A look at the informal sector in the Solomon Islands
Prompted by His Excellency the Governor-General’s new year address to the nation last week when he touched upon the informal sector, urban drift, rural unemployment and the need for vocational skills training, I have been contemplating on what he said and, in particular, how the informal sector might be harnessed for greater productivity and economic development.
Today, economic development does not happen without physical infrastructure, especially roads, bridges, energy supplies and water in particular.
Developed nations provide such infrastructure as public investments and provisioned from the collection of taxes.
In the Solomon Islands, still regarding as a developing nation, the collection of local taxes is insufficient and it has been the case that donor partners, such as Australia, New Zealand, Japan, South Korea, the European Union, Germany, Taiwan and one or more of the Middle East countries have facilitated what large infrastructure developments have taken place, over and above what the Solomon Islands government has contributed.
The informal sector in the Solomon Islands has considerably reduced the ability of the state to collect taxes and it would not be possible to broaden the tax base and impose even greater hardships on the rural poor.
Clearly, the economic cost of the informal sector is a negative burden to the government and manifestly should ensure infrastructure and development takes place without further delay.
His Excellency the Governor-General spoke about the need for vocational training and I agree with his observations.
Job creation in the informal sector is long outstanding and it is perhaps often overlooked what are the social and economic costs which are the characteristic of the informal sector.
Without the proper infrastructure, the workers in the informal sector, and the vast majority subsistence farmers, are characterised as having varying degrees of vulnerability and dependency.
I suspect that many of the workers in the informal sector have little, or no, property rights, which will have deprived them of access to both capital and credit.
I suspect too, such workers are not recognized, registered, regulated or protected under labour and social protection legislation, and are not therefore able to enjoy, exercise or defend their fundamental rights.
An absence of Micro and small enterprises (MSEs) in the informal economy lack the capacity to generate sufficient transitioning from the informal to the formal economy.
To escape the traps individuals are facing trying to make a living from subsistence farming, it is little wonder why many from the rural areas, and especially the young, have ventured to the main urban centres and contributed to urban drift, informal settlements and unemployment lines.
Over the years the Solomon Islands government has been deprived of public revenue and limited in the fiscal space and ability to development the necessary infrastructure in the informal sector, but that must change.