements don’t have access to basic services such as water, electricity, waste disposal and rubbish collection.
The recent call by the Minister for Lands, Benny Allen, for the Provincial Lands Board to issue titles is to be commended. It is hoped that such an arrangement will fast track the issuance of titles on state land as well as developing proper urban development plans.
In addition the government will need to strengthen the Incorporated Landowner Group Act to make sure customary land is freed up for development purposes. The Act should strengthen accountability by recognising collective bargaining and benefit sharing through the clan system rather than on an individual basis.
This means that a strong administrative body is in place to prevent rampant corruption. The Taurama Urban Development Project is an example of how a poor administrative function can allow corruption to creep in and in the process tarnish the confidence that landowners have in the government and its agencies.
The PNG government has already taken a giant leap forward in introducing a law to promote and control the growth of the informal economy. Maintaining an appropriate balance should now be its primary objective and should be the intent behind the review of the Informal Sector Development & Control Act 2004.
THE enactment of the Informal Sector Development and Control Act 2004 brought into force a landmark law which attempted to regulate the unregulated segment of the economy.
Guided by a ground-breaking study of 2000 that looked at constraints affecting the growth of the informal economy in PNG, the drafters meandered their way through a river of controversy to come up with this law.
They were able to generate a law that attempted to maintain a balance between controlling and developing the informal economy in PNG.
This is contrary to commonly held views that the law led to the uncontrolled spread of informal economic activities.
In fact the uncontrollable aspect of the informal economy can be attributed to the lack of enforcement by the urban authorities, provincial governments and local level governments who are the administering authorities.
However, the Act’s biggest flaw is that its applicability is very much restricted to the National Capital District and, to a lesser extent, other urban centres of PNG with minimal or no applicability to the rural informal economy.
So the law turned out to be urban-biased and ignored the existence of the rural informal economy which is dominated by the agriculture sector, the single biggest sector in terms of the proportion of the PNG population who are involved in it.
There are strong sentiments that provinces need to develop their own policies on the informal economy to reflect their unique challenges and issues. In other words informal economy issue in PNG should be dealt with on a case by case approach.
The challenge ahead for the government after the review phase of the Informal Sector Development & Control Act 2004 is monumental.
The government has made it clear that it aims to align the law with the National Informal Economy Policy 2011-2015. That means it will be compelled to promote financial inclusion as one of the key strategies to promoting the informal economy in PNG.
The government will have to closely work with the Bank of Papua New Guinea to address issues relating to the stringent policies of the commercial banks that have prevented most Papua New Guineans from opening simple bank accounts.
This will have to be complemented by establishing new and strengthening existing microfinance institutions.
The government should also graduate microfinance institutions into banks to provide competition to existing commercial banks.
The Bank of PNG must also realise that its jurisdiction cannot cover certain areas such as informal lending. While complaints of exorbitant interest rates have been a cause for concern, it is important to understand that these are determined by a social contract that exists within a community.
Therefore the government, through the Bank of PNG, should focus on establishing minimum standards that should not stifle the informal credit market but allow lenders to progress to a stage where they enter the formal financial sector.
The government will also have to broaden its horizon to include the agriculture sector and find ways of stimulating its growth.
In larger population centres it will need to see how best urban planning can enhance and protect the interests of the informal economy.
To complement this, the government will also need to create avenues where it can engage in dialogue with groupings of market vendors and mobile traders.
Within urban areas the government will need to address the huge increase in the number of informal squatter settlements popping up on state and customary land. Without formal titles, these settlements don’t have access to basic services such as water, electricity, waste disposal and rubbish collection.
The recent call by the Minister for Lands, Benny Allen, for the Provincial Lands Board to issue titles is to be commended. It is hoped that such an arrangement will fast track the issuance of titles on state land as well as developing proper urban development plans.
In addition the government will need to strengthen the Incorporated Landowner Group Act to make sure customary land is freed up for development purposes. The Act should strengthen accountability by recognising collective bargaining and benefit sharing through the clan system rather than on an individual basis.
This means that a strong administrative body is in place to prevent rampant corruption. The Taurama Urban Development Project is an example of how a poor administrative function can allow corruption to creep in and in the process tarnish the confidence that landowners have in the government and its agencies.
The PNG government has already taken a giant leap forward in introducing a law to promote and control the growth of the informal economy. Maintaining an appropriate balance should now be its primary objective and should be the intent behind the review of the Informal Sector Development & Control Act 2004.
In fact the uncontrollable aspect of the informal economy can be attributed to the lack of enforcement by the urban authorities, provincial governments and local level governments who are the administering authorities.
However, the Act’s biggest flaw is that its applicability is very much restricted to the National Capital District and, to a lesser extent, other urban centres of PNG with minimal or no applicability to the rural informal economy.
So the law turned out to be urban-biased and ignored the existence of the rural informal economy which is dominated by the agriculture sector, the single biggest sector in terms of the proportion of the PNG population who are involved in it.
There are strong sentiments that provinces need to develop their own policies on the informal economy to reflect their unique challenges and issues. In other words informal economy issue in PNG should be dealt with on a case by case approach.
The challenge ahead for the government after the review phase of the Informal Sector Development & Control Act 2004 is monumental.
The government has made it clear that it aims to align the law with the National Informal Economy Policy 2011-2015. That means it will be compelled to promote financial inclusion as one of the key strategies to promoting the informal economy in PNG.
The government will have to closely work with the Bank of Papua New Guinea to address issues relating to the stringent policies of the commercial banks that have prevented most Papua New Guineans from opening simple bank accounts.
This will have to be complemented by establishing new and strengthening existing microfinance institutions.
The government should also graduate microfinance institutions into banks to provide competition to existing commercial banks.
The Bank of PNG must also realise that its jurisdiction cannot cover certain areas such as informal lending. While complaints of exorbitant interest rates have been a cause for concern, it is important to understand that these are determined by a social contract that exists within a community.
Therefore the government, through the Bank of PNG, should focus on establishing minimum standards that should not stifle the informal credit market but allow lenders to progress to a stage where they enter the formal financial sector.
The government will also have to broaden its horizon to include the agriculture sector and find ways of stimulating its growth.
In larger population centres it will need to see how best urban planning can enhance and protect the interests of the informal economy.
To complement this, the government will also need to create avenues where it can engage in dialogue with groupings of market vendors and mobile traders.
Within urban areas the government will need to address the huge increase in the number of informal squatter settlements popping up on state and customary land. Without formal titles, these settlements don’t have access to basic services such as water, electricity, waste disposal and rubbish collection.
The recent call by the Minister for Lands, Benny Allen, for the Provincial Lands Board to issue titles is to be commended. It is hoped that such an arrangement will fast track the issuance of titles on state land as well as developing proper urban development plans.
In addition the government will need to strengthen the Incorporated Landowner Group Act to make sure customary land is freed up for development purposes. The Act should strengthen accountability by recognising collective bargaining and benefit sharing through the clan system rather than on an individual basis.
This means that a strong administrative body is in place to prevent rampant corruption. The Taurama Urban Development Project is an example of how a poor administrative function can allow corruption to creep in and in the process tarnish the confidence that landowners have in the government and its agencies.
The PNG government has already taken a giant leap forward in introducing a law to promote and control the growth of the informal economy. Maintaining an appropriate balance should now be its primary objective and should be the intent behind the review of the Informal Sector Development & Control Act 2004.
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