National Audit Survey of the Informal Economy in PNG

Fieldwork for this project was carried out by a team mobilised by the Department for Community Development and Religion (DFCDR) working with CIMC during March-October 2018. The project received additional support from UN Women which contracted FOCUS Pty Ltd to oversee development of the audit methodology and analysis of results, and which also commissioned Digicel to undertake a phone survey that would validate key findings. This complex project involved huge personal and corporate commitments as well as impressive interagency teamwork. This reflects a combined commitment to ensure that the findings of the audit accurately incorporate the collective voices of the workers themselves. We trust that the results of this work will be useful to the Government in developing its policy response, and that it will ultimately benefit the informal economy workers (around 8,000 of them) who participated in the audit, as well as all of those individuals and families who are working in PNG’s informal economy.

Funding support for the audit came from Government through DFCDR, UN Women and the European Union Delegation of Papua New Guinea through the Consultative Implementation & Monitoring Council.

Global understanding of the informal economy has undergone some shifts particularly in recent years. The New Urban Agenda launched by UN Habitat in 2017 provides additional impetus for new thinking, particularly urging Governments to work with rather than against the participants in the informal economy, and the Sustainable Development Goals provide a framework for monitoring the effectiveness of Government action. Together these initiatives are now identified as Agenda 2030 with a key development goal that “No-one is left behind”. Papua New Guinea is in a unique position to show leadership in this regard, as its constitution, legal and policy framework already provide the foundation for transformative approaches to social and economic development, and its Medium Term Development Plan III uses the Sustainable Development Goals as a tool for setting targets and measuring achievements.

Building on this foundation, there is much to be done in gaining a fuller understanding of the informal economy: who are the participants, what activities are they involved in, what resources do they use, what goods and services do they produce, what are the outcomes for the wellbeing of their families and communities, what is their contribution to local and regional economies, what are the barriers to formalisation of informal enterprises, as well as whether the current bureaucratic and regulatory frameworks for the formal economy are appropriate at all in a developing economy.

In the first instance, and for the purposes of this audit, the focus was only on the cash economy. This is concentrated in urban areas as well as localities that have an urban-rural interface, including business activity nodes such as mining areas and commercial plantations.

The research involved 1,801 face to face interviews with informal economy workers in the six sample survey localities as well as 6,106 phone interviews. Data was collected on a larger number of people, including household members and helpers in the business. Taking this into account, the audit provides data on around 3% of all workers in the informal economy across the nation. The key findings from the audit have been aligned to the SDGs to provide a framework for subsequent monitoring of changes as a result of policy interventions or other factors. A copy of the audit report will be made available here shortly.

Produced the draft revised National Policy on the Informal Economy

This Policy will replace the previous National Informal Economy Policy 2011-2015 and will complement the Informal Sector Development and Control Act 2004 and its revised version. The Policy will guide the Government in its administration of the Act, and in all matters concerning development of the informal economy. Although this Policy will replace the National Informal Economy Policy (2011-2015), it has retained much of the content and strategic direction. In particular, this revision takes account of the findings of the National Audit of the Informal Economy conducted in 2018 (a global first), which suggest some new directions for policy and action.

The PNG Constitution provides strong recognition and endorsement of the informal economy. The Preamble to the Constitution calls for ‘development to take place primarily through the use of Papua New Guinean forms of social and political organization’ and for economic development to give special emphasis to ‘small scale artisan, service and business activity.’

It is clear that the framers of the Constitution intended for the State to provide a central place for the ‘informal sector’ (as it was then known) in the social and economic system of an independent PNG. This policy is yet to be widely consulted and finalised.

Informal Economy Voice Mechanism and Strategy

The Committee has initiated and developed the Informal Economy Voice Strategy for informal economy participants. In the context of this Strategy, the Informal Economy Voice Mechanism will take the form of IPA registered Informal Economy Associations set-up to provide voice for informal economy participants. These associations will be set-up based on their geographical location or type of economic activities. These IE Associations include those operating inside formally set-up markets as well as mobile traders and peddlers. The associations will be responsible for raising their members concerns to the government and working with the government to find amicable solutions to address informal economy related problems. The absence of such a mechanism has seen ongoing conflict between the informal economy participants and the government authorities resulting in widespread abuse and harassment of many informal economy participants; most of whom are women.

The objective of creating IE associations is twofold. Firstly, to enhance representation of informal economy participants in the decision making processes at all levels so that harmonious relationships are created in order for informal economy to be recognized and provided a space to thrive. Secondly, it will enhance coordination and management as well as addressing capacity gaps within the informal economy for them to advance individually and collectively as a sector contributing to the development of the country in general.

 The voice mechanism/IE association will be an independent organization that will represent the interest of its members without fear or favor and aligning its organizational goals and objectives to key government policies such as the Vision 2050, PNG Development Strategic Plan, StaRS, MTDP, The National Informal Economy Policy, SME Policy and so forth.

A draft copy of the strategy is yet to be validated externally through regional workshops in Lae, Madang, Mt Hagen, Goroka, Kokopo, Alotau, Port Moresby and Kerema.

Review of the Informal Sector Development & Control Act 2004

The Informal Sector Development and Control Act were passed in 2004 to promote and protect the informal sector in Papua New Guinea (PNG). The intention of the Act was to encourage the growth of the informal sector in a safe environment. In 2011, the National Informal Economy Policy (2011-2015) was endorsed to guide the general policy statements on how to effectively promote the informal economy as a whole.

Background of this Review

In 2010, the NEC Decision No. 172/2010, endorsed the National Informal Economy Policy and recognized the Department of Community Development as the lead implementing agency to coordinate implementation of the Policy. In the same decision, the NEC directed the CLRC to review the Informal Sector Development and Control Act 2004 in collaboration with the Consultative Implementation and Monitoring Council (CIMC)’s Informal Economy Committee to align the Act with the National Informal Economy Policy.

However, the direction did not materialize until 2012 when the Minister for Justice issued a TOR in accordance with Section 12 of the Constitutional and Law Reform Commission Act 2005 to conduct the review. The NEC decision could not be acted upon by the CLRC because under the CLRC Act, the Commission can only receive directions from either the Minister for Justice (via TORs); or from the Head of State (Constitutional Directive); or from a Parliamentary Committee.

Summary of Recommendations

Based on the review conducted, the CLRC is making several recommendations (a total of 11) to be considered by the National Government. Recommendation No. 11 concerns the setting up of an Informal Economy Voice Mechanism which will take the form of Informal Economy Associations in the strategy.

 11 The National Government to consider creating an informal business voice mechanism that can serve as the link between the informal economy vendors, administering authorities, and the Provincial and National Governments for the purposes of promoting and protecting the informal economy in the country. Alternatively, relevant government department creates that mechanism administratively.  

Further to the above CLRC has included a new provision (Section 17A) which will allow for the creation of “INFORMAL ECONOMY COMMITTEES”. The committee will be responsible for dealing with issues relating to informal economy at various tiers of government. One of the reps in the Committee is the rep from the Provincial Informal Economy Association. CIMC Informal Economy Sectoral Committee has further recommended for the composition of that Committee to be made “explicit” in the law. CIMC is one of the proposed members of the Committee.

Progress to date

The TOR for the review was issued in 2012 by the then Minister for Justice & Attorney General Hon. Allan Marat and the review was concluded sometime in 2015 and up until now (2018) we are still waiting for the Report and the Bill (amended) to be presented to NEC for their deliberation and endorsement. CLRC to advise where they are now with the progress.

 Other work done through partnerships

1. Established the Public Goods and Services and Financial Inclusion Sub-Committees with their own terms of reference to guide the successful implementation of the National Informal Economy Policy. These two committees report to the CIMC Informal Economy Committee (IEC);
2. Initiated the review of the INFORMAL SECTOR DEVELOPMENT & CONTROL ACT 2004. CLRC allocated funding and led the review with support from CIMC, NCDC, Dept for Community Development and key stakeholders;
3. CIMC has been instrumental in pushing for a FINANCIAL INCLUSION EXPO to amplify to the public and Government about the serious issue of financial exclusion;
4. CIMC IEC is a member of the BPNG Financial Inclusion EXPO Planning Committee;
5. CIMC IEC is a member of the National Child Labor Tackle Project Advisory Committee, a project that looks at developing a national policy on dealing with child labor;
6. CIMC IEC is a member of the Working Group on Employment Review which is a working group established in the Department of Labor & Industrial Relations to review the Employment Policy and develop an Employment Act in PNG;
7. CIMC IEC is a member of the UNWOMEN Safe Cities Market Project Steering Committee;
8. CIMC IEC is a member of the Department of Health Food Sanitation Council.

Following are links to some work done by the Committee during the years. Most of them relate to indept articles written about issues and successes relating to PNG informal economy and published on various mediums i.e. ANU’s Policy Development Blogsite, Pacific Institute of Public Policy and East Asia Forum.

1. http://devpolicy.org/planning-for-a-more-productive-informal-economy-in-png/
2. http://devpolicy.org/a-tough-nut-to-crack-legislating-for-papua-new-guineas-informal-economy-20150526/
3. http://devpolicy.org/betelnut-beyond-bans-spot-fines-20160825/
4. http://devpolicy.org/election-looms-png-political-parties-consider-supporting-informal-economy-20170517/
5. http://devpolicy.org/reflections-png-governments-interventions-informal-economy-20171114/
6. http://devpolicy.org/organising-disorganised-proposed-informal-economy-voice-strategy-20180129/
7. http://pnginformaleconomist.blogspot.com/2015/11/new-law-on-informal-economy-could-be_11.html
8. http://www.eastasiaforum.org/2015/12/05/getting-pngs-informal-economy-right/
9. http://pnginformaleconomist.blogspot.com/2015/11/

In 2000, the Informal Economy Committee commissioned a study that reviewed the constraints to Informal Economy development in coordination with the INA/CIMC/ADB/UNDP.

The results of the study gave birth to the Informal Sector Development and Control Act (2004). The Act encourages the development of the Informal Economy by organizing in a manner that promotes public health and cleanliness. The Act is aimed at creating employment opportunities and income generation to eradicate poverty and improve the living standards of Papua New Guineans.

Recently in 2011, the National Informal Economy Policy 2011-2015 was launched in Port Moresby by Dame Carol Kidu who was then Minister for Community Development.