First audit of informal economy


A GOVERNMENT-sanctioned National Informal Economy Audit Report has been endorsed by the National Executive Council this month.
The Department for Community Development and Religion (DfCDR), through its economic branch and its partners have done a wonderful job in completing the much needed audit, which can now play a vital role in empowering and protecting those involved in the sector.
The National Informal Economy Audit provides an up-to-date picture of PNG’s informal economy and subsequently will inform the review of the National Informal Economy Policy and finalisation of a new law to replace the current Informal Sector Development and Control Act of 2004.
The audit, said to be a global first, was conducted last year between March-October in collaboration with the Department of National Planning and Monitoring, Consultative Implementation and Monitoring Council (CIMC), and UN Women.
According to the DfCDR’s informal economy assistant secretary Israel Luluaki, who led the 2018 audit, the information was collated through physical interviews and via phone conversations across the country.
Local enumerators were engaged to collect information upon interviews and that accruing from local knowledge in 17 districts and eight provinces which were physically visited. The provinces included Gulf, Central, Morobe, NCD, East New Britain, Western Highlands, Jiwaka, and East Sepik. However, the undertaking was done countrywide as those districts not physically covered were accommodated through phone interviews.
This article highlights the challenges of the sector based on the recommendations of the report itself and from some informal groups, but for now, let us briefly go through the magnitude of the sector.

Scale of the sector
The sector is a sleeping giant that needs proper coordination by the Government through effective empowerment and protective policies to safeguard the participants. The report puts its current value at K12 billion per annum – money that is unbanked but is certainly in circulation. One only has to approach a roadside or any informal vendor to know their daily takings, and do your own calculations depending on the size of the participants.
The amount is equivalent to or almost surpasses the country’s annual fiscal budget of the formal economy. And rightly so. Secretary Anna Solomon, when describing the impact of the sector on the ordinary citizens of PNG at its launch earlier this month in Port Moresby, said that informal sector has far outweighed the formal sector in terms of employment.
It is the largest employer, since all who do not get a chance in formal employment opt to trying their hands in this burgeoning sector. Strikingly, the report reveals that many of the formal sector employees are also participants in the informal economic activities after hours to supplement their income.
It goes on to say that the cash takings accumulated over a fortnight are much higher than the fortnightly earnings of many formal sector employees – thus, it is not surprising to see formal wage employees engaging in it during non-official times.
In all, about 80 per cent of the country’s populace is immersed by the sector and provides around 90 per cent of incomes to local households.
Solomon, when defining the informal economy in a simple version said: “It is an economy that feeds 90 per cent of Papua New Guineans and provides employment for almost the similar portion of the country’s population – not the formal economy”.

Challenges and resolutions
At the launch of the audit report earlier this month, a group of informal sector youths and mothers presented a role play depicting the challenges faced in the cities and other urban centres relating to joblessness and dwindling opportunities resulting in poverty and other social ills, and how opting into informal sector creates a rescue avenue, but a peril of being harassed by authorities almost frequently.
The play presented the notion that many issues faced by the youths and wider segment of the informal economy can be amicably addressed if the sector is properly regulated with clear guidelines and policies. For the last 40 years, the sector as simply received little to no support from the Government, although it is a critical element for the national growth. The poor and the vulnerable continue to be harassed through law enforcement agencies such as police.
With the nation currently facing a down turn in the economy and reduced opportunities in the formal sector, the informal economy has wider potential in rescuing the country, such that its regulation with the clear policies can significantly contribute to the country’s annual GDP growth.
There is no doubt that the sector has played a huge part in the production of many highly educated professionals in the country over the years and will continue to do so, and that it is now incumbent upon some of these professionals in their line of duty to truly give back to the sector by way of amalgamating the sector with the formal using the audit findings and recommendations, with our very own PNG Ways of conduct incorporated into it.
Comments from authorities
While we have an audit report to provide a workable direction to replace the outdated National Informal Economy Policy and Informal Sector Development and Control Act of 2004, the ball is in the hands of those in power and authority to truly make it a reality. But the stakes are high that a luminescent light has brought a new dawn for the country to begin its journey to economic independence. This is evident by what some in high office said of the report.
Deputy Prime Minister and Minister for Justice and Attorney-General, who is also the chairman of the social sector and under whose prerogative the concerned sector falls, said the report was indeed timely.
“This will make it happen for the good of the majority of people who fall under the informal economy.
“The launch is only a formality, but the government through the NEC has already endorsed and adopted this report. There is a bigger work that needs to be done in our country, and this productive report is a yardstick to move the sector forward.
“Do not give up on your faith and hope of moving our country forward; together we will and can make it happen to take back PNG,” Steven said.
Minister for Youth, Community Development and Religion Wake Goi said as minister responsible, he will give his best in the NEC to address the issue.
UN Women representative Susan Ferguson said: “Informal economy helps unemployment makes ends meet through the informal sector, thus, it needs investment from government, donors, and private sector help it grow and expand.”
I end with the words of Israel Luluaki, who has played a very instrumental role in the completion of the first-ever global National Informal Economy Audit: “If we truly protect and empower the citizens of this nation, we will be forever smiling.”

  • Eric Piet is a freelance writer.