“Inclusive
Development
in
the
Face
Diplomacy
Dialogue
of Informal Trade: Success Stories
and Best Practices”.
Prof. Raymond Saner, TPGP, CSEND, Geneva
Joint Working Session, WTO Public Forum 2016
CUTS International, Geneva,
Ministry of Industry & Commerce, Tunisia
and Organisation Internationale de la Francophonie
CSEND All rights reserved 2016
Diplomacy
Dialogue
Structure of Presentation:
1. ILO-WTO Trade & Informal
Economy Study
2. Meso-Macro Informal
Entrepreneurship Study
3. Possible Solutions
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Diplomacy
Dialogue
Globalisation and informal jobs in
developing countries
(Study conducted by Marc Bacchetta, WTO, Ekkehard Ernst
and Juana P. Bustamante, IILS (ILO), 2009
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The informal economy is large and in many countries it has been growing
90
Informal employment (in %)
78.2
78.3
80
68.5
70
60.9
60
50.1
52.8
63.6
55.7
52.2
50
40
30
20
10
0
Africa
Asia
Latin America
Ea rl y 1990s
La te 1990s
Source: IILS estimates based on the IILS Informality Database.
2000s
Average per capita growth rate (in %)
• Informal employment is associated
with lower economic performance of a
country
4
3
2
1
0
Low
Medium
Average rate of informal employment
High
…adjustment processes are impaired…
Diplomacy
Dialogue
• Persistence in informality is
high
– Chances for upward mobility are low, while risk of
downward mobility is high in informal jobs
18.2
Formal
employment
65.5
42.1
Informal
employment
19.7
7.1
38.2
No job
85.5
Informality makes developing countries more vulnerable …
Frequency of crisis increases with
informality
– Countries with large informal economies are hit by shocks
High
more
often and have lower sustainable growth rates
Frequency of crisis
Diplomacy
Dialogue
Medium
Low
Low
Medium
Average rate of informal employment
High
“
Diplomacy
Dialogue
Shades of Grey: How Do Informal
Firms Navigate Between Marco and
Meso Institutional Environments?
(Study conducted by JULIO O. DE CASTRO, SUSANNA
KHAVUL, and GARRY D. BRUTON; IE Business School,
Madrid, Strategic Entrepreneurship Journal, 2014)
Diplomacy
Dialogue
Research findings
(de Castro et al.)
(1) Their research shows that when making
decisions about informality, entrepreneurs
in emerging economies purposefully
navigate between the enabling and
constraining rules of the macro
institutional environment and the norms of
the meso institutional environment.
… (2) as entrepreneurs grow more
Diplomacy
successful they become simultaneously
Dialogue
more attuned to the countervailing
constraints of both the macro and meso
institutional environments; and..
(3) informal firms and formal firms
weave together an exchange system that
legitimizes the persistence of
informality. In the context of
informality, meso institutions serve as
the connective tissue which cross-link
levels of the environment and shape the
context in which entrepreneurs make
decisions.
Diplomacy
Dialogue
Proposition 1: The weaker the formal macro
environmental institutions, the more likely
informal entrepreneurs are to rely on norms
in the meso institutional environment.
Corollary 1: Meso institutional narratives
and beliefs influence the decisions of
entrepreneurs with respect to
formalization of their firms.
Diplomacy
Dialogue
Proposition 2: At each stage,
entrepreneurial firms will choose, within
each institutional dimension, a level of
compliance where the benefits of
formalization outweigh its cost.
Corollary 2: Informality is a
multidimensional continuum that ranges
from no formal registration with any
government agency to degrees of partial
registration with intermediate authorities
and across multiple institutional
dimensions.
Diplomacy
Dialogue
Proposition 3: As the wealth of informal
entrepreneurs increases, they become
more attuned to formal rules in the
macro institutional environment and
launch their firms on the path to
formalization.
Corollary 3: Financially successful
informal entrepreneurs adopt staged
formalization when the level of their
commercial activity threatens to expose
them to formal scrutiny.
Diplomacy
Dialogue
Proposition 4: As the wealth of informal
entrepreneurs increases, they become
more attuned to the constraints of the meso
institutional environment.
Corollary 4: Financially successful
informal entrepreneurs avoid strong
displays of their success to prevent a
backlash from their meso institutional
environment.
Diplomacy
Dialogue
Proposition 5: The more developed the
channels of interaction between informal firms
and formal organizations in local environment,
the lower the incentive for informal firms to
formalize.
Corollary 5: Informal firms interact with a
variety of formal organizations in their
environment to weave together an exchange
system that legitimizes the persistence of
informality.
Diplomacy
Dialogue
Overlapping options for informal
entrepreneurs (CSEND, 2016)
Micro (informal)
Macro (formal)
REGISTRATION
National, provincial,
local admin.
LICENCES to Operate
(Business, Employment,
Health etc)
INSPECTIONS
Labour, Health,
Mirgrants
EXPORT LICENCES
Ports, Shipment, etc
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If
benefits
are
higher
than
costs
(financial
, political,
security)
M
E
S
O
if benefits
are lower
than costs
(financial,
political,
personal
security,
family,
CORRUPT
INSPECTORS
REQUESTS FOR
POLITICAL OR
RELIGIOUS
SUPPORT
THREATS TO
SAFETY OF
ENTREPRENE
UR AND
FAMILY
Diplomacy
Dialogue
Possible Solutions
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Facilitating adjustment & transition to formal jobs
(ILO-WTO study)
• Develop active labour market
policies
– Extend public employment services also to the
informal economy
– Job search and matching can be improved when
informal workers are being reached as well
• Focus on education, also in the
informal economy
– Improved education and skills is key for workers to
find formal jobs
– Vocational training systems in the informal economy
can provide additional policy leverage
Facilitating adjustment & transition to formal jobs
(ILO-WTO 2)
• Strong social dialogue between
employers and workers helps...
– ...in the design of measures
– ...extend the reach to the informal economy
• Reform product markets and
enhance governance
– Eliminate red tape and improve governance to lower
entry barriers and stimulate firm growth
– Well-designed taxation helps job creation in the
formal economy
Facilitating adjustment & transition to formal
jobs (ILO-WTO study) 3
• Carefully designed trade reforms
– Credible announcement of reform path
– Gradual implementation
– Country-specific trade reforms
• Support trade
– Aid-for-trade initiative: Least developed countries need
support to export diversification and export development
• Exploit complementarities
– Countries reap greater benefits from trade opening when
labour markets allow better adjustment of jobs across
sectors.
– Coordination of trade and labour market reforms
Strengthen links between macro (state),
meso (informal) and micro levels (informal
Diplomacy
Dialogue entrepreneur) (De Castro et al. 2014, CSEND 2016)
• Provide incentives to entrepreneurs to move from
informal to formal economy (registration, licences
etc)
• Limit opportunities for corrupt behavior of
government officials (cut back red tape while at the
same time ensure decent work, education, human
rights)
• Provide vocational education and apprenticeships
(avoid split between formal and informal education)
• Give informal sector recognition (e.g. labour unions
represent a minority of workers in informal
economies!)
• Make legal system transparent and provide legal
CSEND All rights reserved 2016
CSEND Proposition
Diplomacy
Dialogue
• Encourage and support development of
cooperatives (agriculture, housing, industry,
services)
• Cooperatives produce goods and service AND
engage in social integration (crucial in
countries with high youth unemployment,
discrimination of women, ethnic minorities)
• Cooperatives also engage in trade!!! See
CSEND policy brief Nr. 10, Cooperatives for
inclusive growth
(http://www.csend.org/csend-policy-briefs)
and CSEND + ILO Aid for Trade panel on
Cooperatives and Trade (July 2015).
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Diplomacy
Dialogue
谢谢
謝謝
CSEND All rights reserved 2016
Thank you