Informal sector in Port Moresby and Lae, Papua New Guinea : activities and government response

  • Philip Sawi Kavan

    Student thesis: Professional Doctorate


    The urban informal sector is a sub-set of the total informal sector as well as of the total urban sector. In the context of Papua New Guinea (PNG),the urban informal sector is described as livelihood activities which include microenterprises or tiny livelihood activities selling, distributing, producing or manufacturing goods and providing services, either regularly or occasionally or on a needs-basis and being carried out in prescribed or un-prescribed markets or areas, such as streets, roadsides, in front of supermarkets or offices, at bus stops, and in yards of houses (Eugenio,2001). These activities can be owned by one or two persons, a family or by a group of people. The informal sector in PNG has expanded rapidly in the post-independence period, particularly in rural areas. This is because of rapid population growth and slow economic growth. PNG is still in the early stages of its population transition with a relatively high total fertility rate, compared to most of the other six countries compared here. Its urban sector is, also, relatively small as compared to those countries. But it grew rapidly from a small base in the 1970s and at above the rate of total population growth rate in the 1990s. This is mainly because of the pull factors of rapid localisation and a sharp increase in urban minimum wages in the early seventies, increasing the urban wage-rural income gap, in line with the Harris-Todaro model. There was also an expansion in the urban informal sector. The urban sector’s growth as a whole slowed down between 1990 and 2010,as urban minimum wages were cut, while jobs had been substantially localised and the economy went into a prolonged recession until the second half of the first decade of this century, but the urban informal sector as a whole continued to grow more rapidly than the overall population. Factors that influence the growth of the urban informal sector are: rural-urban migration; increase in urban unemployment; shortage of jobs in the formal sector; urban population growth; increased number of school leavers; and underpaid employees. As the economy moved into recession, the informal sector became the employer of the bulk of the population in both the rural and urban areas in PNG. Unlike Brazil, the Philippines and Fiji (in the latter case, land inequality and/or landlessness made the push factor more significant),in PNG the availability of traditional landownership rights in general reduce this pressure. For a number of reasons discussed in this thesis, there were no direct policies favouring the urban informal sector for the first 30 years of the post-independence period. But the recession of the 1990s and dwindling opportunities in the urban formal sector led to a determination among the politicians to make changes to laws, which made it easier for the informal sector to conduct businesses. It led to the Informal Sector Development and Control Act, hereon referred to as “the ISA.” This research had two aims. First, it aimed to examine the factors that increase the informal activities, the major activities and the effects of the informal sector in Port Moresby and Lae, PNG. Second, the research aimed to explore the effects of the ISA on both the formal and the informal business activities in these two cities. It used both qualitative and quantitative methods of research including participant observation, semi-structured interviews, focus group interviews, unstructured interviews and questionnaire surveys. Results of the research revealed that the factors that increase the informal sector activities were rural-urban migration and unemployment; the major activities in the informal sector were selling betel nuts, lime, mustard, cigarettes and store goods. The uneducated had lower participation rates in the informal sector than school leavers. The main reason for vendors to migrate to Port Moresby and Lae was to have more chances to earn money or to obtain a job. The businesses in the formal sector viewed the ISA as a threat to their profits and survival, while the informal sector street vendors saw it as a way of expanding the range of goods to sell and places to sell. Lastly, urban informal activities had an impact in terms of crime, health and ethnic conflict. This brought fear to women and children, who felt unsafe walking on the streets. Street vendors snatched bags and harassed the general public, especially women. Rubbish created by informal sector activities made the city look filthy and led to the spread of diseases and contributed to law and order problems in terms of ethnic clashes. The ISA has been poorly implemented, with no proper controls and regulation in place and hence has caused a lot of social problems. It has had significant effects on both the formal sector and urban informal sector; hence, the recommendation that the PNG Government reviews the ISA to address the concerns of the street vendors, formal businesses and the residents of Port Moresby and Lae. In general there were negative perceptions about the informal sector activities among the general public; harassment of vendors by police and city authorities was common. Policy makers must address each of these issues and as well as make regulations that will control and protect the interests of the urban street vendors. This research has some limitations. Firstly, the data collection was limited to two major cities, Port Moresby and Lae. Future research can be extended to other main centres. Secondly there were limitations to the kind of data collected. There was no data on the size of the urban informal sector. The PNG 2000 Census National Report did not cover it and the report itself is now out of date. Future research can use data from the 2010 census report where possible. Thirdly, future research could also cover activities regarded as socially undesirable and/or illegal such as prostitution, drug dealing and street begging, which have been omitted here.
    Date of Award2013
    Original languageEnglish
    SupervisorAnne Daly (Supervisor) & Desh Gupta (Supervisor)

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