EMPOWERING INFORMAL ECONOMY FOR LOCAL EMPOWERING INFORMAL ECONOMY FOR LOCAL

ECONOMIC DEVELOPMENTECONOMIC DEVELOPMENT

(The Role of Local Government)(The Role of Local Government)

Dr. Asif ChidaDr. Asif ChidaInclusive Growth & Private Sector Development Regional Inclusive Growth & Private Sector Development Regional

SpecialistSpecialistUNDP Pacific Centre, FijiUNDP Pacific Centre, Fiji

(formerly Rapporteur, UN High Level Commission on Legal Empowerment (formerly Rapporteur, UN High Level Commission on Legal Empowerment of the Poor)of the Poor)

2014 Pacific Local Government Forum2014 Pacific Local Government ForumPort Moresby, Papua New GuineaPort Moresby, Papua New Guinea

19-23 May 201319-23 May 2013

Key Focus of this Key Focus of this PresentationPresentation• IntroductionIntroduction• Informal Economy in the Pacific- An OverviewInformal Economy in the Pacific- An Overview• Why do we have IE?Why do we have IE?• IE in the Pacific- Some ChallengesIE in the Pacific- Some Challenges• Empowering IE- First StepsEmpowering IE- First Steps• How Local Government can empower IEHow Local Government can empower IE• Empowerment of IE- Making it Happen- The Way Empowerment of IE- Making it Happen- The Way

Forward and Policy MessagesForward and Policy Messages• ConclusionsConclusions

Informal Economy in the PacificInformal Economy in the Pacific- An overview- An overview

• Informal Economy (IE) constitutes 60-85 % of Informal Economy (IE) constitutes 60-85 % of Pacific economies and it is growing due to Pacific economies and it is growing due to lack of jobs/opportunities in formal sectorlack of jobs/opportunities in formal sector

• Women & Girls comprise of 75-90% in IEWomen & Girls comprise of 75-90% in IE

• IE occupy bottom of the pyramid but attracts IE occupy bottom of the pyramid but attracts little attention resulting in emerging poorlittle attention resulting in emerging poor

• poverty results from disempowerment, poverty results from disempowerment, exclusion and discriminationexclusion and discrimination..

Why do we have IE?Why do we have IE?

• Limited employment opportunities in the Limited employment opportunities in the formal sector for the growing populationformal sector for the growing population

• Legal, financial & bureaucracy barriers to Legal, financial & bureaucracy barriers to be self employedbe self employed

• Easy entry to create livelihoods/incomesEasy entry to create livelihoods/incomes

• Outside the “laws and taxes”Outside the “laws and taxes”

• IE will stay and continue to growIE will stay and continue to grow

The Face of Informal Economy Lilieta Silakati of Waisa in Naitasiri at the Suva Market

( Fiji Times 4/4/11)

- - Sells Fresh produce at the Sells Fresh produce at the weekend market for 20 yrsweekend market for 20 yrs

- Travels 25Kms, transport - Travels 25Kms, transport charges $10 charges $10

- Leaves home @ 3.00 am - Leaves home @ 3.00 am arrives market at 5.00 amarrives market at 5.00 am

- Pay for a table $3.50 - Pay for a table $3.50 (2ftx3ft)(2ftx3ft)

- Sales have been dropping - Sales have been dropping from $200 few years back from $200 few years back to around $100. earns <$ 40to around $100. earns <$ 40

- Husband does farming- Husband does farming

- Income earned is to - Income earned is to support for school fees, food, support for school fees, food, uniforms, transport, etc.uniforms, transport, etc.

- Needs better table, seats - Needs better table, seats and facilitiesand facilities

- Lacks financial literacy- Lacks financial literacy

Informal Economy Informal Economy Some CharacteristicsSome Characteristics

• Invisible contributors to GDP

• Seen from social lens rather than commercial

• Significant contributor to Town Councils/LG operational budget in terms of fees

• Limited or no reinvestment to address IE needs.

• relying on moneylenders for weekly credit

• limited access to broader economic opportunities

• vulnerable to uncertainties, corruption and violence

• have few means to settle disputes apart from bribery, threats and terror or violence

IE in the Pacific – Some ChallengesIE in the Pacific – Some Challenges

Legal DeficitsLegal Deficits• Access to JusticeAccess to Justice:

- Few means to settle disputes - Without legal rights or protections, IE and women in particular are in a continual and

often worsening state of legal and political vulnerability- Discrimination & lack of equal access to resources, employment, markets and trade,

• Property Rights Property Rights :

-Both statutory and customary property systems disenfranchise particularly women. occupying land they do not own with insecurity

- Revise and repeal discriminatory laws and related administrative practices to ensure women’s full and equal access to economic resources, including their inheritance and equal right to own property

IE in the Pacific – Some ChallengesIE in the Pacific – Some Challenges

Decent Work DeficitsDecent Work Deficits• Women work in IE 10 to 14 hrs daily under appalling Women work in IE 10 to 14 hrs daily under appalling

conditions – unhygienic , poor sanitation & drainage, garbage conditions – unhygienic , poor sanitation & drainage, garbage removal etc. removal etc.

• Poor occupational and Safety Conditions – personal safety & Poor occupational and Safety Conditions – personal safety & security, sleeping on footpaths, Lack of Child Care facilities, security, sleeping on footpaths, Lack of Child Care facilities, nursing babies, Basic health care first aid nursing babies, Basic health care first aid

• Lack of a minimum set of enforceable labour rights for workers in the informalinformal economy

• Lack of inclusive social protection

IE in the Pacific – Some ChallengesIE in the Pacific – Some Challenges

Governance DeficitsGovernance Deficits

• Gender Blind Spot in Local GovernmentsGender Blind Spot in Local Governments

• Gender insensitive bye-laws, policies, Gender insensitive bye-laws, policies, budgets, plans and projectsbudgets, plans and projects

• Huge funds collected in forms of taxes & Huge funds collected in forms of taxes & fees but less re-investment in IEfees but less re-investment in IE

• Lack of support for women organizationsLack of support for women organizations

• Need for Voice, recognition and dialogue Need for Voice, recognition and dialogue for gender just strategies for market mgt.for gender just strategies for market mgt.

How to Empower IEHow to Empower IEFirst Step: Legal First Step: Legal EmpowermentEmpowerment

Legal empowerment of the poor (LEP) seeks to make the law work for Legal empowerment of the poor (LEP) seeks to make the law work for everyone to provide equal economic opportunities to alleveryone to provide equal economic opportunities to all

It is an agenda of inclusive development that presents a unique focus on It is an agenda of inclusive development that presents a unique focus on key livelihood rights - property, labour, entrepreneurial rights and access key livelihood rights - property, labour, entrepreneurial rights and access to justice – to prevent legal exclusion and foster economic growth, to justice – to prevent legal exclusion and foster economic growth, poverty reduction and human developmentpoverty reduction and human development

Legal empowerment of the poor is an end in itself as a human rights Legal empowerment of the poor is an end in itself as a human rights agenda but also a means to an endagenda but also a means to an end

It is a necessary condition for poverty eradication & Inclusive GrowthIt is a necessary condition for poverty eradication & Inclusive Growth LEP is an important tool and process through which threats are

reduced, protection is increased and opportunities are enhanced by use of the law

Legal Empowerment entails Legal Empowerment entails Inclusive Growth and Sustainable Inclusive Growth and Sustainable

LivelihoodsLivelihoods• LIVELIHOODS of people are based on assets (such as land), activities LIVELIHOODS of people are based on assets (such as land), activities

(business or labor) and entitlements (protections, freedoms, (business or labor) and entitlements (protections, freedoms, opportunities)opportunities)

• SUSTAINABILITY: economic efficiency, ecological integrity, social equity, SUSTAINABILITY: economic efficiency, ecological integrity, social equity, resilience (capacity to cope with and recover from shocks and stresses)resilience (capacity to cope with and recover from shocks and stresses)

• VULNERABILITY is the inability to cope with and recover from shocks and VULNERABILITY is the inability to cope with and recover from shocks and stresses to the livelihood systemstresses to the livelihood system

• EMPOWERMENT is the process through which people gain greater EMPOWERMENT is the process through which people gain greater control over their lives and livelihoodscontrol over their lives and livelihoods

• LEGAL EMPOWERMENT is the process through which threats are LEGAL EMPOWERMENT is the process through which threats are reduced, protection is increased and opportunities are reduced, protection is increased and opportunities are enhanced by use of the lawenhanced by use of the law

Legal Empowerment of the IELegal Empowerment of the IEThe ProcessThe Process

Identity and Legal Status as Citizen

Identity and Legal Status as Asset holder

Identity

Identity and Legal Status as Worker

Identity and Legal Status as Business-man/-woman

Access to Justice

Access to Assets

Access

Access to Decent Work

Access to Markets

Conditions for Legal Empowerment

Rights

Property

Rights

Labor

Rights

Business

Rights

Pillars of Legal Empowerment

Protection

Opportunity

Goals of Legal Empowerment

SYSTEMIC

CHANGE

Information and Education

Voice

Organization and Representation

Rule of Law

and

Access to Justice

How Legal Empowerment help How Legal Empowerment help Informal EconomyInformal Economy

E.g. STREET VENDORSE.g. STREET VENDORSCommon issues and challenges faced

What local govt. can to do? 

- insecure place of work: due to competition for urban space

- capital on unfair terms: due to dependence on wholesale traders

- uncertain quantity, quality, and price of goods: due to dependence on wholesale traders

- lack of infrastructure: shelter, water, sanitation

- ambiguous legal status: leading to harassment, evictions, and bribes

- negative public image 

- secure vending sites

- access to capital on fair terms: a loan product tailored to their daily need for working capital

- bargaining power with wholesale traders

- infrastructure services at vending sites: shelter, water, sanitation

- license to sell and identity cards

- freedom from harassment, evictions, and bribes

- Positive public image

Why Informal Businesses Need Why Informal Businesses Need Legal Empowerment?Legal Empowerment?

Inappropriate Design Of The Legal/Regulatory

Environment (Biased Towards Larger Enterprises)

Lack Of Implementation Of Legal/Regulatory

Environment

Resistance By Market Competitors And Other

Stakeholders

Lack Of Knowledge Or Access To Legal/Regulatory

Environment

Lack Of Legal Rights

Lack Of Bargaining Power

Lack Of Representation And Voice

How LG can empower IEHow LG can empower IE

• Strengthening Governance from supply side Strengthening Governance from supply side (capacity building) and demand side (supporting (capacity building) and demand side (supporting local or community driven initiatives)local or community driven initiatives)

• Reforming and Transforming Institutions Reforming and Transforming Institutions (inclusion, cohesion and accountability)(inclusion, cohesion and accountability)

• Making laws (e.g. Alternative Dispute Resolution) Making laws (e.g. Alternative Dispute Resolution) work for the informal businesses, andwork for the informal businesses, and

• Rights (knowledge and understanding of rights, Rights (knowledge and understanding of rights, asserting and enforcing rights collectively)asserting and enforcing rights collectively)

Pillars of Legal Empowerment Linkages with Informal Businesses

Access to Justice and Rule of Law a) Designing and developing of legal tools for empowering informal businesses.

b) Examine the efficacy of above tools.

Property Rights a) Vending security and business securityb) Stable address helps informal businesses in

its business identity, and access to finance and clients.

Labour Rights a) Strong links identified between right to employment and business opportunities.b) Capacity for informal businesses to provide

better protections and provisions for their workers.

c) “Work Deficit”: Labour productivity, Occupational health and safety, Social security, etc.

Road Maps For Implementation Of Reforms:Implementation Strategies, Including Toolkits

And Indices

a) Coordinate in developing a reform “toolkit” for policy makers focussing on legal, institutional, regulatory, operational and financial reforms.

How LG can Empower IEHow LG can Empower IELinking Legal EmpowermentLinking Legal Empowerment

Empowering IE: Making it HappenEmpowering IE: Making it Happen

Issues for further Issues for further discussionsdiscussions

• Need for a Common Definition at National/Local LevelNeed for a Common Definition at National/Local Level

i) Do we need to define informal business (es) generically, or do i) Do we need to define informal business (es) generically, or do we have a definition that can be adopted?we have a definition that can be adopted?

ii) Who are the constituents of businesses in the informal sector? ii) Who are the constituents of businesses in the informal sector?

• Informality to Formality – The Empowerment Process Informality to Formality – The Empowerment Process for LEDfor LED

i) Towards a new approach to formalizationi) Towards a new approach to formalization- Addressing common legal deficits and barriers- Addressing common legal deficits and barriers- Developing a framework of indicators- Developing a framework of indicators

ii) Providing legal tools for empowermentii) Providing legal tools for empowerment- Identifying and developing a set of concrete legal tools- Identifying and developing a set of concrete legal tools- Explaining and illustrating the efficacy of tools- Explaining and illustrating the efficacy of tools

Empowering IE: Making it HappenEmpowering IE: Making it HappenIssues for further discussionsIssues for further discussions

(cont)(cont)• Institutionalizing the empowerment Institutionalizing the empowerment

processprocessi) Conceptual frameworki) Conceptual frameworkii) Institutional mechanismii) Institutional mechanism - clear, secure and transferable property rights- clear, secure and transferable property rights - secure and enforceable contracts- secure and enforceable contracts - conflict resolution- conflict resolution

• Policy framework for inclusivenessPolicy framework for inclusiveness- Entry and Exit Mechanisms- Entry and Exit Mechanisms- Operation and expansion mechanisms- Operation and expansion mechanisms- Extra –national dimensions of business constraints - Extra –national dimensions of business constraints

Empowering IE: Making it HappenEmpowering IE: Making it HappenIssues for further discussionsIssues for further discussions

(cont)(cont)• Inclusive FinanceInclusive Finance

i) Banking for the poor- mobile bankingi) Banking for the poor- mobile bankingii) Micro insurance to protect livelihoods & incomes during ii) Micro insurance to protect livelihoods & incomes during

naturalnatural disaster, sickness, deaths & funeralsdisaster, sickness, deaths & funerals

• Other Key issues include: Other Key issues include: - Environmental Issues- Environmental Issues

- Sustainability Issues- Sustainability Issues- Benchmarking good/successful practices in the - Benchmarking good/successful practices in the

informal businessesinformal businesses

Empowering IE: Making it HappenEmpowering IE: Making it Happen

KEY POLICY MESSAGESKEY POLICY MESSAGES

i) i) Adopt an inclusive and integrated Adopt an inclusive and integrated approach to local economic approach to local economic development such that there is legal development such that there is legal recognition and empowerment of IErecognition and empowerment of IE

ii)ii) Engage in evidence based reformEngage in evidence based reform

iii) The right to participate in the market -Recognition and correction of the bias in existing commercial policies, regulations, laws, and procedures favoring larger firms/enterprises

Extension of government incentives and procurements to Tiny businesses in the IE

Facilitation as appropriate of backward and forward linkages on fair terms between larger and smaller firms

Promotion of market access and fair trade for smaller firms and enterprises

Adequate and relevant retraining, life-long learning, and other support to Trade & labour mobility (Seasonal Workers)

iv) What Legal empowerment entails making laws and regulations Appropriate and relevant to the realities in IE,

specifically, it implies:

A competent and independent judiciary applying the law

equally and evenly on all members of the community.

Essential are education of the legal profession; full publication

and dissemination of legal texts including judicial decisions.

Transparent and coherent laws including laws for the

protection and facilitation of business

Enforcement officers who apply the law uniformly to all.

Significant effort to reduce grand corruption and, ultimately,

to reinforce social norms that constrain petty corruption.

vi) Private – Public Partnership

vii) Informality to Formality: Need for value based change process

In ConclusionIn Conclusion

The opposite of poverty is not wealth it The opposite of poverty is not wealth it is justice. The objective…is to create a is justice. The objective…is to create a more just society, not necessarily a more just society, not necessarily a wealthier one. And the great question wealthier one. And the great question is how do we do this?is how do we do this?

Leonardo Boff Leonardo Boff

Franciscan Theologian, BrazilFranciscan Theologian, Brazil