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Political parties must consider supporting the informal economy


AS the national election looms, Papua New Guineans are already contemplating what the future will hold for them.

While important issues concerning employment, infrastructure, education and health will be a key feature for most political parties, equally important for urban voters will be the new government’s approach to PNG’s large informal economy – street vendors, market sellers, carvers and weavers, and so on.

In places such as Port Moresby and Lae, the informal economy accounts for the majority of the urban population.

More than 80% of PNG’s urban unemployed live in unplanned settlements and villages and are involved in some form of income generation in the informal sector.

This number is expected to increase as cities and towns throughout the country experience further growth.

Driven by promises of transformational outcomes as a result of resource development, people rushed to cities like Port Moresby and Lae in search of useful employment and other benefits. But most found employment opportunities scarce and their situation became dire as urban development did not encompass their interests.

Indeed, in recent years the attitude of authorities towards the informal economy has made life difficult for participants.

The National Capital District’s ‘buai ban’ and recent evictions from settlements around Port Moresby are examples of disruption and similar cases have been reported in Lae, Madang and Mt Hagen. Nevertheless, the informal economy flourishes and shows no sign of receding.

The government needs to change tactics by focusing instead on embracing the informal economy with a view to promoting its positive aspects. Experience on the ground has demonstrated that taking a confrontational approach is no good to anyone.

The national government took a big step with the introduction of the Informal Sector Development & Control Act 2004 and the National Informal Economy Policy 2011-15. These two important documents represent a landmark achievement for successive PNG governments.

Although in initial years, the policy struggled to gain support from government, this is slowly changing due largely to the efforts of the central bank in promoting financial inclusion and the Community Development Department setting up an Informal Economy Section to coordinate law and policy on the informal economy.

Despite this progress, though, the sector lacks political voice. The government’s push to stimulate small to medium enterprises has failed to recognise the contribution of the informal economy although it aims to increase PNG-owned SMEs from 49,000 to 500,000 in 2030.

With no clear pathway to transit into the SME sector, most micro-enterprises are languishing in the informal economy with little government support. Subsequently, the ambitious plan to increase the number of PNG owned SMEs is in limbo.

This is where political parties contesting the general election should consider supporting the informal economy as a key policy priority. The sector alone accounts for 80-85% of the rural and urban population.

The informal economy will continue to grow as the rate of urbanisation increases and turning a blind eye to its problems will not help. Any political party aiming to form the next government should seriously consider the concerns of informal economy participants who make up the largest voting blocs in most urban centres.

There is no doubt that the sector is a sleeping giant and, if given the right support, it can contribute significantly towards addressing some of the country’s development challenges such as rising unemployment and poverty.

The author is an economist who works with PNG’s Consultative Implementation & Monitoring Council as a Senior Project Officer specialising in informal economy


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