New law on the informal economy could be a game changer for PNG (part 2)

New law on the informal economy could be a game changer for PNG (part 2)

On October 19, 2015 the Constitutional Law Reform Commission launched the draft report on the Review of the Informal Sector Development & Control Act 2004 at the University of Papua New Guinea. The report contains a set of recommendations and the proposed bill that would be presented to the government for its consideration and endorsement sometime around November. If passed the bill may well be the game changer to transform PNG’s socio-economic landscape. Particularly if the informal economy is seen as a wealth distributive mechanism, it could allow money generated in big impact projects such as the PNG LNG, to be transferred to the majority of the population who are its beneficiaries.

The first part of this blog was published last week. The following is part two:

However, the report fell short of proposing a mechanism to protect the rights of the informal economy participants. Subsequently, there is no mention of the need to properly organize informal economy participants and their activities into groups for the purpose of dialogue and consultation. Section 3(1) of the Informal Sector Development & Control Act 2004 provides for the administering authority to consult (if they wish to) with relevant ward committees, the police force and relevant government agencies responsible for health, physical planning and building, when declaring areas on which informal economy businesses could be conducted. However, experiences thus far have indicated that this has not been the case.

Even if this exists in some provinces there is little evidence to suggest that the administering authorities sought views from informal economy operators or vendors because informal economy, both its activities and operators, are disorganised. Furthermore, given the complexity and cross-cutting nature of the informal economy, provinces need to have special informal economy committees comprising of key stakeholders to deal with these issues. For instance, border provinces such as Vanimo see massive influx of cheap Indonesian goods into Vanimo town and the villages along the highway leading to Batas. These imported goods (with questionable content and quality) make up a large portion of the informal economy in Vanimo and the neighbouring villages. To protect consumers and ensure fair play, the provincial government or the Vanimo Town Authority will have to work with the Border Development Authority, customs, police, NAQIA and others. Therefore, the absence of such a mechanism will do little to change the status quo of the situation.

while the intention is to put forth a progressive and rosy image of the city and urban areas, this should not come at the expense of people’s livelihoods

The report also did not highlight the need for a proper restorative justice mechanism to be in place to deal with cases of harassment and abuse inflicted by enforcers on informal economy participants. The Informal Sector law in its current form is silent on this matter. Section 3(6) of the law only goes as far as saying that “an operator (informal economy vendor/participant) aggrieved by the decision of the Administering Authority under section (4) and (5) may appeal to the District Court”. Yet for most informal economy operators or vendors the Village Court is the most affordable, reliable, reachable and dependable arm of the justice system since it addresses individual and community’s legal concerns through a typically PNG way. The District Courts can be utilized by an interest group or an entity representing the interest of informal economy vendors/operators. Therefore, the report fails to recognize that the infringements done by the informal economy participants (apart from the sale of drugs, counterfeit products and homebrew) are ‘economic crimes’ and not criminal offences that would require the ‘heavy arm of the law’. Thus section 4(2) of the Informal Sector law should be reworded or amended to ensure that the members of the police force are excluded from being appointed as inspectors to police the informal economy.

The NCDC buai ban law demonstrated that administering authorities armed with additional powers can abuse it and in the absence of a voice and an appropriate restorative justice mechanism for the informal economy participants, the informal economy will be suppressed to a point where lives could be lost. Deaths relating to the buai ban have been well-documented in the media. Such actions would thereby defeat the whole purpose of the law. In saying that the law does provide sufficient space as captured under section 3, where the administering authority is required to “adequately notify and welcome feedback from the informal economy operators of its attempt to make changes/determination to the law”. The operator(s) on their part should respond within a set time frame or take the matter to the district court if not satisfied with the authority’s feedback. In addition, inspectors appointed by the administering authority as per section 5(2) should properly notify the informal economy operator/vendor of its decision or actions. However as alluded to earlier, with most of the operators/vendors lacking basic literacy skills and resources (funds) they would need someone to do this for them, or better still an entity like an informal economy market vendor association to represent their common interests and amplify their concerns in order to get the attention of the authorities or policy makers.

Increasing penalty fees and repealing section 18 of the Act, which has a list of laws and their clauses that were excluded, means that informal economy participants will be forced to comply with standards that may be too high for them, especially when most of these participants have very poor literacy skills and lack formal employment to supplement their meager incomes. While the intention is to put forth a progressive and rosy image of the city and urban areas, this should not come at the expense of people’s livelihoods. PNG is now a country that is already experiencing a widening gap between the rich and the poor amidst its most prosperous period in its 40 years of nationhood. Early indications are that the PNG LNG will not be as transformative as it was predicted to be. On the contrary, the emergence of the PNG LNG project has created more problems than solutions for this nation. The cost of basic household goods and services have dramatically increased while the government is being forced to make deals that could possibly cost this country a great deal. At a difficult time when this nation is heading into uncharted waters, the wisest thing to do for the PNG government is to lean on its strengths. The informal economy with almost 80-85% of its population engaged in myriad of activities is its strength. Through the good and bad times, it has helped this nation to ride out crisis after crisis. Giving it its long overdue consideration in the national agenda may well be a game changer for PNG.

Caption: Village men in the Trobriand islands (PNG) work on their carvings. Many informal sector participants are innovators and skilled survivalists. Photo by Ben Bohane –

This article was written by
Busa Jeremiah Wenogo

Busa Jeremiah Wenogo is from Papua New Guinea and is an economist and national award winning freelance writer. He works with the PNG’s Consultative Implementation & Monitoring Council (CIMC) specializing in the area of PNG’s informal economy. He is the creator and administrator of the Facebook page Black Economy - The truth about the other side of PNG and the blogsite PNG Informal Economist.

There are 4 comments for this article
  1. roxane at 9:20 am

    It is going on all over the world even in America ! Keep up the good fight and may peace be always with you! ♫

    • Busa Jeremiah Wenogo
      Busa Jeremiah Wenogo at 2:27 pm

      Thanks Roxane. I suspect that governments in countries like America and others react negatively to the informal economy because of its underground/black economy nature where there is evident of a proliferation of illegal activities, in PNG it is about the survival of the people. Most people in PNG are agriculturalists who produce for their own consumption however, in a country that is quickly experiencing rapid monetisation, more and more people are now looking for means and ways of generating income and sustaining theirs and their family’s needs. This is where government recognition and support is so crucial.

  2. Anand Chand at 4:17 pm

    Good paper. send me any other reports on informal sector in Pacific.

  3. Nigel at 3:12 pm

    A good comprehensive analysis of the informal sector in PNG. I guess that this agenda must be pursue at the ministerial level. Mechanism such as APEC, ACP, PIF and other regional and national development forum a good avenues to revive or give recognition to the Informal sector.

    Please keep in the loop for more of the articles. I do support your good work!