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Despite rhetoric, informal economy struggles

Wenogo - Deputy PM Davis Steven
Despite the deputy prime minister launching reform recommendations, PNG's informal economy continues to struggle


PORT MORESBY - When the first audit of Papua New Guinea’s informal economy was launched in 2019, it generated a sense of optimism for the future of this important sector of the nation’s economy.

But a year later, despite legislation and policy encouraging the growth of the informal economy, its participants remain voiceless – and depressed.

The informal economy is estimated to involve 75% of the PNG population.

Many informal economy participants have been victim to police or city rangers’ harassment and brutality and are feeling betrayed because of what they see as a broken justice system.

Faced with this situation, an understandable level of excitement was present in the informal economy when the government launched its report in September last year.

It was significant that the report made it clear that the informal economy continued to be an important element of PNG’s socio-economic system. It also disclosed the challenges that had been ignored for many years.

In fact these issues had been reported in the first study on the informal economy – ‘PNG informal sector study report: review of constraints to informal sector development’ by Ofelia Eugenio – 20 years before.

The audit of 2019 was touted as one of the first of its kind in the world and reinforced the importance of the informal economy, which - although much maligned by successive governments - continues to play a significant role in addressing many of the country’s pressing challenges such as chronic unemployment and rising poverty.

The report exposed that despite PNG’s heavy reliance on the extractive industry for revenue, the informal economy remained an important safety net - absorbing the unemployed and supporting formal sector workforce by salary supplementation.

It also has a major social effect in moderating law and order problems that may be triggered by poverty.

The study of 2019 brought together policy makers, donor partners, bureaucrats and informal economy participants who told heartfelt stories of their struggles and challenges.

Dignitaries present for the occasion, including deputy prime minister and attorney general Davis Steven, expressed strong sentiments in support of the informal economy, which is estimated to be worth K12 billion to the PNG economy.

But one year later, informal economy participants and advocates are still waiting to see action.

Indeed, in 2017 the national government had promised to introduce interventions that would lay the platform for the much awaited transformation of the informal economy.

One of these was to be the introduction of new legislation and policy. However, we are yet to see any progress. And if progress has been made it has not been publicised.

A large part of the delay may boil down to the government offering fine words but not making concrete financial commitments when it endorsed the audit report.

Despite that, for a time, the future of the country’s informal economy seemed to take a turn for the better but the emergence of Covid-19 has led to the closure of many informal economic activities and a rapid descent into a precarious existence that has driven many people into destitution.

That said, some informal micro-entrepreneurs have shown resilience and unearthed income earning opportunities such as selling masks, an activity which has boomed since the government introduced rules enforcing mandatory mask wearing.

However, for the foreseeable future, Covid-19 or not, the informal economy is expected to remain lethargic unless the government pull up its sleeves and begins to implement its previously announced policy.

History has shown that, when it comes to informal economy, the government has demonstrated an inability to keep its promises.

Initially, even though the national audit found that the informal economy had failed to progress over two decades, the government failed to make funds available to implement its new legislation and policy.

So a new approach aimed at making an impact at the grassroots level is required more than ever to salvage the future of the informal economy.

There are projects that show that government investment will work: the Help Resources-led initiative in Wewak; the Fresh Produce Development Agency’s Market for Village Farmers Project which aims to convert subsistence farming into viable commercial businesses; the Centre for Excellence in Financial Inclusion-led financial inclusion activities; and the CIMC-led informal economy voice strategy.

These are all good examples of interventions that the government should invest in supporting if the informal economy is to be transformed.

Without investing in these sorts of initiatives all we will have is more rhetoric and less constructive action.

Busa Wenogo is a development economist who has been at the forefront of informal economy policy and legislative reforms in Papua New Guinea for almost a decade


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Lindsay F Bond

Dear Busa, will the dumping of deputy Davis even make a difference?

By the way, as an aside, MP Steven is continuing in the PNG ministry.


That economic necessity which "feeds 90% of Papua New Guineans" shuffles along. Perhaps ministerial attention will have more time to digest the needs for feeds.

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