A proposal to establish Informal Economy Vendors Associations in Papua New Guinea: PART 2

This is a continuation of a series of discussion around the concept of establishing Informal Economy Vendors Association (IEVA) in Papua New Guinea. Part 1 provided a background to the IEVA concept and the structure of the research paper.

Note: Discussions are extracted from a research paper written by Busa Jeremiah Wenogo as a partial fulfillment of the requirements of the NRI Diploma in Economic Policy Analysis Course of 2016

3. Literature Review

A synthesis paper of six studies on street vendors carried out over the past decade in Phnom Penh by (Kusakabe, 2006) stated that literature on street vending can be categorised into four groups. For the purpose of this paper the third sets of literature highlighting the rights of street vendors and the harassment they face, as well as their lack of organization (Bhowmik, 2005) will be examined. For instance, in India street vendors are important members of Self Employed Women’s Association (SEWA), and their achievements through their organization have impressed many in other countries.

The PNG Economy consists of two unequal parts, the formal economy and the informal economy. The formal economy generates ‘kina’, in money terms, but the informal economy supports more people, in human terms (Department of Community Development, 2011).The informal economy is also divided, between urban and rural components. While most attention focuses on the informal economy operating in towns, infact there are more rural people involved in the informal economy than there are urban people (Department of Community Development, 2011). Joku (2005) estimated around 85% of the total PNG population as participating in informal sector activities; the substantial majority of such participants were in rural areas (Kavan, 2013). This fact is further substantiated by the NRI led study on the rural informal sector in PNG where it found that informal economy (where agriculture is the dominant sector) is the main source of livelihood for many rural households(Sowei, Vatnabar, & Lahari, 2010).

The ‘2008 Feeding Port Moresby’ study, by PNG’s Fresh Produce Development Agency, revealed that the total supply of fresh food to the city each year is around 57,780 tonnes, with an overwhelming 50,350 tonnes sourced from local urban and peri-urban production, which is almost entirely from the informal economy. Only about 7,000 tonnes comes from other provinces and international imports. Agriculture accounts for 32.2 percent of PNG’s gross domestic product, with the greater part of this originating from informal and national smallholder producers (Wilson, 2012). Yet in PNG informal economy is often treated as a ‘little brother’ of SME although in reality they both are different interms of their “culture, structure and operational methods (Department of Community Development, 2011). 

More recently, the National Informal Economy Policy 2011-2015was designed to offer concrete guidelines for achieving the aspirations of the Informal Sector Development & Control Act. It is the product of a very wide and thorough consultation at all three levels of government, with private sector, Civil Society Organizations and development partners. It was informed by commissioned studies on the informal sector of PNG as well as experience from abroad, and was developed over a period of five years. The government of Papua New Guinea through its NEC Decision No. 172/2010 endorsed the Department of Community Development & Religion as the lead implementing agency. However, the policy since its inception has suffered greatly from lack of support from the lead implementing agency. Changes at the political level have led to this stasis. Currently CIMC working in partnership with the Department of Community Development & Religion is developing an implementation plan for the policy and a host of activities have been identified and captured in the plan (Conroy & Wenogo, 2012). One of the key outcomes of this plan has been the introduction of the “Informal Economy” Branch within the Department of Community Development & Religion which will be responsible for coordinating the implementation of the policy and most likely the Informal Sector Development & Control Act 2004 which is currently undergoing review. With the government putting a spotlight on the SME Sector it is important that the informal economy is given due consideration in terms of policy implementation.

Establishing a peak body that represents the interest of the informal economy participants is very important in PNG. With an estimated 85% of the population engaged in the informal economy, establishing informal economy vendors associations can facilitate the process of [EK1] achieving the country’s development goals. For instance the National Constitution calls for “development to take place primarily through the use of Papua New Guinean forms of social and political organization’ and to work according to their talents in socially useful employment, and if necessary to create for themselves legitimate opportunities for such employment(Independent State of Papua New Guinea, Constitution of the Independent State of Papua New Guinea, 1975).

The idea of establishing informal economy vendors associations would be to enhance representation of interest groups involved in, or affected by, the informal economy in the decision making processes of government at all levels so that harmonious relationships are created in order for informal economy to be recognized and provided a space to thrive alongside the formal sector. For example, women, together with informal economy helpers and workers, are important groups in this category with significant occupational health and safety concerns in working in the informal economy. Also informal economy vendors associations could ensure that issues such as consumer protection, especially in the area of food handling, are taken into account. Further, formal enterprises to which informal economic activities pose a threat, could identify a focal point for negotiation, mediation, or other forms of resolution. Another example is the need for the informal economy to have input to policy development processes regarding the provision of public goods and services of value to people such as market vendors or service providers.

PNG as a developing economy has been experiencing the increasing growth of informal economy. Kopel (2002) states that the dependence on the informal sector, since 1990 has increased. In a study commissioned by CIMC that looked into constraints of the informal economy in PNG 60% of the respondents claimed that their households rely solely on the informal economy currently engaged in for their source of household income. A closer look revealed that of those who stated that their households have other sources of income, 52.5% of them actually have other household members working in informal economic activities. This means that the proportion of households which are dependent on the informal economy could be greater than 60% and could be in the vicinity of 80% (Eugenio, 2001).

Despite its contribution 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. The figure of 85% would be true if the whole of the agricultural sector were defined as informal. Perhaps better to say that if informal and subsistence activities in agriculture are aggregated, then 85% of livelihoods are found outside the formal economy. Although no comprehensive studies have been done to clearly delineate non agriculture informal economic activities from agriculture inclusive informal economy nevertheless, in PNG agriculture cannot be viewed separately as the agriculture sector. It is intrinsically linked to the overall definition of informal economy. However, there is a clear need for further studies to look into the contribution of each sub-sector that can provide a much accurate picture of each sub sector’s contribution’. In addition, both rural and urban informal economy in PNG are usually characterised by a high proportion of trade taking place mostly around the sale of agricultural produce, petty trading, manufacturing and services. The 1999 CIMC commissioned study found that of the five urban centres surveyed bulk of the informal sector (economy) activities is in petty trading (82% of the total respondents). The other 14% of the respondents stated that they are engaged in production and manufacturing sub-sector while remaining 4% are engaged in personal services such as repairing and shining shoes and so forth. Where the concentration of activities is in petty trading, and most people are selling the same thing (local produce, betelnut and cigarettes, cooked food, second hand clothes, bilums and other traditional clothing, handicrafts and artefacts etc), competition is very high as they are all doing the same kind of activity which results in sometimes individuals taking home very little or none daily from those activities(Eugenio, 2001).

4. Methodology

Due to time factor the paper heavily relied on review of secondary sources of literature. This paper draws on two (2) key studies on the subject of the informal economy in PNG as well as lessons learnt from the UNWomen/NCDC Safe Cities Market Project conducted in Gerehu and Gordon Market in Port Moresby. These were complimented by other related research publications and online articles from different websites as well as relevant laws of the Independent State of Papua New Guinea as follows;

·  (Eugenio, 2001) “Papua New Guinea Informal Sector Study: Review of Constraints to Informal Sector Development: Discussion Paper No. 85, a study of constraints affecting informal sector in five urban centres in Papua New Guinea. The study was commissioned by CIMC and INA with funding assistance from the Government of Papua New Guinea through the Department of National Planning & Monitoring, Asian Development Bank and United Nations Development Programme (UNDP).

·    (Sowei, Vatnabar, & Lahari, 2010) “The Rural Informal Sector in Papua New Guinea: An Analysis of Development in Select Communities, NRI Special Publication No. 48,The study complemented the above urban informal sector study conducted by CIMC and INA. The study was funded by the Government of Papua New Guinea in partnership with ADB’s Employment-Oriented Skills Rural Development (EOSDP), through the Department of National Planning & Rural Development, and in collaboration with the Consultative Implementation & Monitoring Council and Institute of National Affairs. 

·        (Kusakabe, 2006) “On the Borders of Legality: A Review of Studies on Street Vending in Phnom Penh, Cambodia” is a synthesis paper of six studies on street vendors carried out over the past decade in Phnom Penh (Rao, 1996; Kusakabe, 2001; Banwell, 2001; Kusakabe et al., 2001; Agnello and Moller 2004; Pou 2005). The Urban Sector Group, a non-government organization (NGO) supporting the Vendors’ Association in Phnom Penh markets, facilitated all these researchers

·      (Bhowmik, 2005) “Street Vendors in Asia: A Review”. The paper attempted to examine recent research done on street vendors in Asia with the aim of assessing the magnitude of street vending in different countries –and the composition of the vendors. Further it collates information on the extent of the unionisation of the vendors and other organisations, such as non-government organisations (NGOs), self-help organisation (SHO). Advocacy groups, etc, that work for their welfare.

·     (Kaugla & Cheong, 2016) “Update on the UNWomen/NCDC Safe Cities Market Project” to the CIMC Informal Economy Sectoral Committee during the committee’s 1^st meeting. The meeting was held on 6^th July 2016 at SambraHaus, Department of Community Development & Religion, Port Moresby, Papua New Guinea.

(PART 3: is entirely focused on exploring the pros and cons of establishing the Informal Economy Vendors Association. In this section I 1) conduct a brief comparative analysis between two countries and the PNG UNWomen/NCDC Safe Cities Market Project, 2) analyse the possible challenges that the proposed Informal Economy  Vendors Association may encounter and 3) conclude with a analysis of the current PNG Political Structure and its implication on the Informal Economy Vendors Association)