INFORMAL ECONOMY and SME IN THE CONTEXT OF THE NATIONAL CONTENT LEGISLATION BY BUSA JEREMIAH WENOGO The idea of national content was a result of the LNG Project when the project developer (Exxon Mobil through Esso Highlands) decided that it would be in the best interest of the project that landowners be involved as active participants not only benefiting from loyalties, but take part in spin offs generated by the project. The idea goes hand in hand with the idea of localization and therefore, it was a matter of time before a government focused on empowering indigenous Papua New Guineans would try to capitalize on the idea. The government of PNG as part of the 21 recommendation from the SME Summit in Madang, proposed for a legislation on national content. The idea of national content would require in a nutshell, a whole range of industries at a micro and SME level (including informal economy) that will have to link up with the more larger and complex formal sector and will be required to meet the output, standards and quality but at the same time, the link would provide local suppliers the opportunity to learn and be incubated to becoming successful business men and women. Overall the linkages would allow for local enterprises to provide a certain portion of the total output of a company within an industry. While SMEs could easily meet those requirements, one must never lose focus of the fact that most raw products (such as sale of agricultural produce) would be predominantly sourced from the informal economy. Although quite a sizeable portion of the output quota could be met by local SMEs who are into catering and transportation due to their conformity to necessary requirements, it is in other lucrative areas such as designing, consulting, manufacturing, packaging and other technical areas that locals need to be trained and provided opportunity to take part in. One successful model would be the Zenag Chicken Model where local informal economy chicken farmers are provided the training and knowledge on breeding chickens by Zenag. The chickens are then sold to Zenag for it to be distributed to retailers and consumers alike. Zenag for its trouble in providing trainings,deducts a portion from the takings and leaves the rest to the producer. This successful model provides one an example of how informal economy participants can be able to overtime, develop into SMEs provided that they have sufficient training and skills in a particular trait or industry. In addition, this model easily depicts the link between the informal producers all the way to Zenag which has a chain of stages that the chicken goes through before it ends up in most freezers in supermarkets. The essence of a national content legislation would be for the government to encourage down stream processing. Yet before that the government must find linkages between the informal economy and SMEs. The Business Names Act provides informal economy the opportunity to be “formally” organized in some form to be able to carry out their business activities.Laws created to empower indigenous Papua New Guineans must be made simple so that majority of Papua New Guineans can be able to understand and comply with its requirements. Other mechanism most notably the cooperatives, have their own challenges and will need to be revitalized in such a way that it would once again become the tool to link the rural agriculture sector to the formal sector. Yet eventhough such avenues promote entrepreneurship at the top level, informal economy participants need to be provided an opportunity to express their concerns on issues that affect them. Just like the Business Council of PNG or PNG trade Union Congress where issues relating to government polices and laws that may have direct impact on their membership, are debated and lobbied through these bodies to ensure that a win-win situation arise, informal economy also need to “voice” their concern. In this regard, the role of the Indigenous Business Council will need to be clearly articulated in such a way as to ensure that it will not only represent the interest of the indigenous entrepreneurs but also link up with other peak body such as the PNG Business Council and the PNG Manufacturing Council. This is important to ensure that constraints and issues affecting the various sectors are addressed through an amicable approach. It also needs to be clarified whether the Indigenous Business Council will represent the interest of the informal economy participants. If its scope does not then it is imperative that informal economy will need to be given a “voice”. The result of a “voiceless” informal economy can be seen through the constant disregard and neglect for the law and subsequently, a widespread display of discontent and ill conceived strategies by the relevant government agencies to arrest the chaos and lawlessness that spring up. The absence of regular dialogue and exchange of information will not help either the government or the micro-enterprises from progressing. Information from the informal economy participants must be able to reach the government to push for necessary reforms and government polices and laws should be effectively communicated to this segment of the economy to allow for some form of order and control to take effect. This is the only way to understand the unique challenges and needs of people who are at the base of the economic pyramid. Through this approach the government can be able to device appropriate strategies to best help overcome those obstacles otherwise, as mentioned earlier on, not many would be able to move up the order due to lack of capacity and support.
Posted on: Fri, 30 Aug 2013 03:40:59 +0000
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