Informal

The Urban Informal Economy
Initiatives Innovations Inspiration

This resource book compiles the lessons learned from The Urban Governance Initiatives (TUGI) three awards The Urban Governance Innovations Facility (UGIF) Award, the Cybercity Award and the Young Leadership for Good Urban Governance Award. TUGIs Awards System achieved a nearly 100% success rate in all the projects that were supported. This achievement is primarily due to the vision and boundless belief in the human capacity for creativity of TUGIs Senior Regional Advisor, Anwar Fazal. His 40 years of experience in human development work helped TUGI use the Awards system to identify success factors in adapting or replicating good practices. His intuitive experience has now found practical expression, and we hope that this compilation of success stories will continue to serve as inspiration to all those who struggle alongside workers in the urban informal sector, to improve lives and enable choice. Special thanks to Leo Fonseka, for being the quintessential Coordinating Rapporteur that he was, at the Regional
Symposium on Local Governance and the Informal Economy, December, 2004. We also owe our gratitude to K.A. Jayaratne
and Wicaksono Sarosa for their work in conducting the two studies on supporting workers in the informal economy that were commissioned by TUGI. We would also like to thank all our partners, both city governments, civil society and private sector organisations, without whom this publication would not have been possible. Please see the back cover of this publication for a full list of partner agencies. As a disclaimer, TUGI does not advocate the promotion of the informal economy as a solution to the dearth of formal employment opportunities. Instead, we are highlighting efforts that improve the realities of people involved in the sector, in the face of inadequate formal employment.
UNDP
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ISBN: 983-40263-3-1
Book & Layout Design : Michael Voon <amx@tm.net.my> and

Kevin Ng
Cover Design Illustrations Printer
: Michael Voon and Tan Sie Yang : Sabariah Jais @ Cabai : TM Graphic
Published by:
The Urban Governance Initiative (TUGI) UNDP, P.O. Box 12544 50782 Kuala Lumpur, Malaysia Tel: (603) 2095 9122 Fax: (603) 2093 2361 E-mail: <tugi@undp.org> Website: <http://www.tugi.org> Virtual Policy Studio: http://www.cebe.cf.ac.uk/tugi/
INITIATIVES, INNOVATIONS, INSPIRATION
Page 3 4
Contents Foreword by Anwar Fazal
7 11 31
Chapter 1 Chapter 2 Chapter 3
The TUGI Awards Why the informal economy? Mobilizing informal sector strategies for poverty reduction: Challenges to local governance by Leo Fonseka Lessons learned Factors to successful up-scaling Legislation to support the informal economy A case study of Papua New Guinea by Alois A. Francis Understanding the informal economy and the role of civil society in Indonesia - The Urban and Regional Development Institute, Indonesia
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Chapter 4 Chapter 5
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Chapter 6
Foreword
By Dato (Dr.) Anwar Fazal
Senior Regional Advisor The Urban Governance Initiative (TUGI)

The best way to have a good idea is to have lots of ideas. Linus Pauling1
TUGI has always believed in the power of ideas, and of the necessity for partnerships in realizing them. Our 12 years of investment in people had resulted in the emergence of a large number of organisations that TUGI had special relations with, and who had grown with us through the years to becoming governance best-practitioners in the region. Together, we generated a stream of great ideas, then collaborated to support each other in realizing them. This book tells the success stories of this partnership. In 2002, it was felt that we had enough critical mass to clearly identify the reasons why some good ideas grew exponentially, seeming almost to take on a life of their own. We wanted to take the concept of good practices to the next level, and we turned to our partners to help guide the way forward. The preparation for this task involved the identification of a jury made up of key members representing our network. This included Maxine Olson, who at that time was the Resident Representative of UNDP Malaysia; Bernadia Irawati Tjandradewi, Programme Manager of Citynet, the Regional Network of Local Authorities and Management of Human Settlements; Sunil Kumar Singh, Director at the Ministry of Urban Development & Poverty Alleviation of India and Somsook Boonyabancha, Director of the Community Organisations Development Institute of Thailand. Our sincere gratitude goes out to all of them for contributing towards a process that identified projects worthy of support. The nearly 100% success rate that was achieved by the TUGI Awards is largely due to the astute choices which they made. We would also like to thank Leo Fonseka for his role in leading the sharing of lessons learned from the Awards process at the Regional Symposium on Local Governance and the Informal Economy, held in Colombo in December 2004. Also, to our friends K.A. Jayaratne from the SEVANATHA Urban Resource Centre in Sri Lanka and Wicaksono Sarosa of the Urban and Regional Development Institute (URDI) in Indonesia, without whose support we could not have completed the bouquet of options for local governments in up-scaling good practices. A regional project depends upon the support and collaboration of UNDP Country Offices to help implement our programmes. The success of TUGIs Awards are largely due to the tireless efforts of the UNDP country offices in the region that mediated, monitored and advised on our projects. We appreciate the advice and support from the UNDP focal points in all the countries where we had projects on the ground. They were our eyes and our ears, and at times, our heart. We owe special thanks to Dr. Richard Leete, the Resident Representative of UNDP Malaysia and his team, who provided administrative and logistical support to TUGI.
Special gratitude goes out to Anis Yusal Yusoff, the Assistant Resident Representative of UNDP Malaysia, for his role in helping to keep TUGI focused and our programme on track. He provided invaluable support, despite his over-stretched resources, and was looking out for us when we were too busy to note the small things, especially at the critical end-period of the project. TUGIs staff have been the cause of our cascade effect drawing from the inspiration of our Awards recipients and disseminating that inspiration to others in the region. They have kept the governance hub of TUGI well-oiled so that our information, advocacy, capacity building, resource mobilisation and networking ability remained in top working condition, to support the work of our partners. We would like to recognize the support and contributions of Erna Witoelar, Sri Husnaini Sofjan, Sivananthi Thanenthiran, Rozana Isa, Juliana Mokhtar, Jeyashree Nadarajah, Azlina Megat, Revathi Murugappan and Noorjuliana Mohd. Yusoff. Our gratitude goes also to the finance team who enabled our support to the Awardees, namely, Mei-Mei Hew, Cheah Yew Hee, Adeline Chick and Debbie Chan. Special thanks to Saira Shameem, Programme Specialist for Capacity Building and Project Development, and later, Officer-in-Charge of TUGI, who oversaw the implementation of the TUGI Awards, and worked to compile the lessons learned in this publication. She contributed to this work with the kind of special and joyful competence, creativity and passion that she has brought to TUGI over these years. And finally, our immense gratitude to our project partners and Awardees, totaling 16 organisations and individuals in 7 countries within the region, who continue to be the reason why there is hope in this world - who are the source of our inspiration and an inexhaustible fountain for good ideas. Kuala Lumpur, Malaysia 18th December2 2004
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Endnotes
1
Linus Pauling received two Nobel prizes, one for chemistry in 1954 and one for peace, in 1963. His Peace Prize was in recognition of his tireless campaigning, not only against the testing of nuclear weapons, but also against the spread of these armaments and their use, as well as against all warfare as means of solving international conflict. The 18th of December is also the United Nations International Day for Migrants, a commemorative reminder that refers to the date on which the UN General Assembly passed the International Convention on the Rights of Migrant Workers and Members of their Families in 1992. The date was first commemorated in 1997, as the result of a partnership with the International Organisation for Migration, the ILO, UNDP and the Scalabrini Centre for Migration, in Manila, Philippines, at the behest and as a brainchild of Dato (Dr.) Anwar Fazal.
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Chapter 1 The TUGI Awards

Background
The TUGI Awards were initiated in January 2002 with a very specific objective in mind that of capturing the secret of success in up-scaling best practices. One theme was retained throughout the three years of the TUGI Awards implementation that of local government support to the informal economy as a method for effective poverty eradication. The TUGI Awards grew out of the realization that many of TUGIs network partners had developed good practices in urban governance that were internationally and locally recognized. Yet often these efforts amounted to drops in the ocean of the crisis of urbanization. Not only were these good practices limited to a specific issue, at times they were also bound by geographic and demographic factors. The concept of best practice research is based on identifying the essential ingredients to improved performance so that others may learn from or adapt that process.1 It was this learning and adaptation that became TUGIs focus of concern the challenge being that just because something is successful, it does not automatically mean that it can be easily reproduced or replicated. Sometimes, replication was not even possible, because the key factors for success could not be exported into the new environment. TUGI played an important role in fostering this learning process despite the knowledge gaps that existed between the best practice practitioner and the learner-organisation. With the 12 years of regional networking experience the organization had accumulated, we found that often the successful practitioners tended to think of the extraordinary as the norm, while the learner-organisations had to struggle against systems that had become too comfortable with sub-standard practices. The TUGI Awards involved 3 categories of up-scaling best practices. The first was the Cybercity Award, which examined the expansion of projects that successfully used information and communication technologies to improve governance processes. The second was The Urban Governance Innovations Facility, or UGIF Award, which tracked the up-scaling of proven innovations in urban poverty eradication. The final category was TUGIs Young Leadership for Good Urban Governance Award, which was aimed at harnessing the energy of young professionals and challenging them to increase the impact of small yet successful projects which they were already working on within a voluntary capacity. TUGI had two selection periods, one in 2002 and one in 2003. The jury consisted of representatives from the civil society, local government, national government and from within UNDP itself.
In 2002, the jury selected 9 projects out of over 50 submissions received from throughout the Asia Pacific region. Of these 9 winners, 4 were Young Leadership grant recipients, who were supported with a one-year stipend amounting to US$ 10,000 each, and this enabled city stakeholder organizations access their professional skills and services for training and capacity development. Three other recipients received grants under the Urban Governance Innovations Facility (UGIF) of between US$ 30,000 50,000 each. The UGIF Award was aimed at upscaling the scope and impact of creative and innovative ideas that addressed the challenges of urban governance. It was also intended to encourage innovation and leadership for urban governance, as well as create a process for the collation of a body of knowledge that would enable wider information and experience sharing in the region. There were two recipients of the TUGI CyberCity Award, which was given in recognition of the use of new technologies to up-scale good local practices. Each of these awards was for an amount of US$ 20,000 30,000. In 2003, an additional two UGIF Awards and 3 Young Leadership Awards were added to our bouquet of projects, totaling 14 grantees in all. The lessons learned from these projects, as well as the research results from two studies commissioned to complete the bouquet, are summarized in this publication.
Why Awards?
TUGIs strength in the region was based on the role that it played as an information hub for organisations involved in promoting good urban governance. It is in this capacity of disseminating good practices and promoting regional exchanges between local governance institutions, private sector and civil society organisations, that the need for expanding good practices arose. TUGI noted that the mechanism by which to enable the translation of local achievements into policies involved strong local, national and regional networks. It also required close collaboration between local implementers and regional counterparts that could provide the technical backstopping that underpinned successful transfer of good practices. As a project, TUGI was committed to enhancing the capacities of its partner networks in enabling such cascades whereby one success from one locality draws from the strength of an associated regional network to multiply the impact in a number of other cities in the region. Effective poverty reduction strategies often begin with good ideas and the capacity to implement, followed by an effective information dissemination system that helps to capture peoples imagination and harness their participation. If the idea succeeds, then there is a need to institutionalize the solution so that its impact continues to expand. The TUGI Awards were geared at building the bridge between proven local successes and institutional policy change. This linkage needs to be an integral part of good urban governance initiatives before significant impact and the outcomes of the Millennium Development Goals can be achieved.
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The TUGI Awards were not a simple process of awarding one-off grants, but a mechanism for incubating the capacity for partnership building and linking between local successful initiatives and their translation to local or national policy changes. In fact, there is no Awards ceremony associated with the process, but the building of a year-long process of collaboration that reflects the incubator, hub, networker, cascader, facilitator function of TUGI. The TUGI Awards do not provide funding, rather they facilitate a process that aims at congruous capacity building amongst the various stakeholder institutions within urban governance. The TUGI Awards helped to build lateral and vertical working relations within the partnerships that were used to implement the projects. This increased the capacity of local and national agencies to conduct independent resource mobilization, stimulated by TUGIs initial support. The achievement of one locality thus benefited cities and towns that were in turn potential adaptors and replicators of the innovation, without TUGI being directly involved in mid-wifing each and every transfer of the innovative technology. This was an additional reason for linking the TUGI Awards firmly to existing regional urban governance networks so that the momentum that was created could be channeled through existing structures.
Summary
The Urban Governance Initiative created the TUGI Awards to help local governments and their governance partners in the region find ideas to overcome the problems that they were facing, faster and more effectively. We present the key lessons learned from these initiatives in this publication, to explain what made these governance solutions work better, as well as replicate and expand more efficiently. If you are on the path to eradicating urban poverty and are looking for a compendium of ways to up-scale potential solutions to typical governance problems, then this book is for you. We hope that it gives you the inspiration, excitement, compassion, understanding, tolerance, creativity and determination which we found in all our Award recipients. TUGI concluded as a regional project on the 31st of December, 2004. This is the legacy of experience we accumulated, which we would like to leave with you. Good luck!
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Endnotes 1 Katorobo, James. (1998) The Study of Best Practices in Civil Service Reforms. MDGD/BDP/ UNDP. New York.
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Chapter 2 Why the informal economy?

Introduction
This chapter was originally written to inform the implementation strategy for The Urban Governance Initiative (TUGI), which aimed to enable local governments create the appropriate policy, social and economic environments to support poverty eradication. The informal economic sector was chosen as a general theme for all the TUGI Awards because it was the primary source of economic activity and income for urban poor communities. By enhancing local government responses to this challenge, TUGI would directly contribute towards the achievement of the UN Millennium Development Goals of poverty reduction and improved social service delivery at the local level. In preparing this chapter, the following has been taken into consideration: i. The development perspectives of the Bretton Woods institutions; ii. UNDPs sustainable human development paradigm; and iii. The International Labour Organizations rights-based approach to decent work in the informal sector. Given the importance of participation and the need for a sense of ownership over policies that concern workers and families involved in the informal sector, much of the analysis used to build the arguments in this paper have been based on the work of the ILO and their rights-based approach to the issue. It is noted here that the research undertaken to write this chapter does not go back further than 5 years, neither does it cover the arguments related to alternative development models, the question of the efficacy of the Bretton-Woods institutions and associated strategies of economic reform nor has it sufficiently expanded on the gender dimensions of the informal economy. The informal economy is neither the only solution nor a non-issue in poverty alleviation. It is rather an extremely important area in which to maintain focus if the poverty eradication targets of the UN Millennium Development Goals are to be achieved.
In Swahili, the term Jua Kali - which literally means under the burning sun is the traditional name for the informal economy.1
The Urban Informal Economy Who are the actors and what are their motivations?
The International Labour Organization (ILO) has defined2 employment in the informal economy as being comprised of: i. Self-employment in informal enterprises (i.e. small and/or unregistered); and
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ii.
Wage employment in informal jobs (i.e. without secure contracts, worker benefits or social protection).
A large number of people working in the informal economy are self-employed. Only 41 per cent of people employed informally work for wages in informal enterprises.3 Over 65 per cent of employment in the AsiaPacific region is informal.4 If we were to include the number of people employed in agriculture within this estimate, the total number of workers in the informal economy increases significantly in fact, in India, the propor tion of informal workers to total workforce is nearly 93 per cent.5 The contribution of informal employment to national Gross Domestic Products (GDP) amounts to nearly one quarter of the total GDP in many countries in the Asia Pacific region.6 Contribution of informal sector to GDP in selected developing countries* Country ASIA India Indonesia Philippines Korea Informal Sector GDP as percentage of nonagricultural GDP 31% 45% 31% 32% 17%
*Employment Sector, International Labour Office. (2002). Women and Men in the Informal Economy: A statistical picture. Publishers: International Labour Organization. Geneva, Switzerland. Page 24 Table 2.8.
Informal Sector Workers: Who are they? Rickshaw pullers, jeepney drivers, garbage collectors, roadside barbers, waste recyclers, vegetable and fruit vendors, home-based workers such as garment makers, embroiderers, incense- stick rollers, cigarette-rollers, paper bag makers, diamond and gem polishers, kite makers, hair band makers, food processors, shoemakers, snack vendors, pedicab drivers, small artisans, waste workers, sex workers, construction workers, homeworkers, household servants, computers and telecommunication workers, urban fishing and farming, watch-your-car boys, shoeshine, weavers, basket makers, carpet-makers, laundry-workers, beauticians, barbers, dressmakers, lodging-providers, caterers, typists, data processors, telemarketers, bookkeepers, accountants, call-centre telephone operators, tax assessors, legal advisors, designers, computer programmers, writers, engineers, architects and medical service professionals.
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What are the challenges?

A number of challenges face both policy-makers and local governments regarding employment in the informal economy. These include the lack of social protection and benefits that are accorded to workers in formal employment, that they earn less than those in formal employment, and that the informal sector involves a disproportionately large number of urban poor, especially women. At the same time, however, the informal sector remains the most efficient economic engine of employment creation, contributes significantly to GDP, has a general positive impact on poverty alleviation and produces many goods and services at much more affordable rates than the formal economy.7 Despite these facts, however, social perception of this category of work is often associated with such undesirable characteristics as uncleanliness, inefficiency, extra-legality (not properly licensed but not specifically needing licensing either), low-quality goods and unreliability. There is also a prevailing tendency for informal activity to exist in situations of general non-conformance to city-based regulatory frameworks of the where, when and how people involved in the informal economy could carry out their businesses. Many governments still subscribe to the notion that the informal sector is not only unproductive and inefficient, it often employs obsolete technology, poor skills, lack of clear organizational structures and is regarded as having little impact on the productive economy. 8 This perspective has lead to a focusing of investments away from and outside the informal sector in more positively regarded economic activities such as manufacturing. Yet in India, despite a growth rate in GDP of 6.5 per cent over the last decade that has resulted in an apparent reduction in poverty, there was no reciprocate improvement in the employment situation.9 The analysis revealed that this was due to the fact that much of the growth has been capital- and information-intensive, rather than labour-intensive. Coupled with more growth in informal than formal employment as well as limited growth in the manufacturing sector, large numbers of people continue to remain, or can only find income opportunities, in the informal economy. Appropriate and well-informed policy is often inexistent or is too weak to link the benefits of economic growth to workers in the informal sector, and remains an important area of focus for local authorities that are committed to genuine poverty reduction.10
Historical Context
The term informal economy was first used by a British economist named Keith Hart in his study of economic activities in Ghana in 197111.
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His was a positivist appraisal1 of what had been previously regarded as an undesirable though necessary prelude before poor traditional economies were transformed by capitalist development processes into modern economies that were characterized by full and formal employment opportunities. The successful rebuilding of Europe and Japan in the aftermath of World War II reinforced this perception, but by the mid-1960s concerns of widespread unemployment continued to grow despite prevalent optimism about the prospect of economic growth as a solution to poverty.12 In response to this, an ILO mission to Kenya was conducted in 1972 and the study concluded that what was at the time referred to as the traditional sector had not only persisted but expanded to include profitable and efficient enterprises. It had not only generated employment but had also contributed substantively to the production of goods and services. In recognition of this fact, the ILO mission chose to adopt Harts positive terminology of informal sector in reference to the efficiency, creativity, and resilience13 of the range of small-scale and unregistered businesses that had previously been known as the traditional sector. Its persistence, and in fact expansion, relates directly to the social and economic role that the informal sector plays in acting as a buffer in periods of economic crisis and increased unemployment, creating a comparatively higher number of jobs per dollar of capital invested than formal enterprises. Improved statistics enable the informal economy to better show itself up on the radar of economic development so that policies can be better tailored to fit needs and improve working conditions of people involved in the informal economy. Towards this end, the 1993 International Conference of Labour Statisticians (ICLS) adopted an international statistical definition of the informal sector that subsequently was included in the revised International System of National Accounts, SNA (framework which calculates national gross and domestic production) 14. In this definition, the SNA set the informal sector within a framework of the type of economic unit of production2 and not the nature of employment3 within these small enterprises. This was to enable the capture of information with regards how much was being produced, in order to estimate the contribution of the informal economy to the GDP. However, it was recognized that this was as yet a non-inclusive definition and more research was initiated in order to better understand the employment-based dimensions of informality.16 More recently, the ILO has been using the term informal economy as opposed to the informal sector used in ICLS statistical definition, in order to reflect both employment relations as well as the enterprise characteristics in developing as well as developed economies. According to the ILO, the informal sector is defined in contrast to the formal sector, and described as the sum total of income earning activities which fell outside of regulations that determined enterprise as well as employment relations. This definition of the informal economy specifically excluded17 legally regulated formal enterprises, activities associated with the criminal economy which dealt in illegal
The 1993 ICLS dened the informal sector as all unregistered or unincorporated enterprises below a certain size, including: Micro-enterprises owned by informal employers who hire one or more employees on a continuing basis; and Own-account operations owned by individuals who may employ contributing family workers and employees on an occasional basis.15
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goods and services and the reproductive or care economy made up of unpaid domestic labour, and is phrased as follows: Very small scale units producing and distributing goods and services, consisting largely of independent self-employed producers in urban and rural areas of developing countries, some of whom also employed family labour and/or a few hired workers or apprentices, which operate with very little capital or none at all; which utilize a low level of productivity; and which generally provide very low and irregular incomes and highly unstable employment to those who work in it. They are informal in the sense that they are for the most part unregistered and unrecorded in official statistics; they tend to have little or no access to organized markets, to credit institutions or to many public services and amenities; they are not recognized, supported or regulated by the government; they are often compelled by circumstances to operate outside of the framework of the law and even where they are registered and respect certain aspects of the law, they are almost invariably beyond the scale of social protection, labour legislation and protective measures at the workplace.
[Source: ILO, Decent Work and the Informal Economy Report VI, International Labour Conference, 90th Session, (Geneva 2002)]
Prevailing Debates
The debate surrounding the role and importance of the informal sector can be summarized into the following two categories18: i. Those that understood the informal sector as a marginal or peripheral player in the market, unconnected to the formal sector or to modern capitalist development. This view contends that the informal sector would disappear once developing countries reach a level of economic growth or industrial development. Those whom argued that industrial development might take a different path in the developing countries of today, one which involved an expansion and active participation of the informal sector in economic growth, poverty reduction and improved quality of life.
ii.
It was clear by the 1980s that economic advancement and developed-country status was not necessarily synonymous with a gradual decrease and eventual disappearance of the informal economy. In fact, production was increasingly being organized into small-scale and more flexible economic units. Globalization further advanced this phenomenon, increasing the informalization of work in developed countries4 while at the same time fueling the growth of the informal economy in developing nations as a result of structural adjustment programmes or related economic reforms. Although globalization did create new jobs, global competition was forcing companies with predominantly formal workforces to hire at lower wages and decreased benefits. The casualization of labour, involving a process of converting stable, monthly waged employment into short-term contractual jobs with little or no benefits, was
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increasingly becoming a popular economic strategy to increase productivity and decrease wage-associated costs in advanced capitalist countries. The ILO also noted a rise in sweatshop production, and increased sub-contracting of the production of goods and services to small-scale informal units or industrial out-workers. This led to an increasingly prevalent view that the informal sector was not only NOT diminishing, but in fact was becoming a more permanent, although subordinate, feature of capitalist development.19 One of the key strategies adopted by the ILO has involved focusing specifically on improving statistics on the informal economy in order to provide more information to inform policy change aimed at improving employment relations and thus, impact positively on income poverty. Despite inherent problems in comparability and data quality, improved statistics remain essential for informing good policy on the informal economy.5 The ILO was given the responsibility of setting standards related to the collection of labour force statistics by the UN Statistical Commission. The ILOs Bureau of Statistics played an important role in developing methods for the collection of data on employment in the informal sector and in providing technical assistance concerning the same at national government levels.20 Cooperation between researchers, statisticians and organisations representing the interests of informal sector workers has been an important development since the 1990s. In 1995, faced with a dearth of data on home-based workers, the SelfEmployed Womens Association (SEWA) 6 of India and the international alliance of home-based workers (HomeNet) collaborated with the research community to collect and analyze data from micro-surveys on home-based workers from around the world. This information helped to inform their advocacy work and lead to the passing of the Home Work Convention at the 1996 International Labour Conference.21
What can local governments do?

Small enterprise development holds the promise of employment and income for millions of people.22
Local governments committed to poverty eradication need to tailor their policies to reflect pro-poor governance, implying improvements in the efficiency of public and social service delivery as well as the transparency and accountability of the institutions implementing the same.23 Local governments have the capacity to draw potential investment from external sources by creating appropriately conducive policy and economic environments, and by harnessing the untapped resources of the informal economy. Encouraging entrepreneurship in the informal sector and expanding city-level GDP assessments through incorporating the contribution of the informal economy can improve the perceived investment climate.24 Local policies that promote productivity in these ways will create more jobs, higher-quality jobs and jobs for people in the lowest income bracket. These are known as the high-road strategies involving job quality, healthy and safe working environments, and access to basic social services leading to improved productivity, better employment and hence poverty reduction for more workers.25
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The potential role of local governments in promoting employment towards poverty alleviation is very significant. Not only can they source more goods and services locally, thereby increasing the demand for products of the informal sector, local authorities can also encourage labour-intensive strategies in the delivery of public services. 26 Opening up the delivery of services such as water distribution and waste management to local informal enterprises can potentially create new jobs and new markets leading to improved livelihood opportunities. Improving working environments and social protection within the informal economy involves a process of increased integration with the formal economy. Key support structures include accessible licensing processes, access to credit and formal markets, skills training, appropriate technology, legal protection and reasonable taxation. 27 The social protection provided by public and private schemes are currently excessively expensive or inaccessible in other ways, and need to be scaled down in order to act as effective insurance to informal sector workers, while cooperative insurance schemes based on localized micro-savings programmes need to be scaled up and further supported institutionally.28 Both local and national laws and regulations are a means to secure basic social protection for workers that would improve working conditions and address job insecurity. On the other hand, support for the organization and representation of informal sector workers in leading advocacy and providing input to policy formulation is considered to be a key area to promoting better working environments in the informal economy.
The Bellagio International Declaration of Street Vendors

In 1995, representatives from street vendor associations and activists, lawyers and researchers working with street vendors from 11 cities around the world met in Bellagio, Italy to form an international alliance (now called StreetNet) of street vendor associations and of organization working with street vendors. The founders of the network drafted the Bellagio International Declaration of Street Vendors. The Bellagio Declaration identifies the following common problems of street vendors around the world: No legal status, no right to vend Lack of space or poor location Restrictions on licensing, costs of regulation Harassment, bribes, confiscation and evictions Lack of services and infrastructure Lack of representation or voice. The Declaration urges national governments to incorporate street vendors in economic policies relating to trade, financial policies relating to microentrepreneurs and social policies relating to the working poor. The Declaration also urges city governments to incorporate street vendors in urban planning processes and urban policies and to promote institutional mechanisms for street vendor associations to voice grievances, make demands and resolve disputes with other urban stakeholders.
Source: Bellagio International Declaration of Street Vendors, 1995.
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Poverty eradication is the principal goal of development cooperation, and is UNDPs central mission and overriding objective. UNDPs specic role is to support countries to build capacity to eradicate poverty, using targets set nationally, regionally and globally through the UN sponsored global conferences.
Local governments have an important role to play in changing public mindsets on the urban informal sector. Supportive policies, efficient and fair implementation and especially increased participation of the informal sector in decisionmaking, will determine the extent of effectiveness and the commitment of the local government in creating the social and economic environments which are aspired for. In summary, local governments can support the informal sector within three major areas29: i. To organize: The existence of associations of informal enterprises and workers would better enable them to voice their needs and contribute collectively to the most appropriate policies to support the informal sector. Local governments themselves need to better organize internal and external processes such that they that exude all nine characteristics of good governance transparency, participation, strategic vision, equity, accountability, rule of law, responsiveness, consensus orientation and effectiveness & efficiency - in order to be able to deliver on their commitments to improve pro-poor governance. To Recognize: Once the representation of the various interests of the respective stakeholders has been registered, the next step is to enable the recognition of these needs, and the translation of their potentials, into concrete policies and implementation measures that further enhance the capacities of the informal economy. To Realize: It is in the confluence of the active participation of people involved in the informal sector and the open recognition and support of their contribution to the economy by local authorities, that the full potential of the informal economy can be realized. The spin off benefits of policies that release the informal sector from the restrictions of inadequate regulation and lack of rights-based recognition has the potential to create a positive and sustainable feedback loop. Supporting the informal economy supports the growth of the formal economy, and the increase of incomes and livelihood opportunities in the poorest sections of the city.
ii.
iii.
SEWA started a collaborative research project in 1997 with the National Council of Applied Economics Research (NCAER) and the Gujarat Institute of Development Research. It studied the size and contribution of the informal economy in Ahmedabad City that compared official data with the results of the special sample survey. Convinced by this study of the desirability and feasibility of better capturing the informal economy in national sample surveys, the National Sample Survey Office of the Gov of India commissioned the principle investigator of the Ahmedabad study to assist the NSSO to design special modules to measure the rural and urban informal economy. These modules were administered in the 1999-2000 round of the national sample survey and found that 370 million workers, or nearly 93 per cent of the total workforce of India, were employed in the informal sector.
Source: Employment Sector, International Labour Ofce. (2002). Women and Men in the Informal Economy: A statistical picture. Publishers: International Labour Organization. Geneva, Switzerland Pg. 14.
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Whos doing what, where and how?

1. The United Nations Development Programme30
UNDPs commitment to and implementation of improved policy as well as capacity building for good governance and sustainable human development has been considerable. However, recently, it has been noted that in order to better assess the impact of investments in these areas, specific delivery targets were clearly required, in so far as poverty alleviation was concerned. Hence, tracking progress on the Millennium Development Goals (MDGs) is assuming increasing importance in the context of monitoring poverty and the corresponding allocation of resources. These commitments were reinforced through the process of the Johannesburg World Summit on Sustainable Development held in August 2002. UNDPs aim in the conference was to work towards achieving a fresh impetus to the sustainable development paradigm. UNDP revitalized focus on a number of key initiatives that specifically addressed poverty alleviation including: i. Capacity 2015 which builds on the success of Capacity 21, both of which aim to develop the capacities needed by developing countries and countries in transition to meet their sustainable development goals under Agenda 21 and the Millennium Development Goals (MDGs) at the local level. Through the Poverty and Environment Initiative (PEI), UNDP in conjunction with the European Commission, the World Bank and the UK Department for International Development, are helping countries to integrate the environmental concerns of the poor into poverty reduction strategies and policies, to identify practical measures for their implementation, and to share their experience and good practices. The Local Initiative Facility for Urban Environment, LIFE is another UNDP programme which addresses urban poverty through the promotion of locallocal dialogue and partnerships between NGOs, CBOs, local governments and the private sector towards improving the living conditions of the urban poor and influencing policies for participatory local governance.
ii.
iii.
In 1992, UNDP supported the Urban Management Programme for Asia and the Pacific, UMPAP in promoting good governance and building capacities for city stakeholders, as well as Asia Pacific 2000, a project aimed at supporting civil society participation in local decision-making. The Urban Governance Initiative RAS/92/011 and it second phase implementation of RAS/02/001 focused on building local government capacities for good governance and maximized the benefits of having access to a strong network of urban stakeholders that had been nurtured in the preceding projects. TUGI effectively translated the concept of good urban governance into popular formats and helped to promote it in the region. This contributed towards the growth of a broad-based movement for good urban governance which garners support from both local governments as well as civil society organisations in the Asia Pacific.
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UNDPs support to poverty reduction has been long-standing and pre-dates the 1995 World Summit for Social Development and well before the 1999 formulation of Poverty Reduction Strategy Papers (PRSPs) was a required activity. In providing support to the PRS process, UNDPs role has included: i. Harmonizing the PRSPs with the national long-term strategic perspectives the 2020 or 2025 Visions, the UN Systems Common Country Assessments (CCA) and the UN Development Assistance Framework (UNDAF) as well as the IMFs Poverty Reduction and Growth Facility (PRGF); Supporting National Human Development Reports; Supporting poverty monitoring, and the establishment of Social Observatories or Poverty Observatories; Support for participatory assessments and involvement of communitybased groups and CSOs in the PRSP process; Building linkage between governance reforms, such as the promotion of decentralization and community empowerment to the PRSP process.
ii. iii. iv. v.
UNDPs South Asia Poverty Alleviation Programme (SAPAP) is the most prominent example of making the link between governance and poverty. The project utilized the concept of micro-credit to positively impact on the income of rural and smalltown communities in South Asia. SAPAP operated in Bangladesh, India, Maldives, Nepal, Pakistan and Sri Lanka. Scheduled to last seven years and ending in 2003, SAPAP pursued a three-pronged approach to poverty reduction: i. ii. iii. Social mobilization to enable the poor to enhance their skills with a focus on management, savings and loans operations and support for implementation of public projects; Development of pro-poor policies focusing on integrating economic growth strategies with poverty eradication and decentralization; Poverty monitoring to enable public action by government and the people to reach fuller understanding of the dimensions of income and human poverty.
In some Asian countries, UNDP is supporting the government in strengthening the linkage between macroeconomic policies and poverty outcomes and in adopting the Integrated Framework on Trade and Poverty. This lead to the support for a Poverty Monitoring Technical Unit within the Council for Social Development to monitor poverty trends and provide policy recommendations to the Government. Prior to the above mentioned initiatives, UNDP had received a mandate from the 1995 Copenhagen World Summit for Social Development to focus on building capacities at local, national and regional levels for the implementation of social development programmes aimed at poverty eradication.31 In response, UNDP launched a multi-donor programme called the Poverty Strategies Initiative 32 to assist countries in their efforts to comply with the Copenhagen commitments, by supporting the formulation of national strategies and action plans to fight poverty. With funding of approximately USD20 million the initiative provided support for:
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i.
ii.
iii. iv. v.
Raising public awareness of the extent, distribution and causes of poverty and creating political space for a debate on national development priorities; Strengthening the capacity of government agencies and civil society to gather, analyze and monitor social indicators and to review public policies, budgets and programmes that impact on peoples well-being; Defining national goals and targets for the reduction of overall poverty and the elimination of extreme poverty; Improving coordination among agencies dealing with social and economic policy; and Building a consensus among public, private and civil society actors on the most effective means to tackle poverty in their country.
The PSI supported the National Human Development Report process in over half of the countries that were involved in the Initiative. Another area that received significant attention in Asia and the Pacific relates to poverty mapping and assessments. Although countries vary in their stages of understanding national poverty, defining what poverty means in their own context and understanding the scope and depth of poverty within their boundaries have been important first steps towards improving the policy framework for poverty reduction. Some key questions need to be considered when making the assumption that without appropriate governance structures, the developing countries will not be able to generate sustained economic growth or a momentum towards rapid poverty reduction. These include: i. ii. iii. What are the essential features of an appropriate governance structure? What are the problems involved in achieving good governance? What actions need to be taken to tackle these problems?33
A number of PSI sponsored studies were commissioned to analyze the relationship between good governance and poverty alleviation. Governance has been interpreted in many different ways so as to encompass many different aspects of social organisation and the institutional framework within which social and economic activities are performed. Some conclusions from the ideas and lessons learned from the PSI studies commissioned to look at the relationship between good governance and poverty alleviation include the following: i. ii. Decentralized governance emphasized as an essential precondition for successfully executing plans and programmes for poverty alleviation. Genuinely participatory governance at the local level can yield benefits in terms of both efficiency and equity, by giving the people a sense of ownership, by allocating resources according to peoples preferences and by utilizing their skills and knowledge. Two major obstacles were identified to genuinely participatory decentralization: Reluctance of politicians and bureaucrats at the higher echelons of governance to relinquish power to lower levels. Inability of the weaker segments of the population to make their voice heard in the face of elite local domination of traditional power structures.
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iii.
iv.
Empowerment of common people integral to achieving genuinely participatory decentralization. Two components of this involve: The improving of the economic security of the poor because an economically insecure group of people can hardly be expected to exercise effective bargaining power with the powers-that-be. The second component is social mobilization the poor need to be organised so that their collective voice can overcome the weaknesses of their separate voice.
2. The International Labour Organization (ILO) 34

The International Labour Organization estimates that the total labour force in developing countries grew from 1.4 billion in 1984 to 2 billion in the year 2000, and further projects that this number will rise to 3 billion people by 2025. Of this number, 1.7 billion people will be looking for work in the urban centres of the developing world. Total Labour Force Growth in Developing Countries
3000 2500 2000 1500 1000 500 0 1980 2000 2025
Urban Labour Force (in millions) Total Labour Force (in millions)
Source: United Nations Development Programme (1991). Cities, People & Poverty Urban Development Cooperation for the 1990s: A UNDP Strategy Paper. UNDP: New York, U.S.A.
The ILO has focused on business growth, better jobs and improved working conditions as a route out of poverty. Insofar as the urban informal sector is concerned, the ILO has developed the InFocus Programme on Boosting Employment through Small Enterprise Development (SEED). This programme aims to address improved policy environments for small and micro enterprises, the provision of business development services and training, enabling small businesses move into new markets, addressing equal opportunity and gender issues within the informal sector, and finally, promoting greater representation of the informal sector in local and national decision-making. In 1998 the International Labour Conference adopted a Recommendation which recognizes the importance of a policy and legal framework in setting an environment for small enterprise development. This is ILO (1998) Recommendation 189 concerning General Conditions to Stimulate Job Creation in Small and MediumSized Enterprises. [Available online at www.ilo.org/seed] More recently in June 2000, the OECD issued a Bologna Charter on SME (Small and Medium Enterprise) Policies (OECD, 2000) in which governments from the OECD
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member countries recognized the role of small and medium-sized enterprises and recommend broad policy orientations conducive to their growth. The ILO initiated the Research and Policy Promotion Programme that develops and coordinates an international comparative research programme in seven countries on conducive policy environments for small enterprises (ILO, 2000). The ILO notes that the impact of different types of policy and regulatory environments has not been studied sufficiently. Aspects of the link between the policy environment and employment on which little research is available include: i. At least some aspects of the impact of policies on employment depend on the countrys socio-economic development and institutional history and thus are country or region-specific. The different levels of government national, regional and local addressing the issues of any of these levels specifically can make the analysis on how to address poverty alleviation through supporting the urban informal sector, more concrete and useful for policy formulation purposes.
ii.
See www.ilo.org/seed for a database of national policies, laws and regulations pertaining to small enterprise development..
3. The Bretton-Woods Institutions

The World Bank is advocating a focus on acceleration of economic growth, improving distribution of income and wealth as well as social development as key steps to poverty eradication.35 There is also acceptance of the importance of statistical infrastructure in monitoring progress and hence encouragement of activities that build capacities for better data accumulation and analysis. The Poverty Reduction Strategy Papers or PRSPs are an effort to strengthen in-country capacities, especially in determining what works and what does not in poverty alleviation, and to focus new investment in areas in which clear gains can be made with regards achieving poverty eradication targets. In order to put these numbers into perspective, this situation roughly translates to the need for 228 million new jobs being created within the cities of developing countries in order to keep up with the population trends within the 1990s alone. In the next 25 years, another 875 million jobs will be required. The World Bank has perceived the informal sector as one that needs to be further integrated into the formal economy within a Local Economic Development strategic planning process. The informal economy is a growing part of local and national economies, and support for them by both the WB and IMF has been primarily focused through the PRSP process. One of the main problems perceived in the PRSP process was the difficulty in linking proposed actions to the poverty reduction outcomes as a measure of their appropriateness or success.36
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PRSPs were primarily to be drawn up between the Ministry of Finance, ministries responsible for major expenditure and donors.37 There is an inherent assumption that agencies involved in poverty reduction, sustainable development or local governance will be automatically involved, but in fact, since this is not mandatory hence it seems not to be occurring predominantly in many existing PRSP processes. The PRSPs were intended as documents that would be viewed and critiqued by a wide consultation process, but this remains an area in which many governments are challenged because accepting such criticism constructively has not been an easy undertaking, especially in situations where the democratic support structures for such communications were inherently weak. The participation of civil society organisations is a key ingredient to improving the understanding and analysis of the extent and causes of poverty as well as the effectiveness of projects aimed at reducing the same. Their involvement in the PRSP process has not proved a costly waste of time as some had feared.38 There are clear parallels between the fiscal and financing framework of the PRSP process and that of earlier Bretton-Woods structural adjustment programmes, however it is anticipated that the emphasis on PRSPs could mark the beginning of a major change in development strategy.39 If poverty reduction targets are not achieved as expected from the PRSPs, then the basic strategy behind this process may have to be reassessed.
In Conclusion
In the face of both the challenges as well as the opportunities afforded by the urban informal economy, UNDPs strategic support towards poverty eradication should include methods for increasing the entropy of this system so that it can resolve its inherent weaknesses and expand existing potentials to address income poverty directly, and human poverty (access to basic needs and services), indirectly. Given the scope of support and work done by such institutions as the International Labour Organization, investments by both multi- and bi-lateral development organisations in poverty reduction and UNDPs own commitment in the last few decades to poverty eradication, there exists today both the intention and capacity to develop the skills and knowledge-base of national focal points on effective poverty reduction measures. This work is on-going, and continues to expand in terms of outreach and effectiveness, much reflected in the current focus of the MDGs (Millennium Development Goals) on achieving clear-cut targets for poverty reduction. Yet in order for national-level investments in skills and policy development to translate to effective measures on the ground, the primary link factor of local governance structures needs to be assessed in terms of its capacity to deliver as part of an integral poverty reduction strategy. Not only is the internal capacity of the local authority important a factor that is much addressed within the global decentralization phenomenon but also the social institutions that support the effective functioning of good local governance.
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An effective media, the active and genuine participation of civil society in local decision-making processes and a legal system that can maintain and propagate systemic integrity are three essential factors for creating a sustainable conduit between national policy development and delivering implementation at the local level towards an objective of enabling social and economic partnerships that complete the good governance circle. The capacity of local authorities to negotiate and cooperate with these various social stakeholders in building governance systems that can effectively implement poverty reduction measures vis a vis the urban informal sector requires both knowledge of the issue as well as tools to engage in the initial discussion of what needs to be done, who will do it, and how these initiatives would be measured and expanded. The UNDP, ILO and Bretton-Woods institutions do much in terms of building capacities for the creation of policy environments for poverty reduction as well as enhance the practical skills necessary to implement poverty reduction strategies. However, there is a gap between capacities and skills for poverty reduction strategies and actually impacting on poverty levels, this being the process of governance itself. Local governments, being the primary link between policy and implementation, require not only the data, knowledge and tools for poverty reduction, but also the means to facilitate a process that is based on good governance principles, in order to be able to utilize apparent skills towards achieving poverty eradication objectives. TUGI has built up an extensive information base of tools and methodologies, and mechanisms for promoting and implementing improved governance that could be directly linked to poverty reduction targets and disseminated in user-friendly formats to local governments as a method of filling this gap.
References
Committee on Employment and Social Policy, ILO. (March 2002) Poverty Reduction Strategy Papers (PRSPs): An Assessment of the ILOs Experience. International Labour Office: Geneva, Switzerland. Galing Pook Foundation. (2001) Kaban Galing Transforming the Local Economy: The Philippine Case Bank on Innovation and Exemplary Practices in Local Governance, Series #3, 2001. Manila, Philippines. Gnanasegaran, Sanjeev. Informal Economic Sector: Organize, Recognize, Realise. [Research Paper] The Urban Governance Initiative, Kuala Lumpur, 2003. International Labour Conference. (2002) Provisional Record of the Ninetieth Session of the International Labour Conference: Report of the Committee on the Informal Economy. ILO: Geneva, Switzerland. International Labour Organization. Employment, Job Creation and Enterprise Development; Informal Economy. [Website: http:www.ilo.org/dyn/empent/]. ILO: Geneva, Switzerland. International Labour Organization. InFocus Programme: Boosting Employment through Small Enterprise Development. [brochure]. ILO: Geneva, Switzerland.
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International Labour Organization. (2001) Local Employment in the Informal Economy: Course Guide for staff in local governments and partnerships organizations. ILO: Geneva, Switzerland. International Labour Office. (2002) Women and Men in the Informal Economy: A statistical picture. Publishers: International Labour Organization: Geneva, Switzerland. Reinecke, Gerhard. (2002) Small Enterprises, Big Challenges: A Literature Review of the Impact of the Policy Environment on the Creation and Improvement of Jobs within Small Enterprises. SEED Working Paper No. 23. InFocus Programme on Boosting Employment through Small Enterprise Development, Job Creation and Enterprise Department. ILO: Geneva, Switzerland. Osmani, S.R. Participatory Governance, Peoples Empowerment and Poverty Reduction. [Online SEPED Conference Paper Series: www.undp.org/seped/publications/conf_pub.htm]. United Nations Development Programme: New York, U.S.A. Sethuraman, S.V. (1997) Urban Poverty and the Informal Sector: A Critical Assessment of Current Strategies. Development Policies Department, International Labour Office: Geneva, Switzerland. Tolentino, A. (2001) Guidelines for the analysis of policies and programmes for small and medium enterprise development. Enterprise and Management Development, ILO: Geneva, Switzerland. UNICEF. (2002) Poverty and Exclusion Among Urban Children. Innocenti Digest No. 10, Nov 2002. Publishers: Innocenti Research Centre: Florence, Italy. United Nations. (2001) Economic and Social Survey of Asia and the Pacific 2001. United Nations: New York, U.S.A. United Nations Development Programme (1991). Cities, People & Poverty Urban Development Cooperation for the 1990s: A UNDP Strategy Paper. UNDP: New York, U.S.A. United Nations Development Programme (2002). Propoor Macroeconomic Policies: UNDPs Asia Pacific Programme on the Macroeconomics of Poverty Reduction. [Website] http:// www.asiapropoor.net/ UNDP: New York, U.S.A. United Nations Development Programme (1999). Poverty Strategies Initiative. [Website] http://www.undp.org/poverty/initiatives/psi/ United Nations Development Programme. (2000) Poverty Report 2000: Overcoming Human Poverty. UNDP: New York, U.S.A. United Nations Development Programme. (2000) Poverty Report 2000: Overcoming Human Poverty. UNDP: New York, U.S.A. United Nations Development Programme. (Sept. 2001) UNDP Support for Poverty Reduction Strategies: The PRSP Countries Interim Report. UNDP: New York, U.S.A.
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Footnotes
1 Employment Sector, International Labour Office. (2002). Women and Men in the Informal Economy: A statistical picture. Publishers: International Labour Organization. Geneva, Switzerland. Page 49. 2 Ibid. Pg. 7. 3 Ibid. Pg. 7. 4 Ibid. Pg. 7. 5 Ibid. Pg. 7. 6 Ibid. Pg. 7. 7 Employment Sector, International Labour Office. (2002). Women and Men in the Informal Economy: A statistical picture. Publishers: International Labour Organization. Geneva, Switzerland. Pg. 8. 8 International Labour Organization. (2001) Local Employment in the Informal Economy: Course Guide for staff in local governments and partnerships organizations. ILO: Geneva, Switzerland. 9 Ibid. Pg. 33. 10 Ibid. Pg. 33. 11 Ibid. Pg. 10. 12 Employment Sector, International Labour Office. (2002). Women and Men in the Informal Economy: A statistical picture. Publishers: International Labour Organization. Geneva, Switzerland. Pg. 10. 13 Ibid. Pg. 10. 14 Ibid. Pg. 11. 15 Ibid. Pg. 11. 16 Ibid. Pg. 11 but quoted from Rauf Hussmanns, Informal Sector and Informal Employment: Elements of a Conceptual Framework. Paper presented at the Fifth Meeting of the Expert Group on Informal Sector Statistics, Delhi (September 2001). 17 Employment Sector, International Labour Office. (2002). Women and Men in the Informal Economy: A statistical picture. Publishers: International Labour Organization. Geneva, Switzerland. Pg. 11. 18 Ibid. Pg. 10. 19 Ibid. Pg. 10. 20 Employment Sector, International Labour Office. (2002). Women and Men in the Informal Economy: A statistical picture. Publishers: International Labour Organization. Geneva, Switzerland Pg. 12. 21 Ibid. Pg. 12. 22 Juan Somavia, Director-General, ILO. 23 World Bank Institute (2001). Regional Conference on National Poverty Reduction Strategies: East Asia and the Pacific December 4-6th, 2001- Final Summary Report. World Bank. 24 International Labour Organization. (2001) Local Employment in the Informal Economy: Course Guide for staff in local governments and partnerships organizations. ILO: Geneva, Switzerland. Pg. III-2. 25 Employment Sector, International Labour Office. (2002). Women and Men in the Informal Economy: A statistical picture. Publishers: International Labour Organization. Geneva, Switzerland. Pg. 2. 26 International Labour Organization. (2001) Local Employment in the Informal Economy: Course Guide for staff in local governments and partnerships organizations. ILO: Geneva, Switzerland. 27 International Labour Organization. InFocus Programme: Boosting Employment through Small Enterprise Development. [brochure]. ILO: Geneva, Switzerland. 28 Ibid. [Brochure]
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37 38 39 40
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Gnanasegaran, Sanjeev. Informal Economic Sector: Organise, Recognize, Realise. [Research Paper] The Urban Governance Initiative, Kuala Lumpur, 2003. United Nations Development Programme. (Sept. 2001) UNDP Support for Poverty Reduction Strategies: The PRSP Countries Interim Report. UNDP: New York, U.S.A. Osmani, S.R. (1999) Participatory Governance, Peoples Empowerment and Poverty Reduction. [Online SEPED Conference Paper Series: www.undp.org/seped/publications/ conf_pub.htm] United Nations Development Programme: New York, U.S.A. United Nations Development Programme (1999). Poverty Strategies Initiative. [Website] http://www. undp.org/poverty/initiatives/psi/ Osmani, S.R. Participatory Governance, Peoples Empowerment and Poverty Reduction. [Online SEPED Conference Paper Series: www.undp.org/seped/publications/conf_pub. htm].United Nations Development Programme, New York, U.S.A. Reinecke, Gerhard. (2002) Small Enterprises, Big Challenges: A Literature Review of the Impact of the Policy Environment on the Creation and Improvement of Jobs within Small Enterprises. SEED Working Paper No. 23. InFocus Programme on Boosting Employment through Small Enterprise Development, Job Creation and Enterprise Department. ILO: Geneva, Switzerland. World Bank. (2003) PovertyNet. [Website] http://www.worldbank.org/poverty/index. htm Committee on Employment and Social Policy, ILO. (March 2002) Poverty Reduction Strategy Papers (PRSPs): An Assessment of the ILOs Experience. International Labour Office: Geneva, Switzerland. Ibid. Pg. 3. Ibid. Pg. 10. Ibid. Pg. 11. United Nations Development Programme (1991). Cities, People & Poverty Urban Development Cooperation for the 1990s: A UNDP Strategy Paper. UNDP: New York, U.S.A Ibid. Pg. 47.
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Endnotes
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Keith Harts Informal Income Opportunities concept of 1973 used the term informal sector to denote the informal income opportunities pursued to satisfy basic human needs. To Hart, informality means informal income opportunities or activities through selfemployment mechanisms. In his conceptualization, it is not treated as a separate sector. In 1989, Peruvian economist Hernando De Soto developed the ends-means criterion where informality refers to those economic activities whose ends are legitimate (generation of income to satisfy basic human needs) but whose means are illegitimate in the sense that they contravene official regulations. In this approach, the legal status is the main element distinguishing informal from formal activities. It relates the emergence of the informal sector to the policies applied. It suggest, therefore, the deregulation of the market and the almost complete abolition of State intervention. [Source: Employment Sector, International Labour Office. (2002). Women and Men in the Informal Economy: A statistical picture. Publishers: International Labour Organization. Geneva, Switzerland.] Type of Economic Unit: This is determined by considering whether the businesses were micro-enterprises consisting of an employer and some employees, a family business run by an owner-operator and sometimes unpaid family members, or an own-account operator that has an individual who is both owner and operator Nature of Employment: This refers to informal employment relations characteristic of the working terms of such jobs as domestic workers without a regular contract, workers employed in informal enterprises, casual day labourers without a fixed employer,
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temporary workers who get work through an agency, part-time workers for a fixed employer, home-based workers, industrial outworkers for formal or informal firms and unregistered or undeclared workers. Employment in the informal economy in developing countries is linked to employment arrangements that have tenuous connections between the workers and formal structures and little if any access to fundamental labour rights and protection and employmentbased social protection. The following specific categories of non-standard employment arrangements are relevant: a. Part-time employment in formal firms b. Temporary employment in formal firms c. Self-employment, in particular, own account workers with no employees d. Inter-firm subcontracted work e. Industrial outwork, including homework f. Sweatshop work g. Day labour [Source: ILO, Decent Work and the Informal Economy Report VI, International Labour Conference, 90th Session, (Geneva 2002)]
Very few countries have undertaken regular surveys on the informal sector and only two or three countries have collected the data that provide for measures of informal employment outside informal enterprises. Few countries have prepared the estimates of the contributions of the informal sector to GDP. A number of obstacles exist to the international comparability of the data due to countries applying deferring criteria of non-registration, enterprise size and or workplace location. Also, according to the 1993 ICLS guidelines, individual countries can decide what size of unregistered units to include in the informal sector and whether (or not) to include agriculture and domestic service in the informal sector. Official data are often not comprehensive most countries exclude agriculture from their measurement of the informal sector and some measure only the urban informal sector. Finally, official data are not tabulated or presented in a standard format. [Source: Employment Sector, International Labour Office. (2002). Women and Men in the Informal Economy: A statistical picture. Publishers: International Labour Organization. Geneva, Switzerland. Pg. 18.] SEWA are also members of the Women in Informal Employment: Globalizing and Organizing (WIEGO), a global network committed to advocacy on home-based workers rights.
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Chapter 3 Mobilizing Informal Sector Strategies for Poverty Reduction: Challenges to Local Governance
by Leo Fonseka,
UN Consultant and Retired UNICEF Regional Urban Advisor for South Asia
Achieving the Millennium Development Goals is government policy in Asia and the Pacific. The first of its seven major goals is eradication of extreme poverty and hunger by 2015. In praxis, the achievement this goal will help achieve the other six goals also. They are universal primary education, gender equality, child health, maternal health, reduction of combatable diseases and sustainable environment. Achieving the poverty eradication goal calls for a complex strategy-mix and a multi-pronged approach. The informal sector necessarily plays a significant role in poverty reduction. The reason is very clear. There is no significant reduction in urban poverty. The formal sector is unable to grow fast and create a corresponding demand for unskilled labour the labour of the poor. Over 70% of the urban poor are employed by the informal sector and therefore, in stagnating economies, it is the only sector that can create jobs for the poor. That is the sector that has always been closer to the poor, however coarse, exploitative and discriminatory their job positions and conditions may have been. There are other reasons too for this growing attention. The sector often registers the lowest per-capita investment for any created job. It provides the cheapest transport cost and time to the workers because a good portion of these undertakings are often located in the periphery of low-income settlements, as a sure way to reduce establishment costs. With low establishment and recurrent costs, more people are able to invest in their businesses, as compared to the formal sector. This makes the informal economy a thriving sector. It is true that the informal sector is not the ideal and final platform for a sustainable job market and competitive economy. The ideal for developing economies is a healthy mix between the formal and informal sectors with a sparse sprinkling of pubic sector undertakings in essential services.1 The informal sector is not the best employer viz a viz the facilities, perquisites and working environment. However, the sector fills a void, meets a need and offers a solution to the unemployed and under-employed. In a sub-standard economy, developing nations depend heavily on this sector to step in and create job opportunities for the unskilled. This paper will not make the mistake of many others by eulogizing the informal sector as the panacea for some
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of the economic ills that these nations are facing. Instead, it hastens to establish that the informal sector is and should be a temporary phenomenon in the transition from a developing economy to a developed one. The difference is that the latter will not depend heavily on informal mushroom systems and avenues to support the national or provincial economy while the former, due to resource constraints, depends much upon it. There is no gainsaying that the informal sector in developing economies is performing a noteworthy role in sustaining the national and city economies. There is an umbilical relationship between it and the poor of their cities. They cannot thrive or survive without each other. A set of complex factors, briefly described above, makes the informal sector a much recognized growth engine in city economies. Increasing attention paid to it since the early eighties must be viewed from the perspective that transitional economies cannot live without it. There is growing attention on the role of local government authorities, i.e., the municipal councils, provincial councils and state assemblies, in promoting and enabling the informal sector economy within their areas. These institutions in transitional economies have paid very little or limited attention to the informal sector in the past. Apart from permitting the sector to grow informally and without any articulated method, the municipal and other sub-national governments have done very little to promote and facilitate the growth. Because the sector does not bring in much municipal revenue as in the case of formal sector, often the local governments treat the informal sector more as a headache than a solution to the headache. This attitude is exacerbated by the fact that municipal human resources and institutional arrangements lack the time, space and expertise to assist and promote the sector. The sector accounts for at least one fourth of the city economy and a minimum one third of the city employment. Yet, most municipalities and similar local government authorities do not have the human and financial resources to provide any systematic service to assist it not even a special facilitation desk to help them minimize the procedural delays and institutional red-tape relating to their applications for approvals and support services. Encouraged by the development assistance agencies, particularly the World Bank, Asian Development Bank, UNDP, ILO and UN-Habitat, developing countries have begun to shed more light and attention on their informal sector. In the process, the local governments have begun to realize that besides the land and property related taxes, the municipal governments can use a number of other tax and non-tax sources of revenue and that their role and potential are neither adequately known or appreciated.2 As the municipal government adds on to its repertoire larger responsibilities for economic development and equity promotion, it necessarily needs to pay greater attention to the informal sector and provide better functional attention to its organization and well being, assuming that such well being goes hand in hand with rapid job creation for the urban poor and revenue enhancement for urban local authorities.
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If the sector is thus viewed, its role in the urban economy must become a striking new focus of the city development strategy of every big municipality. Municipal systems, by-laws, procedures and institutional arrangements must then be reformed to support such a developmental thrust and venture. The municipal reform agenda must be centered on stakeholder participation, transparent decision making, accountability and people-centred planning. Within such a milieu, the informal sector will have a prime support base in the local governance arena. The sector will then perceive the local government as a friend and guide, not an adversary. In short, it will finally mean mainstreaming of the informal sector in the city economy. Local governance must adopt a Give and Ye Shall be Given approach to the sector. Finally, it all boils down to good urban governance because good governance upholds strategic development, participatory analysis, sensitivity to public needs, all-party consensus, accountability to the people through the representative governing mechanisms, transparency, rule of law, equity building and effectiveness all of which are what any investor, big or small, is asking for, to ensure a level playing field for them so that they compete in conjunction and not under commission. Our exercise, therefore, is to search for opportunities to inform, motivate and mobilize comprehensive local government action to make their institutions, systems and procedures more friendly towards and supportive of the small investor community the informal sector. In doing so, it is our commitment to engage in a productive dialogue with the local governments and the informal sector to seek out consensual understanding on legal, institutional, resource and partnership challenges that lie ahead of us and to help them determine the remedial actions that both parties need to take to create an enabling environment to support each other.
Legal Issues and Challenges

The fiscal powers of municipal government are limited and their revenue collection too is not so satisfactory. The more lucrative areas of potential revenue are tightly and possessively held in the hands of the centre and other higher forms of sub-national governments. Consequently, the revenue that the local government can generate from within or outside their areas of jurisdiction is limited, low and insufficient. For long, municipal functions and powers have been defined in various Acts and parliamentary legislations and not in the Constitution. As a result, these functions are changed at the whim and fancy of the central and provincial governments. Increasingly, many governments have now come under local government pressure to provide constitutional imprimatur and cover for local governance. Unless their role and functions are enshrined in the Constitution, local investors will fight shy of entering into any feasible contract with the local authorities for fear of threat of punishment or vengeance. If municipal governments are to make a significant contribution
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towards improving the city economy, this fear must completely disappear. They are not large investors and cannot afford wasting time going pillar to post seeking the indulgence of political and administrative echelons to get a building plan approved or to ascertain whether there will be an imminent road widening in the area earmarked for their business. Decisions must be hardy, standing the test of time and must not be subject to the changing colour manifestations of the political hierarchy. Without that assurance of continuity, it is difficult to attract small time business investors, particularly in the provincial towns. Minimize the arbitrariness and ad-hocism in the state and municipal decision-making process to avoid relativism that imposes uncertainties in economic planning. The methods of distribution of taxes, duties, tolls and fees that the higher forms of government derive from any particular local government area must be revisited. These methods must be revised each time additional responsibilities are thrust on local government authorities. Such revision must be accompanied with sufficient legal imprimatur and protection. Currently, Local Government Ordinances do not provide clear legal provisions for municipal private sector partnerships. As a result, local authorities do not consider it their duty or responsibility to support private or public sector economic activities. Times, needs and opportunities have undergone substantial change since these ordinances have been last revised. Today, the local authority requires powers that encourage, promote and support business entrepreneurial activity and not shackle them into non-productive obedience.
Financial and Human Resource Issues and Challenges

A World Bank study conducted in 18 countries in 1988 revealed that such local revenue accounted for less than a third of the total required budget. As a result, the majority of them depend on transfers from higher levels of government to bridge the gap. As a result, the common amenities and public services suffer and the local authorities are at the flak end of the people. Increasing the taxes and raising local revenue from such dissatisfied clients is difficult and can lead to further confrontation and trouble. In democratic societies, the elected municipal leaders depend solely on the local voter for political survival. Under the circumstances, inaction and indifference become the best therapy, even when it means rapid deterioration of the city conditions due to lack of funds. The local government authorities have very little to do with the running of the city economy. In short, their authority loosens the moment the Certificate of Completion is issued to any building where a business establishment is located. They have hardly any control over the business houses though
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such places depend a lot on municipal services for daily survival. The worst of control available is the power to take over and auction a building if the rates and taxes are not paid in full within an allotted period. This is more an act of commination than an act of fiscal enablement. That is one reason why distaining orders are rare and haphazard in observance in South Asian countries. Local government authorities must possess very clear guidelines on empowering and fair practices in business establishments. Municipal governments are generally seen as a service provider and are not supposed to engage in profit making activities. Even the municipal ordinances are often silent on this issue. For example, even the floating of municipal bonds for development of commercially viable municipal property is not possible. Under the circumstances, local government creativity in revenue making is stifled and priceless local government property lies idle. If the local government authorities are permitted to enter into collaborative enterprises, with proper planning and foresight, the local revenue share of the total municipal budget can easily increase from the current 30% to 50%.
Thirteen Ideas for Local Government Action

In absolute numbers, poverty is increasing in Asia. The staggering numbers of urban poor will endanger Asian democracy now and always. Democratic governance in Asia is at risk. Creative action is urgently needed to avert a political and social catastrophe. It is our experience that employment creation is cheaper, larger and faster in the informal sector. If properly animated and empowered, local government authorities can play a vital role in encouraging and supporting the informal sector activities with the view to opening up new markets for jobs, goods and services. Compared to the formal sector, the informal sector always operates at a much closer range to where action is needed. It takes into consideration the local needs and attempts to link such local needs with the formal markets. Hence, any municipal support to the informal sector must be viewed as boosting the local market, particularly the markets that the poor of the city generally patronize. Local government authorities can encourage and support the growth of the informal sector in many different ways. Legal Protection: The informal sector needs legal protection. Such protection can come from local registration with the municipal authority as an authorized business. Municipal authorities must consider opening up a Facilitation Desk for Local Business Enterprises. The desk must be staffed with persons experienced in public relations and the needs of the local informal sector. For municipal purposes, the registered businesses may be classified into different classes depending on the aggregate range of investment, the number employed and the turnover.
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Incentive for Informal Investments: Tax-holidays and other concessions in rates and taxes could be offered to those who are registered as per the classification. Incentives could be such that encourage employment of larger numbers and employment of registered residents of the city as opposed to importing unskilled and semi-skilled labour into the city from other areas. Authorized Areas with Site & Services for Informal Sector Operations: Local authorities must identify and authorize different areas in the city for informal sector operations. Where needed, these areas must be provided with a site and related services. The floor size of the authorized area may range from one small mobile stall to a large sophisticated market or mall. While generating an income for the local body, confining informal activity within these authorized areas will help maintain city order and urban art form at an acceptable level. Confederation and Self Management of Market Areas: As part of the aforesaid registration process, the local body must insist that the registered businesspersons form their own traders associations in each area to take over the maintenance and management of the authorized sales pitch. Physical Security for Informal Sector Assets: Furthermore, in cooperation with the city police, the associations must be persuaded to install a round the clock security system in and around the premises. This can either be done by the municipal council with the traders association jointly paying the city police the cost of providing such additional services by employing an auxiliary police security system or by engaging a private security firm to provide the required services. Business Sector Representation in the Elected Bodies: Local government bodies must consider the informal sector as a fully-fledged institutional partner. Eventually, local governance ordinance must provide an electoral mechanism to ensure their full participation (along with the formal sector representatives) in the governing council. There will come a time soon when local government ordinances of Asia will be compelled to revise the electoral methodology to ensure direct representation of major stakeholders such as the private entrepreneurial sector, the civil society partners such as NGOs and religious institutions and leading educationists/academics of the city, in addition to the currently favoured system of the direct representation of the ward level residents. What is required is an electoral system where the business interests of both the formal and informal sector are directly represented and safeguarded. Such augmentation of the municipal council with representation of the special interest groups will serve the same purpose that the bi-cameral system enshrined in most post-independence constitutions in Asia had played in safeguarding the interests of special groups and the minorities. Stakeholder Participation in Urban Decision Making: Municipal and other local authorities must put in motion new innovative decision-making mechanisms that can involve the major stakeholders in planning and implementing their decisions. The UN-Habitat funded Sustainable Cities Programme has been promoting a working group methodology in over 40 countries to help local government
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authorities set up such a participatory decision-making mechanism. It calls for the setting up of an inter-departmental working group interspersed with major stakeholders for planning and management of every major programme in the city. This working group mechanism holds the various departments together with stakeholders as equal partners. In this particular case in point, we recommend that the working group arrangement be institutionalized as part of the municipal delivery system so that the representatives of traders (small entrepreneurs) associations could be invited to the working group as regular members. Legal provisions for municipal-private partnerships: Legal enactments that prevent the local authorities from entrepreneurial activity and especially from forging creative business partnerships with the private sector must be revisited and revised to support such revenue-making municipal endeavours. Land Use Policy: Urban land policy must contain entrenched provisions to permit land planning and management by local authorities. Municipalities must proactively plan the land use patterns and promote the informal sector participation in optimizing the use of marginal municipal lands while prime properties will naturally be grabbed by the formal sector. Similarly, there should be proviso permitting public issuance of municipal bonds and shares. Where possible, the local authority must be permitted to build urban facilities and amenities such as shopping malls in partnership with public and private investments. The laws must be updated and upgraded to encourage local authorities to participate in building the city economy as equal partners of the private enterprise. National Policy on Municipal Participation in Urban Economy: In this regard, a comprehensive and clear-cut national policy on Municipal Participation in Urban Economy is most urgently needed. The policy must delineate the route map to be adopted by the local authorities in promoting and supporting the growth of the city economy, particularly the prospects and limits of supporting the formal and informal business enterprise building. Outsourcing is Decentralization: Many local authorities have good experience in satisfactorily outsourcing their service delivery responsibilities, particularly in solid waste management. The ABANS and CareKleen experience (large scale disposal of solid waste) in Colombo, The Sulabh Sauchalya International Experience (maintaining pay & use public conveniences) in many cities in India and several other countries have proved that municipal services can be outsourced without any corresponding risks to their quality. In fact, in all these instances, the service quality had improved substantially. With such experience, the time has come for local authorities to consider outsourcing of services to the private sector as a new form of decentralization. Such enterprising decentralization can be effectively done using the informal sector. This sector has proved to be a willing partner to undertake the hand-dirtying municipal services such as solid waste, road cleansing and sewerage. For example, the informal sector may be allowed to purchase water in bulk and retail it to neighbourhoods and communities at an authorized price tag with a reasonable profit margin.
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NGO-Municipal Partnerships in Informal Enterprises: In the past decade or so, many Local Government Authorities in Asia have demonstrated and proved a great aptitude to build productive partnerships with NGOs. Municipal Authorities must find ways and means of facilitating NGO entry into informal markets. Ideally, the local bodies must support such partnerships to gain a foothold in the informal enterprise. NGOs can play a constructive role in demonstrating innovative economic practices in the informal sector. The role played by the Bombay and Ahmedabad Municipal Corporations in the initial years of the Self Employed Womens Association (SEWA) in India and the pioneering role played by the Federation of Women Bank Societies in Sri Lanka in organizing and linking local groups of women with nearby informal sector markets are inspirational examples. Several Municipal Councils in Sri Lanka have already engaged the Federation in extending such banking and marketing linkage to assist the urban poor. Facilitating Formal-Informal Linkages: Local government authorities can also be a go-between to bridge the gap between the formal and informal sectors of urban economy. Local bodies must search for strategies such as rates concessions, subsidized facilities, property collaterals and similar municipal dispensations to encourage formal sector investors to utilize informal sector channels, methodologies and strategies to open up job opportunities for the poor. Appropriate marriages between the two sectors can produce ideal strategies to expedite the pace and process of economic growth in the city. The recent Ceylinco Grameen experience in Sri Lanka is a case in point. Though municipal participation in it was extremely minimal, the experience has begun to offer valuable lessons and options for local government participation. If appropriately orientated and adequately supported, such marriage between the creditworthiness and efficiency of the formal sector and the horse sense and improvisation capabilities of the informal sector can necessarily change the course of urban economies for the better.
Footnotes
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The public sector must chip only in those highly volatile consumer sectors like public services and purpose must be to provide efficient, stiff competition to the private sector to keep the price levels at the doorstep of the poorer groups. Except for this, the public sector must not get involved in economic undertakings. O.P.Mathur & Nathaniel Von Einsiedel, Increasing the Income of Cities, CENTAX, New Delhi, 1996
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Chapter 4 Lessons learned - Factors to successful up-scaling

Part A The Urban Governance Innovations Facility (UGIF) Award
1. Samal Island Mariculture Park Agri-Industrial Park by the Sea, Samal Island, Philippines (2002)
The District Municipality of Samal is a cluster of 9 islets located in the Davao Gulf of the Philippines, with a population of around 85,000 people. The area is richly endowed, producing the best mangoes and citrus fruit in the country. It is a designated Marine Protected Area that has successfully preserved many coral reefs, mangroves and sea grass plains. The municipality is an urbanizing centre that has retained much of its rural character and appeal, enhancing its potential for eco-tourism. The Samal Island Mariculture Park project was a poverty alleviation initiative that was implemented by the local government. The project aimed to address the impact of gradually depleting marine resources and the associated decreasing income levels of Samal Island fisher folk. This was to be done through the use of an integrated income generation plan that would create jobs and, at the same time, promote sustainable development. The Samal Island Mariculture Park was modeled upon the same concept as an industrial park, where the local government delineated a 550-acre mariculture zone, and provided mooring systems and devices for anchoring the fish-cages. They then subdivided this area and leased it on an annual basis to fisher folk cooperatives. Training was also provided to the local fisher folk, resulting in an alternative source of income that was more secure, stable, sustainable and lucrative. The Samal Island Mariculture Park project created 9,000 core jobs and 6,000 ancillary employment opportunities within one year. There was greater food security, with the cooperatives generating a minimum of 10,000 tons of fish per year. One of the most important areas of impact created by the project involved the associated formal and informal industries that were generated in and around this mariculture initiative. These included the production of nets and other fish-cage accessories, cold storage services, packaging, board and lodging, wholesaling and retailing of the fish yield, transportation, production of fingerlings, warehousing, processing as well as the production and distribution of ice. The cooperative structure of developing fisher folk involvement in the Mariculture Park was a critical factor to the success of the project. Larger investors in the zone were required to construct counterpart fish cages for fisher folk individuals as well
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as cooperatives. Mid-way through the project period of one year, there were four fisher folk coo peratives active in the Park. The project was testimony to the public-private partnership contribution to poverty elimination when key governance institutions build equity requirements into economic development opportunities. This ensures a greater balance in the creation and distribution of wealth within local economies. In terms of environmental sustainability, the technology behind the fish-cages was based upon best practices that prevented seawater stagnation around or below the cages, contributing instead to the flourishing of sea-based flora and fauna within the Park. The methodology was of key interest to other small cities and towns and the Samal Island Municipality has since replicated its project in 3 other towns and regions in the Philippines. In 2003, the Samal Island Mariculture Park won the National Search for Best Practices in the Philippines. For further information on the implementation methodology of this project, please contact Mr. Cleto Bravo Gales Jr., City Administrator, Island Garden City of Samal, City Hall, Penaplata, 8119 Davao del Notre Province, the Philippines. Tel: 63-917-719 4038; Fax: 63-82-227 0964; E-mail: mayor@samalcity.gov.ph; jongales555@yahoo.com.
2. Waste Busters Gujrat Sanitation Project Gujrat, Pakistan (2002)

The Gujrat Sanitation Project is an up-scaling of another successful best practice in solid waste management, implemented by Waste Busters of Pakistan in the city of Lahore. The project was a public-private partnership that utilized a communitybased contracting system to process the organic component of municipal solid waste into commercially viable compost. Implemented in the City of Gujrat, a small municipal area of 251,000 people, the project was a public-private partnership between Waste Busters, a private sector company dealing in waste management, and the Gujrat Municipal Administration. Community participation by the citizens of Gujrat formed a key cornerstone to the successful implementation of the project. Building on the community contracting system, the project incorporated the private sector into the equation and was geared towards increasing service delivery while at the same time creating employment and addressing the human and financial resource limitations faced by the local authority. With only 480 sanitary workers to service the whole city, the local government was faced with multiple waste management challenges including a shortage of manpower, an incomplete sewage system, no sanitary landfill servicing the city, an inadequate number of waste transport vehicles and a general lack of participation of the population in waste management. The implementation of this project resulted in a 25% increase in capacity for the management of city waste, from an initial 50% of total waste generated to 75%.
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The city had over sixty hospital and medical facilities, the medical waste from which was either recycled or dumped together with municipal solid waste, much to the detriment of the populations general well-being. The partnership created between the various stakeholders provided a solution to these challenges, where the local government provided 10 acres of land and the basic infrastructure to set up the recycling plant, guaranteed 30 years worth of free municipal solid waste supply to the plant and arranged for the transportation of this waste from the collection point to the processing plant. Meanwhile, Waste Busters was tasked with the establishment, management and operation of the municipal solid waste recycling plant. They were also responsible for the marketing of the compost generated at the plant as well as the sorting and sale of the inorganic waste in order to generate income for the community-based contractors. Waste Busters undertook to share 15% of profits generated with the local authority while at the same time soliciting any additional funds required from external sources to achieve the objectives of the project. The community-based organisations that were involved in the project coordinated the collection of waste and brought it to the designated collection point. Their participation ensured the continuity of the project, creating a positive feedback loop between employment creation and income generation. Unemployed youth were recruited as social motivators and mobilizers, whose primary task was to raise awareness and obtain the cooperation of citizens within the zones they were servicing. This created the necessary mindset change for public participation in this waste management project, and made it easier for the Social Motivators to collect and sort the waste more efficiently. Each household was charged between 30 100 rupees per month (USD $0.50 $1.60) for the services rendered, which was not limited to waste collection but included the cleaning of drains, road sweeping and the transport of waste to appropriate collection centres. At the processing plant, the municipal solid waste was sorted into organic and inorganic materials, where the organic components were converted to compost and the inorganic waste recycled as paper, tin, plastic or glass. The organic compost generated from the project plant was sold at an affordable price 50 Rupees (USD $0.80) per 50 kilogrammes of compost. The benefits of the compost included its organic content, its ability to reclaim soil fertility, potential increases of agricultural yield by 20% and savings of up to 50% on the use of pesticides and chemical fertilizers. The Gujrat Sanitation Project produced 150 mega tons of recycled waste per day, and achieved revenues of more than $337,000 US dollars per year. For further information regarding this project, please contact Mr. Asif Farooki, Chairman, Waste Busters, No. 7 Shami Road, Lahore, Pakistan. Tel: 92-42-667 2632 / 666 6861; Fax: 92-42-667 0976; E-mail:lsp@brain.net.pk.
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3. Increasing Access of the Urban Poor and the Informal Sector to Financial Services Pasay City, Philippines (2002)
Pasay City implemented a broad-based and comprehensive savings based micro-finance programme that was used to initiate micro-enterprises as well as provide social protection and other financial infrastructure support to the urban poor. The majority of the beneficiaries were women who were employed within the urban informal economy. Pasay is a small city with a population of 460,000 people and is located within the National Capital Region. Pasay is home to 18.4% of Manilas total slum dwellers, where 41% of the total population of the city has been classified as poor. The area was previously reputed for its high rates of prostitution, crime, drugs, unemployment and poverty. Accessible financial structures were created under this project specifically to support the economic activities of the urban informal sector. The project demonstrated the positive role that local governments can play in achieving economic expansion and mainstreaming of the informal sector into the citys formal financial economy through the use of inclusive and enabling mechanisms. Referred to as the Integrated Mutual Finance Scheme (Bayanihan Banking Programme), the initiative used micro savings to leverage credit in the form of small, low-interest loans. Over 80% of the Bayanihan members were women. The funds remained within the community, owned and operated by community members, forming a revolving source of credit. Credit was provided within three categories: protection (to relieve liquidity constraints); promotional (purchase of new technologies or for capital investments); extra-protection (insurance programmes geared towards reducing income variability). The BBP model emphasized promotional use due to evidence from studies that suggest credit, particularly when used in the purchase of new technologies, reduced unemployment. The basic unit comprised 20-30 member savings groups known as Bayanihan Centres, which were in turn linked with larger community cooperatives or joined to other Bayanihan Centres in order to enlarge the pool of available resources. The programme provided integrated services that allowed the use of the funds for savings, small loans, housing and land tenure, health care, as well as the development of other cooperatives. Loans could be accessed at an interest rate of 2% per month, which translates to a savings of 18% per month which would have been the rate paid to moneylenders. Latent community energies were harnessed in accumulating human resources for the programme. Private sector agencies, local government bodies, nongovernmental organisations, church parishes, students, teachers, associations of the urban poor and community based organisations were all roped in to provide technical assistance to the programme.
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The enlarged Bayanihan Centres provided financial services, business information, livelihood training, small business opportunities, health care programmes, youth self-help programmes, social protection plans and access to affordable housing. The programme planned to provide these services to Pasay Citys urban poor population over a period of five years. In the year 2000, the urban poor population stood at 130,000 people, which was a little over 30% of the total population of the city. Pasay Citys local government ensured that there was an Integrated Mutual Finance Scheme (Bayanihan) in every urban poor settlement or village. They also provided the necessary infrastructure for coordination between these and other cooperatives, as well as with community based organisations and village committees. The Bayanihan also linked the villages with other city development services such as housing, waste management, education and public health. Pasays youth work under this project was called the Youth Empowerment through Self-help Operations or YESO. This programme involved students and teachers from four public schools who focused on two key areas youth health and access to a savings and credit programme. The health initiative ensured youth access to iodinated drinking water in support of the nutrition programme of the Department of Health, resulting in reduced water borne diseases, kidney disorders and other iodine deficiency disorders. The classroom based savings programme involved associated financial and business skills, while the money was used to purchase books, facilitate tuition fees and address emergency personal needs. Associated benefits which emerged from the mobilization and organisation of communities into these self-help groups included community-based integrated waste management, the provision of clean drinking water, community initiatives for peace, and an increased access to health services. The success of Pasay Citys innovative approach to integrated poverty alleviation resulted in requests by other cities for replication and adaptation. In 2000, Pasig City adapted the programme. In 2001, 20 other cities requested implementation and transfer of technology. As a result of this interest, the national Department of Interior and Local Government (DILG) signed a memorandum of agreement with Pasay City to replicate the programme in 50 cities nationwide within the following one year. By 2003, 194 local governments across the Philippines were implementing the initiative. Key success factors to up-scaling included the fact that at the lowest level Bayanihan unit within urban poor settlements, the concept of strategic alliances with related government and non-government agencies was integrally woven into the practical implementation of the initiative. The Philippines National Congress is in the process of adopting relevant legal measures to ensure institutionalization of this programme in all local governments in the country.
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For further information, please contact Mr. Rolando A. Londonio, City Cooperative Development Officer, Pasay City Local Government, Rm. 426, 4th Floor, Cooperative Office, Pasay City, Hall, F.B. Harrison St. Pasay City, Philippines. Tel: 63-2-551 5233; Fax: 63-2-551 5233; E-mail: rlondonio@pasay.gov.ph.
4. Integrated Urban Poverty Reduction Project in the Informal Economy, in Alwar, Rajasthan, India (2003)
This project, implemented by the Society for Development Studies, focused on improving income levels amongst traditional artisans in the town of Alwar, a small town that lies within the National Capital Region of Rajasthan, India. The artisans then used these increments for habitat improvement and other developments within a set of quality of life indicators. The project worked within the informal sector based upon the assumption that the informal economy could act as an effective engine for growth and employment generation towards the eradication of poverty. Although this initial pilot programme involved only 300 households, the concept of up-scaling was integrally woven into the project through the establishment of an Informal Sector Economic Infrastructure Centre. The centre focuses on the research and development of technology to improve productivity, reduce production losses, improve quality and reduce reject rates. The diversification of the product-mix and the progressive shift towards the high value niches of the market were also key objectives. Business support skills such as quality control, opening of new markets, negotiation with input and output suppliers networks, accounting and bookkeeping as well as building community level partnerships provided an holistic approach to the enabling capacity of the Centre. The initial participatory rapid assessment survey that provided the baseline information for this project involved over 1400 people who were employed as traditional artisans working with such materials as leather, pottery, textile embroidery, bamboo based products, wrought iron and stoneware. The survey constructed an overview of the existing economic activities and an analysis of the production and distribution technologies. Key success factors of the project included community empowerment, establishment of gainful micro-enterprises and mechanisms for capital formation. The implementation methodology involved inter-sectoral integration across various types of community development programmes, such as housing or income generation, as opposed to traditional single-sector strategies. Another critical aspect of the success of the project was to strengthen the organization of informal workers and facilitate a stakeholder partnership process among them in order to increase their negotiating power as partners of development
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programmes with government agencies. This would be necessary for the long-term sustainability of the initiative and the essential ingredient to ensure dependency is not generated between the target sector and the project implementation agency. In terms of up-scaling the project, a presentation was made to senior officials of the Government of Rajasthan during an SDS-World Bank Policy Research Seminar in 2004. As a result, the Federation of Self-help Groups was registered with the Cooperative Department of the Government of Rajasthan under the State Cooperative Societies Act. By August 2004, three such self-help groups had been established and registered with the Department. Negotiations with key financial and government institutions are underway for further project expansion and replication. For further information, please contact Dr. Vinay D. Lall, Director, or Mr. D. Ajay Suri, Associate Professor, Society for Development Studies, Regional Network for Knowledge Infrastructure in the AP and Arab Regions, Core 6A, 2nd Floor, India Habitat Centre, Lodhi Road, New Delhi 110003 India. Tel: 91-11-24699368; 24699369; Email:sds@nda.vsnl.net.in; www.sdsindia.org; www.sdsindia-urbanindicators.org.
5. Urban Poor Communities and Participatory Urban Governance, a case study of Bangkok, Thailand (2003)
The Urban Poor Communities and Participatory Urban Governance project of the Institute for Social Research and Action (ISRA) aimed to create a political platform for urban poor community leaders to become effectively involved in the elections of the Governor of the Bangkok Municipal Administration (BMA). Over seventy community leaders representing fifty community organisations that had been working on local development issues for the past fifteen to twenty years, were involved in the project. In the past, these organisations had successfully mobilized on issues such as environmental degradation, housing for the poor and anti-eviction campaigns. This project was perceived by the participating urban poor community leaders as one way of expanding the political voice and impact of urban poor groups that were normally sidelined from political participation. There are an estimated 2 million urban slum dwellers in Bangkok. A rapid survey of conditions within Bangkok slums showed that 21% of community members were not earning enough to meet their average monthly household expenses. With regards security of tenure, 67% of the population identified housing insecurity as a critical concern. ISRA focused on enabling this group of community leaders to become a driving force for the realization of better urban governance through the participatory translation of good, pro-poor policies into local development plans. The time frame of the project implementation coincided with pending elections in mid-2004, as a test case of the effectiveness of the initiative.
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Utilizing capacity building workshops, community leaders were trained in the concepts of good governance, and how these translated to good practices. The participants also developed mechanisms to monitor the performance of the Bangkok Municipal Administration (BMA), and looked into ways in which the gender gap in public administration and decision-making could be addressed. The enthusiasm for this process was especially apparent due to the impending BMA elections for the next governor, which was to be held on the 29th of August, 2004. Another event leading up to the elections involved a public seminar entitled Grassroots Communities and the BMA Governors Election that saw the five leading candidates invited to a meeting of over 600 urban poor community leaders from 86 slum communities across Bangkok. The media was also present and captured the question and answer session between the community leaders and the candidates, discussing all the key concerns that had surfaced in the rapid survey implemented at the beginning of the project. The process was carried on four television news channels and four mainstream newspapers. Advocacy material developed for the process by the project was aimed at voter education, including leaflets on How to Elect a Good BMA Governor. The community leaders developed performance targets for the Bangkok Municipal Administration (BMA) in the areas of public health, the development and management of BMA administered schools, income generation activities, social welfare and care of the aged and underprivileged. In collaboration with the Thai National Human Rights Commission, ISRA conducted studies of the laws, acts and regulations that were detrimental to the urban poor and posed as obstacles to their development and political participation. The legal framework that was reviewed spanned from housing to the official status of community organisations. The results of the review have been submitted to the Prime Minister and the Chairman of the House of Representatives, as well as the Senate. This project extrapolated and built upon the significant past achievements of the Thai peoples movement. In the late 1960s, eviction of squatter settlements by force was commonplace, and the urban poor were largely unorganized. Negotiation for compensation for the evicted families was unheard of, and the nature of support, both governmental and from the non-government sector, was greatly welfaristic and lacked a rights-based approach. The spate of evictions rose drastically in the 1970s, and so did peoples political organisations, with the establishment and growth of the Voluntary Movement for Peoples Organisations and the Building Together Association. Networking between urban poor communities as well as across various movements lead to the increased ability of people to protect their rights and their homes. The growing strength fed the need for greater political expression of their demands, to construct analyses, propose solutions, create strategies and ensure implementation. It was in tandem with this rising need that the project worked to direct the energies of the connected communities to realizing political impact at the highest level of local governance in Bangkok.
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The ISRA initiative did not identify any particular candidate to be backed nor did it endorse anyone as the representative of the urban poor voice. Instead, the project envisioned political participation in this instance as a process of education and enablement, of influencing the candidature with demands that signified the development of the urban poor sector as a primary voting constituency that was to be respected. For further information, please contact Mrs. Prathueng Chuaykliang, Board Member and Secretary to the Institute for Social Research and Action (ISRA) or Dr. Chamniern Paul Woratchaiphan, Advisor to ISRA, 1770 Soi Ladprao 101, Bangkapi, Bangkok, 10240 THAILAND. Tel: 02-731 4358; fax: 02-731 5218; Email: andaman@kso.th .
Part B - The CyberCity Award

1. Saukaryam Visakhapatnam, India (2002)
The Saukaryam project was and e-governance initiative originally implemented in Visakhapatnam, India, which was up-scaled to eighteen other small towns and cities within the TUGI-supported project period. The successful public-private partnership that underpinned Saukaryam was replicated and adapted within other municipalities. The primary objective of the up-scaling process was to enable other towns and cities to develop similar smart partnerships in order to kick-start their e-governance services towards improving the efficiency and effectiveness of local governance goods and services. Key elements to the successful expansion of the initial good practice included national and regional information sharing workshops, technology and methodology transfer, capacity building and an ever-increasing information dissemination and outreach programme. The Visakhapatnam Municipal Corporation essentially adopted 18 sister cities and worked with them to enable the migration of their services to online facilities. 170 ICT kiosks and service centres have now been established throughout the entire West Godavari region. The investments that the poor have made in registering informal activities through this e-governance mechanism, thereby attaining legality and official recognition has paid off through the generation of additional dividends as a result of their improved status and the associated access to services, including credit and banking facilities. The reduction of red tape and elimination of corruptioninducing systems translated into lowered expenses for the poor, and a concurrent increase in income for the city. The Saukaryam project resulted in increased municipal incomes in all the cities where it was replicated, The up-scaling process was an integrated one, incorporating financial and fiscal management, technical ICT knowledge, improved efficiency of maintenance and
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service provision, policy development, and other governance capacity building elements. The technological changes ran parallel with improved management structures and financial processes and resulted in significant increases in investment from the private sector within the city. These investments were in turn more transparent as well as effectively managed and utilized by the city government, as a result of the implementation of the Saukaryam project. Another important factor in the success of the Saukaryam initiative was the media partnerships that created a mind-shift within the public concerning the ability of ICT-driven efficiency to improve governance and local government services. The Saukaryam initiative managed to use ICT as a tool for broad-based changes in local governance that involved increased efficiency, participatory governance, immediate and effective feedback, improved service and tax collections, and a general perception that improved governance was in turn improving the quality of life. The project partnered with self-help grassroots organisations in an effort to taking services to a broader segment of the urban poor population. This component of the Saukaryam initiative was nominated for the Stockholm Challenge Award 2004 for innovations in new technologies. The e-governance initiative, due to its integrated nature, caused sweeping reforms within local governments involved in the up-scaling process. The hospital management module has enabled tuberculosis to be managed and monitored more effectively. Software used in the initiative is open-source. ICT enabled education, conducted in partnership with non-governmental foundations, provided computer access to over 30,000 primary school students within the project area. Financial indicators were developed as a measure of success in the up-scaling of the Saukaryam initiative. For further information, please contact Mr. Sanjay Jaju, The Saukaryam Initiative c/o Visakhapatnam Municipal Corporation, Tenneti Bhawan, Near RTC Complex, Asilmetta Junction, Visakhapatnam, 530002, A.P. India. Tel: 91-891-746300; Fax: 91-891-568545. E-mail: sjaju1@rediffmail.com; saukaryam@rediffmail.com.
2.I Governance Initiative Naga City, Philippines (2002)

Naga Citys I-Governance initiative was all about enabling public feedback on the effectiveness of local governance through the use of information and communication technology. Such an immediate and demand driven performance assessment system included a comprehensive component for improving access by the poor to ICT through public schools and urban poor areas. Naga is a city of 137,000 people, located on the southern end of the island of Luzon. The project was an extension of an initial e-governance programme that had made all city government functions accessible via the internet.
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This e-governance programme in itself was the result of an evolution from an earlier innovation, the Naga City Citizens Charter, a guidebook on key city government services, which explained how citizens could access various local government services. Every household in Naga is provided copy of the guidebook which lists 120 services provided by the city government, the steps to take to avail a particular service, the name and contract details of the public official in charge and the estimated response time for every service delivery. In 1995, Naga City enacted the Empowerment Ordinance which institutionalized the peoples role in local government with the creation of the Naga City Peoples Council, a body with representatives from over 100 non-governmental and community based organisations. The Peoples Council representatives sit in all the local special bodies and committees and participate in decision-making, development of policies, project implementation, monitoring and evaluation. Many private sector representatives are also key members of these local special bodies. Nagas current economic growth rate is one of the fastest in the whole country, standing at about 6.5% per annum. The I-Governance project took the use of ICT for governance to new heights, implementing a comprehensive programme including the Cyberschool initiative, Cyberbarangay (Cyber Village) and TxtNaga, which allowed citizens to use a mobile text messaging facility to submit complaints to the local authority. In terms youth access, 220 internet-ready computers were installed in 24 public elementary schools across the city. The project is an effective public-private partnership between the City Government of Naga, a private sector agency called SMART Telecommunications, the Department of Education. The impact of the project has been stark in terms of reducing costs of local governance. Whereas the national average cost for constructing one kilometer of road stands at P6 P7 million (USD $111,000 - $129,500), transparent procurement processes in Naga have brought down their costs to only P4 million (USD $74,000). Drugs procured by Naga are 20% - 70% lower that the average price quoted by other local governments. In a country where the World Bank has estimated losses of over $48 billion US dollars to corruption over the last 20 years, Nagas achievements are amazing. The project provided the hardware, software and training en masse to ensure optimum participation and inclusiveness. Within a period of six months in 2004, the number of people using the city website to conduct various transactions or submission of complaints expanded from just under 100 people per day to 1,300 people per day. As a result of the success of the project, the city government partnered with the World Bank to expand the I-Governance programme through wireless technology to schools and villages in 5 mountain villages that presently are not connected with telephone lines. There will also be the creation of a virtual market in the implementation of a Barangay (Village) Agricultural Information
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and Marketing System which is to provide farmers in mountain villages with the necessary information regarding prevailing prices and fluctuations in the commodity market, through the internet. The I-Governance Training Centre, referred to as I-link, has seen over 300 and 50 teachers pass through its doors, including hundreds of other community members. The training involves varying levels of skills and competencies, including the training of other community level trainers. Replication of the I-Governance programme was so successful, the Asia Foundation, the Ayala Foundation as well as the Union of Local Authorities in the Philippines have invested in the further expansion of this modality. Replication has occurred thus far in 14 other towns within the immediate vicinity of Naga. The Naga City I-Governance programme was awarded the United Nations Public Service Award for Local e-Governance in 2004. For further information, please contact Mr. Reuel Oliver, Coordinator of the IGovernance Project c/o City Government of Naga, J. Miranda, Avenue, 4400 Naga City, Philippines. Tel: 63-54-473 2240; Fax: 63-54-473 2055; Email: mayor@naga. gov.ph; Website: www.naga.gov.ph.
Part C - The Young Leadership Award for Good Urban Governance

1. Environmental Protection with Increase in Incomes Sumaira Gul, Rawalpindi, Pakistan (2002)
Sumairas Young Leadership project linked urban poverty alleviation to environmental issues. Utilizing micro-credit methodologies and collective action on the part of Rawalpindi rickshaw drivers, she worked with them towards increasing incomes while at the same time developing sustainable systems of transportation. Rickshaw drivers in many Asia Pacific cities are not employees but small business holders who own their rickshaws. As such, they are an integral segment of the urban informal sector. Rickshaws generally cost in the region of two thousand US dollars per vehicle, which meant that many drivers were already in debt and could not afford conversions to CNG-driven vehicles. On average, the rickshaws in Rawalpindi were twenty to thirty years old, with the drivers working up to twelve hours daily. In Rawalpindi, rickshaw drivers were paying Rs 2.5 (USD $0.42) for every kilometer traveled on petrol, and only Rs 1 (USD $0.02) per kilometer using compressed natural gas (CNG). However, the drivers faced significant challenges in making the modifications including: i. The costs associated with installing the gas-kits; ii. The fact that the gas-kits weighed approximately 10 kilograms, which compromised the weight capacity of the rickshaws;
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iii. iv.
That the gas-kit fitted rickshaws could not negotiate hilly areas as well as the petroleum versions; And that the gas-kit rickshaws could not be driven as fast as the petroleumbased rickshaws.
Given that Rawalpindi was largely flatlands and that the modifications were within reasonable limits in terms of the weight and space required, the primary challenge remained financial constraints. Rickshaw owners using petroleum earned an average of 4 US dollars per day, while the converted vehicles allowed earnings of up to 6 US dollars per day. Through the efforts of Sumaira and the Al-falah Development Organisation (ADO), a local non-governmental body, a credit programme for rickshaw drivers was launched. Once purchase and installation was enabled, the next hurdle was refueling stations. This created a local demand that was met by people living within the locality with access to more capital via ADO, generating greater gas supply which in turn encouraged more rickshaw drivers to make the conversion to gas-kits. The growth of this small-scale localized economy was then faced with administrative restrictions by the local authority. Sumaira and ADO mobilized the rickshaw drivers to engage in constructive negotiations which resulted in a regular dialogue. Gasemission tests on the gas-kits proved the direct benefits of the conversion, resulting in Rawalpindis local administration lifting all restrictions on gas-kit converted rickshaws. The local administration grew to not only remove the restrictions, but support the initiative as an effective poverty alleviation methodology. The original target of Sumairas one year initiative was to help 100 out of a total 5,500 rickshaw drivers active in the city adapt their vehicles with the gas-kits. The programme drew so much of enthusiasm and conviction to the benefits of conversion to gas-kits that by the end of the project period, over 1,500 rickshaws, had accessed credit to enable the change. The key factor to the success of Sumairas Young Leadership project was the extent to which it invigorated the local economy. Each and every component of the project successfully tapped into existing private sector services and adapted these for the specific needs of the project. For example, after the initial provision of small loans to the rickshaw drivers by ADO, the financial sector eventually adapted to the potential of this new market and began providing similar loans to the drivers. The various intersecting relationships involved in the growth of the project became in themselves sustainable. This occurred in loan provision, establishing of gas stations, rickshaw modification, gas-kits parts assembly, sales, distribution and production. Gas-kit fitted rickshaws can now re-fuel in any part of the city, and the success of the project has resulted in Lahore and Peshawar to replicate the initiative. The up-scaling happened on a self-help basis, and was not promoted nor subsidized by any agency. In collaboration with the UNDP Country Office, Sumaira and the rickshaw drivers met with the Secretary of the Senate of Pakistan. He was informed of the fact
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that there are approximately 250,000 rickshaws in operation across the country. A petition was lodged requesting the national legalization of conversions to gaskits, contributing to increased incomes among the rickshaw drivers while at the same time reducing pollution in the cities. There were also savings to be made for consumers who could now travel at cheaper rates. Similar representations were made to the national Minister for the Environment. In March, 2004, the Environmental Protection Agency in Peshawar announced the official sanctioning of CNG- and LPG-driven rickshaws. For further information, please contact Mrs. Sumaira Gul, Chairperson, Al-falah Development Organisation, ZA-256, St. #27, Mazharabad, Rawalpindi, Pakistan. Tel: 92-51-5541 791.
2. Community-based Technical Assistance to Urban Poor Communities in the Philippines Geraldine Matabang, Philippines (2002)
This project focused upon the importance of economic and social factors in determining security of tenure. It linked housing to the ability of the urban poor to retain employment or create job opportunities, while at the same time providing opportunities to build their skill base in the construction of housing. In 1992, the Philippines had the largest informal settler population in all of South East Asia. The number of people living in informal settlements within Metro Manila alone was estimated to be 2.4 million, which was equivalent to a staggering 33% of Manilas total population of 7.3 million people. In 2002, the Housing and Urban Development Coordinating Council, the primary national housing agency in the Philippines, built an average of 338,859 housing units within the Metro Manila area. The annual demand was estimated at 420,000 units, with an additional 889,325 units already in backlog. By 2005, it was projected that this backlog would reach 3.6 million. The objectives of the project were to develop a standard approach to community based assistance for the urban poor that involved planning and implementing housing development programmes with the assistance of students undertaking professional studies from the universities as well as local government officials. The project introduced affordable housing options to the poor, and used a holistic approach that addressed income generation, community support, local asset management and community ownership of the process. The project implemented a systematic approach to providing technical assistance to communities. Beginning with selection of the target community, the implementing agency (in all case, a community-based organisation named Maugma-Ako Inc.) then conducts research and investigations into the area. This is followed by processes that induct the community into participatory methodologies, communal integration, awareness building and commitment to the project outcomes.
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Once the community has been mobilized, planning workshops are held to map the geographic and infrastructural characteristics of the area to be developed. An assessment is also made of the scope and depth of technical assistance required for that project. A socio-economic survey helps the community match their goals of a minimum standard of housing required with the resources and capacities available within the community to achieve those goals. The output of this process of community action planning were development plans and regulations pertaining their housing development project. An example of some of the development regulations constructed through this participatory community action planning process includes the following: i. The owner of a particular house and lot shall either be the key breadwinner (regardless of gender) or jointly owned by the couple; ii. Beneficiaries of the development project would be all of the current residents who would hold ownership for a minimum of 6 months to one year. iii. The house and lot cannot be sold or rented out by the owner within this period. iv. The house structure shall be limited to two stories, and the back area shall be left as an open space. v. Other communal open spaces within this development project shall include a multipurpose community hall, day-care centre, chapel, playground, basketball court, plaza, right of way for trucks and ambulances, drains, water and power lines. vi. Open spaces shall be jointly owned and maintained by the community. Some of the lessons learned from the project included the fact that professionals such as architects and planners need to have advocacy and teaching skills in addition to their core competencies, if their skills were to be of genuine use to the community. Good design was also re-interpreted to include such criteria as accessibility, inclusiveness and affordability, expanding the normal assumptions that attractiveness and safety were all that mattered. For further information, please contact Ms. Geraldine R. Matabang, Member, c/o TAO-Pilipinas, Inc., 29-A Matimtiman Street, Teachers Village East, Diliman, Quezon City 1100, Philippines. Tel: 63-2-926 9504; Fax: 63-2-926 9504; E-mail: ging_matabang@yahoo.com/tao_phil@yahoo.com.
3. Participatory Poverty Identification and Mapping in Kota Bandar Lampung Evi Hermirasari, Indonesia (2002)
Bandar Lampung, located on the southern end of the island of Sumatera, had a poverty rate in the year 2000 that registered at 50% of the citys 750,000 inhabitants. Various poverty alleviation projects previously implemented by the local authority, which perceived the poor as simple recipients of aid, failed to significantly address the problem. This participatory poverty mapping project used a different approach which involved 23,400 urban poor households (37% of the total poor households within the city) as full stakeholders to the poverty alleviation programme.
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Community level processes were held to select volunteers that facilitated a process of local level assessments concerning available infrastructure, services, resources and prevalent economic activities. Within this analysis, sections of the community that were defined as being poor were identified based upon a set of criteria that was collectively developed. A more detailed questionnaire was then added to this process in order to enable an in-depth study of the living and working conditions of the urban poor. This data was collated and fed into the citys existing GIS (geographical information system). Success factors for this project include a commitment to pure volunteerism at the local level, as the facilitators did not receive any monetary compensation. By removing financial incentives, the project ensured that mobilization was based on set of higher motives, enabling genuine cooperation and preventing the creation of hierarchies and patronage systems. The project generated over 600 volunteers who organized and mobilized at the community level in implementing the project. A total of 470 USD was spent on training all these volunteers, with the communities providing food and training venues. 36% of the volunteers were women, 20% had only primary school level education, while another 20% were university graduates. 4% of the volunteers were unemployed, 30% were self-employed whilst another 30% were homemakers. The project utilized the Poverty Wealth Ranking (PWR) methodology developed by the Small Enterprise Foundation (SEF) of South Africa. PWR is a tool used to identify the relative socio-economic conditions of households within a particular community. The participatory nature of the project in identifying households as poor enabled the local government to channel assistance at the community level in a more effective way. The participation of the local government in the implementation of the project in turn had benefits as the communities saw the government officials actively facilitating a process of understanding and consensus, changing the original perceptions of local governments being aloof and uninvolved, which had been prevalent before. An Asian Development Bank-funded poverty alleviation initiative entitled the Neighbourhood Urban Slum Settlement Project subsequently utilized the data generated by this project to channel support and assistance more accurately within the community. The data was also utilized by local level government agencies dealing with poverty as the basis upon which their work was targeted and implemented. A system involving the local government officials was created so that data collected through this process continued to be fed periodically into the citys data base. One of the key benefits of utilizing participatory methods in mapping poverty arising from this project involved the sense of ownership and sustainability of poverty alleviation measures within the community. The project also steered clear of using financial incentives as a method of mobilizing communities or the vounteer facilitators, preventing the development of patronage systems within societies that had suffered from systemic corruption for decades.
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The success of the initiative has resulted in additional support from the Asian Development Bank, and is currently being replicated in ten other districts in Indonesia. For further information, please contact Ms. Evi Hermirasari, c/o The Urban and Regional Development Institute (URDI), 5th fl. Wisma Bhakti, Mulya, Jalan Kramat Raya No. 160, Jakarta, Indonesia. Tel: 66-21-391 8485; Fax: 66-21-391 6095; Email: evi@urdi.org / hermirasari@yahoo.com.
4. National Dialogue of Urban Poor Communities on the Informal Economic Sector Ruhan Shahrir, Malaysia (2002)
The most important lesson that emerged from TUGIs Award projects was in fact the result of this one uncompleted project. Ruhan Shahrirs proposal to organize the Malaysian informal sector into an effective advocacy lobby for improved conditions for the urban poor was an ambitious initiative. In a country where trade unionism within the formal sector hovered at just below 10% of the total number of employed in the country, labour advocacy was a rare skill. The lesson learned was that young people often have wonderful ideas and great initiative, but this needs to be channeled through support organisations that have the skills, contacts, experience and political clout to open the doors and back the initiative with the integrity won over years of impact within the issue. Ruhans project was the only project that was not attached to an organisation or agency that was already working in the issue area. The organisation that did provide the space and opportunity for him to undertake the programme allowed him all the space and independence to implement his innovative idea, but the obstacles that arose in the process proved too large to overcome. The existence of an already organized informal sector would have gone a long way to aiding the projects implementation, but even the forms of organisations which existed were not rights-based nor did they have any experience in handling effective advocacy or lobbying for the informal sector. The experience of local informal vendors in negotiating better working and living conditions in the country was greatly based upon political systems of support and patronage, largely divided by race, which sustained the sector in their most challenging moments. In general, local governments had also progressed to a level where informal economic activity was effectively and efficiently organized within the night-market system or within designated areas for vendoring. Against this backdrop, Ruhans proposal to accumulate the voice of the unorganized sector towards creating a useful dialogue between the urban poor, local governments, the private sector and other relevant stakeholders, proved too ambitious. The process of forming effective representation for achieving comprehensive pro-poor policies was an objective that was too far removed from current objective realities. Mid-way through the implementation period, the challenges became clear and Ruhan communicated his desire to discontinue the project. Much of the work done in this
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initial period involved assessing the situation of urban poor informal workers within the food vending industry. Their demands were documented and data collated regarding working conditions. Some initial discussions were held on developing a joint statement with collective demands for urban poor informal workers, to be presented to the respective local governments within whose areas their activities were carried out. The primary obstacle was the difficulties faced in bringing informal workers from five different cities and towns across the country, together to meet and discuss their joint demands. The effect on their income generation activities was significant enough to deter involvement. There was also added complications from existing allegiances to political parties that had created systems of interdependency between political and economic agendas. This was an additional key factor in bridging the communication gap across races, given the racial basis upon which politics was structured in the country. TUGIs lesson learned was to ensure that innovation and initiative is supported by experience and organizational capacity, in order to be able to achieve that which is aspired. For further information, please contact Ruhan Shahrir, 52C, Jalan Kemuja, Bangsar Utama, 59000 Kuala Lumpur, Malaysia. Tel: 6019 3048524; E-mail: tshirtpagoda@yahoo.com; watakgiu@hotmail.com.
5. Dari Nuk Sudarsih: Building capacities of Poor Communities in the Urban Informal Health Sector, Indonesia (2003)
This Young Leadership project focused on training women from urban poor communities with the skills and knowledge to conduct basic acupressure, disseminate knowledge of locally available herbs and encourage the practice of general health-promoting behaviour. The aim of this training was to counter the negative impact of high costs and inaccessibility to existing health services, leading to a general low level of health and quality of life amongst urban poor women. The project included a national dialogue with policy makers on the issue of health in the urban informal sector, which discussed the importance of micro-credit based savings schemes, employment generation and health as a social service. The projects success resulted in the Indonesian Department of Health adopting the training modules and methodologies for replication nationwide. Adequate funds and resource allocations to achieve this up-scaling was also ensured through an agreement signed between the implementing agency, the Association of Alternative Healing Developers (Kembangpala), and the Department, in order to expand the scope of implementation. The training programme involved a fifty-hour course that covered acupressure, herbal medicines and healthy lifestyles. The training included a substantial practical
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component, in order to accommodate adult learning needs. Inclusive in the training was knowledge on the cultivation and production of home remedies and herbs as well as associated income generation ideas for urban poor women. This 6-month training programme reached out to over 300 urban poor women, and the success of the project was apparent enough for the Department of Health in Indonesia to adopt the idea and expand it throughout Java and other islands in the archipelago. For further information, please contact Ms. Dari Nuk Sudarsih, Association of Alternative Healing Developers (Kembangpala), Jl. Belimbing Raya, No. 268, Depok I, Depok 16432, INDONESIA. Tel: 62-21-7776168; Fax: 62-21-7776169; kembangpala@centrin.net.id.
6. Mohammad Ali Hossain - Apprentice Program for Urban Poverty Reduction, Mymensingh, Bangladesh (2003)
With his Young Leadership Award, Mohammad Ali Hossain conducted a comprehensive training programme for urban poor adolescents aged 14-17 years that focused on skills up-gradation for income generation in the informal economy. Ali was a municipal officer who had previously been employed under UN-Habitat and UNDP related projects in Bangladesh. His TUGI Young Leadership project targeted 100 urban poor youth who lived within Mymensingh Municipality, a small town covered by the Bangladesh Municipal Development Fund, an agency set up by the World Bank to assist the development of local governance. The training was aimed at improving the access of urban poor youth to skills and services, including entrepreneurship, basic accounting and where necessary, literacy. The project based the training development upon a needs assessment of the target sector. The youth were provided training in 11 areas of skill including basic human rights, health care, entrepreneurial training, household machinery, savings schemes, legal aid, driving, basic electrical training, cottage industries, construction and child care. At the end of the project implementation period of less than a year, Ali successfully obtained the commitment from Mymensingh Municipality to continue up-scaling this training programme for urban poor youth through the local government. Ali completed the skills training for 50 young women and 50 young men respectively, with follow up activities conducted to monitor income generation capacities and self-employment sustainability over a longer term, in cooperation with the municipal authorities. For further information, please contact Mohammad Ali Hossain, c/o Basiruddin Mollah, H/N-166 (4th Floor) Avenue 4, Block E, Section 11, Mirpur, Dhaka 1216, Bangladesh. Tel: 880-2-801 2792; E-mail: mohammadalihossain2003@yahoo.com.
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7. Syed Arif Haider: Study of the Urban Poverty Alleviation Model in Bangladesh (2003)
This study project took a small cross section of 1600 families within the Bogra Municipality of Bangladesh, to assess the impact and benefits of the participatory approach used within the USD $20 million dollar Local Partnerships for Urban Poverty Alleviation Project (LPUPAP). The LPUPAP project was implemented in 7 municipalities in Bangladesh, over a 7-year period beginning in 2000. Funded by UNDP with technical support from UNHABITAT, the LPUPAP project affected over 360,000 people in 400 communities, aiming to alleviate poverty through an empowerment and capacity building process facilitated by the local government. LPUPAP funds were directed towards addressing access to community development funds, improving basic services and establishing sustainable systems of service delivery. Community action plans, community contracting, micro-business development and employment-related training and education were integral components of LPUPAP. TUGIs Young Leadership project holder, Syed Arif Haider, focused his study on assessing the effectiveness of the participatory methodology of the LPUPAP project. In other words, he aimed to conduct a process evaluation of the larger LPUPAP project. Within the LPUPAP project population, the smallest units were referred to as Community Development Committees (CDC), which invariably consisted of between 15-25 families. Women were the leaders in 85% of these CDCs. Development projects within LPUPAP focused on the provision of latrines, tube wells, footpaths and drainage. Parallel to the physical infrastructure was the building of community capacities for health awareness, solid waste management, environmental management, participatory poverty mapping and local level asset management. Syed Arif Haiders assessment of the benefit and impact of LPUPAPs participatory methodologies resulted in a recognition of the following facts: i. The communal improvements that were based on participatory processes empowered individual families with the experience to initiate further improvements both at the family and community levels, beyond the scope of the intended outcomes of the project; A sense of social mobility was created through the provision of communal services such as sanitation, whereby families experienced improved health and social status. This then lead to other opportunities such as the identification of suitable marriage partners, further increasing the familys access-to-resource base; The high rate of participation of women within the implementation of the LPUPAP project, especially in the leadership positions of the Community Development Committees, lead to improved social recognition of their inherent capacities, skills and knowledge as agents for positive social change;
ii.
iii.
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iv.
The increased recognition of the importance and benefit of womens involvement in poverty alleviation lead to a general increase in womens access to decision making in the control and allocation of local resources; v. There was a general increase in the creation of job opportunities and small business ventures, with a high level of participation by women; vi. Increased attendance of children at schools, and an increased allocation of the portion of family incomes that are put towards childrens education; vii. Increased use of local health facilities; viii. Increased level of participation of the urban poor in local governance processes including development planning and allocation of resources, and a positive impact on the regulations and policies emerging from such processes which indicate a higher level of pro-poor concessions; ix. Increased security of tenure. The participatory methodologies implemented within the LPUPAP project framework exposed the fact that the urban poor have great capacity to solve many of the structural and systemic problems that they are faced with. They have enough skills at the local level to engage and implement small-scale construction projects, which in turn have the potential to significantly increase their quality of life. The networks created at the communal level through LPUPAPs special focus on empowerment and participation has created sustainable social systems for on-going employment and the further enhancement of community based improvements, beyond the scope of the original project. A final and integral benefit of the emphasis on participation has been the linkages built between the community based organisations and the local government, creating a critical leverage for change that was previously prevented by hostile relations between the two. For further information, please contact Mr. Syed Arif Haider, Mobile: 88-017 1709552; E-mail: arifshaider@yahoo.com.
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The Informal Sector in Sri Lanka A Study by the SEVANATHA Urban Resource Centre, Sri Lanka
Unlike the other awards, this study was commissioned in order to complete the array of options being presented to local governments on the ways in which local economies can be supported through enabling the informal sector. Specifically, the research explored the manner in which the informal economy contributed to the formal economy, especially in terms of employment generation within solid waste management. The study looked into the nature of informal sector involvement in urban waste management, the creation and quality of employment and the evidences to support the necessary changes in policies and procedures of municipal solid waste management that would positively impact on the lives of urban informal sector workers. There are about 35,000 people employed in the informal sector in Sri Lanka. A recent study carried out in 2001 revealed that 84% of the urban poor of Colombo City are working in activities associated with the informal economy, contributing to approximately 40% of the total Sri Lankan GDP (Gross Domestic Product). The study covered 6 municipalities with a cumulative land area of over 12,350 acres, a population of over 400,000 and more than 60 low income settlements. Women played a significant role in most of these informal sector activities, and this has had a great impact as well as particular implications for the active informal work force in Sri Lanka. There is also an increasing trend in the involvement of children1 in informal economic activities. The management of solid waste is one of the essential services of municipal bodies, involving the daily cleaning, collection, transportation, processing and disposal of solid waste. Proper discharge of this service is essential to public health and a clean environment. Urban local authorities are now recognizing the limitations of their technical and managerial solutions to the problems of waste management. It is a fact that every city in Sri Lanka has two parallel systems of solid waste management. One is the formal sector, which involves community storage, collection of garbage, transportation and disposal that relies on conventional engineering systems. The other sector comprises urban poor individuals involved in informal solid waste recycling activities. The research study was carried out mostly based on secondary and primary data collected from the selected municipalities, which were located in the Western and Central Provinces in Sri Lanka. Primary data collection involved conducting field surveys and structured interviews with relevant stakeholders to identify the origins, characteristics and significance of the informal sector activities in solid waste management within the case study areas. The study highlighted factors that contributed to the fragility and vulnerability of informal workers livelihoods. These included the following; Seasonal problems (the rainy season hampers their work);
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Cheating by dealers and customers; Lack of raw materials; Increase in transport costs; No proper market for their products; Threat of eviction; No sufficient room / place for the business; Lack of credit facilities Lack of training and opportunities to expand skill base.
The research showed that the informal workers were marginalized in numerous ways. They were not integrated into the formal financial system, had little access to the legal, health and education systems and many did not enjoy basic municipal services such as electricity, clean water and sanitation. They were treated as lowerclass citizens with low social status within society. The informal workers that were interviewed in the study came up with the following suggestions for the future development of their solid waste management related micro-enterprises: The municipality needs to formulate a policy framework in order to recognize the informal workers and their activities in terms of their service provision to municipal solid waste management; The municipality needs to adopt a policy to recognize the contribution of the informal workers and their activities as a sustainable livelihood activity; Legislative amendments are needed to recognize and legalize these activities with strict conditions to ensure minimum public nuisance and interference; Provision of permanent sites for these informal workers to undertake their business activities, particularly in the main commercial strip where there is movement and concentration of people; Establishment of micro-credit facilities for the informal workers to access funds for investment purposes and business expansion; In terms of interacting with the informal workers, the municipality needs to adopt a friendly and participatory approach as opposed to the prevailing political patronage system in order to ensure good governance. The municipality needs to help link these people to relevant support structures like non-governmental organizations that can provide training in such things as how to handle the waste safely in order to avoid health hazards, and skills training to improve the quality of their products. For further information, please contact Mr. K. A. Jayaratne, President, SEVANATHA - Urban Resource Centre, No. 14 School Lane, Nawala, Rajagiriya, Sri Lanka. Tel: 94 - 11 - 2879710 / 4 - 404259; Fax: 94 - 11 - 2878893; E-mail: sevanata@sri.lanka. net / kajay@sri.lanka.net. _________________
Endnotes
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This fact has been confirmed by Shuaib, F. (2003) as follows: A significant proportion of children are also engaged in the informal sector. It has been estimated by an international study of the ILO that there are between 250,000 and 500,000 child labourers in Sri Lanka.
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Chapter 5 Legislation as a Method of Supporting the Informal Economy

by Alois A. Francis, Project Officer, Consultative Implementation and Monitoring Council, Papua New Guinea
Introduction
In Papua New Guinea (PNG), as in many developing countries in the world, the informal sector has a great potential to provide income and employment opportunities to the growing workforce. Yet, a lot of people, especially the youth, are not interested in any informal sector activities or other self-employment enterprises. Many prefer to work in the formal sector and even migrate to urban areas to look for jobs. Due to limited job opportunities only few are accommodated. As a result, unemployment goes unabated. Where 50% of the population is under 15 years, the shortfall in formal employment is certain to be serious in the foreseeable future unless people look for alternative sources of employment, which includes the informal sector. People are hesitant to join the informal sector due to the commonly held belief that it is a low profit sector that provides meager incomes which are barely enough to survive on. Also, the informal sector is generally perceived as a refuge of the poor, the illiterates or least educated, the unskilled and the undesirables. Anecdotal evidence suggests that not all informal sector participants are poor, illiterate and unskilled. A majority of them are engaged in desirable activities. Some are earning higher incomes than those working in the formal sector. Despite the challenges, many have been successful and are now running medium to big businesses or are engaged in financially rewarding endeavors. Many have improved their standards of living. Unfortunately, these successes and inspiring stories are seldom heard or simply ignored. Also, the importance of the informal sector to the overall development of PNG has not been fully appreciated. Consequently, the informal sector has continued to be unappealing and many have forgone the opportunity to have meaningful sources of livelihood. Given the negative attitude towards the informal sector, little support has been provided by the state and municipal bodies to encourage and stimulate its development. However, due to limited job opportunities in the formal sector, an increasing number of people are carrying out various economic activities informally, as an alternative source of income and employment. In many towns and cities, markets and streets are bustling with people selling all sorts of goods while in their houses many are
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producing handicrafts and artifacts for sale while some are offering repair and maintenance and other services. In rural areas, it is even more evident as subsistence farming undergoes rapid change with the introduction of various cash crops and the people aspiring to have access to more services and goods. The need for cash makes people more innovative and resourceful. Everyone is involved, one way or another, in the informal sector, some on a regular basis, such as mothers in markets, or when a special need arises, for instance when school fees will have to be paid. Even families of workers in the formal sector are involved in various informal sector activities to augment family income. Many consumers are turning to the informal sector to avail themselves of cheaper goods and services and to help them cope with the rising costs of living. It is highly likely that without the informal sector, the socio-economic pressures in PNG would be devastating and many would have been driven to destitution and revolt. Demographic and economic trends suggest that the informal sector will continue to expand in the foreseeable future. With a rapid population growth of about 3% per annum (2000 Census figures) and a high level of school leavers each year (approximately 80,000), aggravated by negative economic growth over the last couple of years (1998 - 2003), the formal sector does not have the capacity to create more job opportunities to absorb the growing workforce. Consequently, the burden of income and employment generation is certain to fall in the informal sector. In order to promote the informal sector in PNG, in 1998 the Informal Sector Committee (ISC) was established in collaboration with the private sector, civil society, and various relevant government agencies & departments. It was envisioned that the ISC would serve as the advisory arm on matters affecting the informal sector, in the absence of an organization that is specifically mandated to do so. The ISC comes under the auspices of the Consultative Implementation and Monitoring Council (CIMC), which is the main forum for dialogue between the Government, private sector and civil society. The Government endorsed the establishment of the CIMC and its 13 sectoral committees, including the Informal Sector Committee in 1998. From November 2000 to September 2001, the ISC carried out an Informal Sector Study in collaboration with the Asian Development Bank, UNDP and ILO, cofunded by the Government of PNG. The study was undertaken in two phases. Phase I involved the conduct of a diagnostic study to obtain an overview of the informal sector. From the Phase I study, six activities were recommended and were carried out in Phase II. These include the following: Activity 1: An opinion poll was conducted to get the views of the general public and local authority officers on the informal sector. It was revealed that the majority of the respondents embrace a positive attitude towards the informal sector although a few, mostly the well to do, harbour negative attitudes towards the informal sector which is viewed as causing litter problems and bad for the city/town image, foods being unhygienic and posing health risks, a breeding ground for
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petty crimes and not providing tax revenue to government both national and local. The Opinion Poll results clearly identified that there is a need to promote a vigorous media campaign to re-orient the negative attitude of the people as well as to reinforce the positive attitudes. The awareness campaign was subsequently conducted under Activity 6. A two-month long media campaign was undertaken to promote the informal sector through radio, television, local newspapers and posters. Activity 2: A Field survey was undertaken pertaining the urban informal sector to obtain general information on the informal sector which could be used by the government and other stakeholders in developing strategic interventions to support and stimulate informal sector development. The results of the survey reaffirmed that the informal sector is the main source of income for many households with a high rate of new entrants into the sector. A total of 17% of respondents stated that they had been into their small business for less than a year. No other sector of the economy can boast of such a growth rate at present. It was revealed however that the informal sector is neglected, with 95% of the respondents claiming to having received no assistance at all. Activity 3: Formulation of a proposal to introduce/strengthen a mechanism to provide legal aid to the informal sector in order to address problems of harassment and enhance the access to legal aid or services by participants of the informal sector. This would require sustained support from both the government and the private sector in order to be implemented. However, it will soon be implemented as the proposed legislation is before Parliament now (December 2003). Activity 4: Review and reform of legislation to encourage informal sector activities need to be undertaken. Restrictive laws against the activities of the informal sector have been identified and corresponding drafting instructions were prepared to amend restrictive laws at both national and local government levels. Many pieces of legislation have certain provisions, which legally prevent a number of informal activities from taking place, especially in the urban centres. This is discussed in detail below. Activity 5: Proposal to introduce or strengthen a mechanism to allow better representation of the informal sector within local governance to address the problem of lack of consultation and dialogue between local authorities and informal sector participants, especially in the formulation of laws and regulations. This will hopefully improve governance and assist in reducing confrontation, as has been experienced in major town centres over the last few years. The PNG Urban Local Level Government Association, which works in very close collaboration with the urban councils throughout the country, is working on promoting governance at the local level. The Association was engaged by the ISC to carry out work on drafting of the draft law. Upon passage of this legislation by Parliament, it will be tasked to draft a model urban local level government law for all urban local level governments in the country to help facilitate and promote the informal sector.
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Activity 6: Formulate a strategy design for an awareness raising campaign on the informal sector, especially on its importance and desirability towards national development.
Action Plan for Promoting and Protecting the Informal Sector

As a result of the above activities, the following specific action plan was recommended to government in order to remove obstacles to informal sector development in both urban and rural areas. It was jointly implemented by the Informal Sector Committee (ISC) of the CIMC and the Go-PNG/ADB Employment Oriented Skills Development Project from December 2001 to November 2002: 1.Introduction of legislative reforms, both at the national level (national laws) and local government level (urban and local level government council by-laws) to remove obstacles to informal sector development in PNG. It was proposed that a national law titled Informal Sector Control and Development Act be introduced and work begun with urban councils to review and amend accordingly their existing by-laws in order to harmonise them and make them more amenable to informal sector. There was intense consultation between Government agencies and civil society organizations as well as Informal Sector Groups, associations (vendors) to come up with a draft act. The Bill is currently before Parliament this month. Once the proposed Informal Sector Control and Development Act is passed by Parliament and becomes law, it will empower all urban and rural local level governments to enact relevant laws to help foster and promote the informal sector throughout Papua New Guinea. Some key features of the proposed Act are: The Informal Sector Development and Control Act is very comprehensive in that it caters for all stakeholders needs and provides for: The setting up of an Administering Authority to be made up of all relevant ward committees, Police, relevant government agencies responsible for public health and safety, physical planning and building, Sets out minimum standards for sale of food, cooked food, ice blocks and drinks, frozen fish and meat, live animals, betel nuts (a local narcotic delicacy), second hand clothing and second hand goods, and Sets out specific fine amounts for violators of each of these minimum standards Sets out provision for manufacture of goods to be carried out in residential areas only upon issuing license by the Administering Authority. Sets out provision for services providers in the informal sector to carry out their businesses in homes and residential areas and other areas prescribed and/or provided by the Administering Authority. Sets out provision for inspectors to visits sites and conduct investigations of items sold by vendors, etc. Sets out rules of conduct for mobile traders taking into account other existing relevant laws such as traffic laws, etc.
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2. Field survey of rural sector and a market survey to complement the urban field survey and to provide a comprehensive overview of the informal sector in PNG such that appropriate interventions could be developed to support the sector. This was carried out in 4 selected provinces (Central, Morobe, Western Highlands and East New Britain) from July to September 2002 and results were made available in early 2003. 3. A media campaign on the importance of the informal sector and other awareness activities to disseminate findings of the study and promote the informal sector was prepared and undertaken starting in August 2002 for 2 months with the slogan Support Informal Business: It is Everyones Business, in the local media. (newspapers, radio and television and through posters). Furthermore a workshop was held in August 2003 with journalists from all the media organizations in the country to get them to have a better appreciation of the informal sector so that they could help promote the informal sector in their reporting. 4. National Book Week Essay competition: The CIMC Secretariat approached the National Book Week Committee in order to conduct an essay competition on informal sector, as part of raising the awareness of students of the importance of the sector. The outward response has been positive. The essay competition is jointly sponsored by the National Book Week Committee, Consultative Implementation and Monitoring Council (CIMC) and the Go-PNG/ADB Employment Oriented Skills Development Project (EOSDP). This fell in line with the celebration of the 2002 National Book Week in August 2002. 5. Documentation of success stories\Experiences of successful informal sector entrepreneurs is ongoing. As part of the media strategy, the CIMC and EOSDP are currently at work collecting and documenting stories and experiences of informal sector entrepreneurs and those programs or projects assisting them. It is envisioned that these first-hand stories or experiences could provide a better understanding of the informal sector in PNG. It is further envisioned that it could provide useful information and valuable insights to policy makers, project implementers and other stakeholders on the impediments and requirements in developing and sustaining informal sector projects. Perhaps it could aid in designing future intervention strategies to stimulate the sector. 6. A study tour to other developing countries (one Asian and one Pacific-island country) to learn best practices and strategies to stimulate informal sector. A group led by the member for Social Welfare and Development and the Deputy City Manager of the National Capital District left during December 2003 for Thailand for a week long tour of the country. The general public is encouraged to support the Informal Sector Committee (ISC) and Employment Oriented Skills Development Project (EOSDP) in carrying out these various initiatives. A concerted effort by the government, stakeholders and the general public is imperative such that informal sector can flourish in PNG and benefit more people.
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Chapter 6 Understanding the Informal Economy and the Role of Civil Society in Indonesia by The Urban and Regional Institute, Indonesia.
Background
The informal economy1 has played a significant role in the urban economy of many developing countries, including those in the Asia Pacific region. It is particularly apparent that since the 1997 Asian economic crisis, many people working in the formal sector have become formally unemployed. As an example, various construction works were delayed and many workers were laid off. However, those formally unemployed subsisted by changing their ways to support their livelihood by working in the informal economy. Although in some Asian countries the economic crisis may have prevailed, in many other countries the crisis still continues. In reality the informal economy remains an important issue in most developing countries in Asia Pacific including Indonesia. While there may be differences in the accuracy of various statistic reports, one report shows that the employment rate of the urban informal economy in Indonesia reached 42.8% in 1997 and increased to 45.7% in 1998.2 Following Indonesias positive economic growth in 2001, the number of employment in the informal economy had decreased to 42 %. However, the informal economy remains a significant source for alternative job markets3, especially considering that the current economic growth-at 3 to 4% per annum-is still far from adequate in absorbing the unemployed or underemployed.4 The situation in urban centers tends to be more problematical because of the complex phenomenon of rural-urban migration and mobility (including circular migration) and the fact that migrants make up a significant portion of the urban informal economy. The urban informal economy is generally associated with illegality and disorderly situations. However, its potentials are actually very evident. The informal economy has not been appropriately and adequately dealt with by the government (at the national and municipal level), as well as by the civil society in general. Governments strategies are generally unclear or inconsistent in their effort to reduce poverty as the people economy remains poor and, in some cases, hazardous or even life threatening. The workers in the informal economy are also prone to exploitation by their employers (if they are not self-employed) or by their working or trading partners which often are formal enterprises as well as by local thugs or even local government officials operating informally. The communities as well as the formal private sector, which often are the users and beneficiaries of the informal economy, also generally do not pay enough attention on the lack of decent working environment in the informal economy.
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Some studies have indicated that the costs of doing business in informal economy could be more expensive than in the more formal one. Such conditions result in low productivity (despite long working hours) and even lower earnings. There have been a number of good practices by local governments as well as by civil society organizations in general, in supporting the improvement of working conditions in the urban informal economy. The Urban Governance Initiatives (TUGIs) recent symposium on informal economy in Colombo, Sri Lanka (December 2003) presented some good examples of assisting those working in the informal economy, which is parallel to addressing the problem of urban poverty. Yet there are many good practices in informal economy that have not been well identified, documented and disseminated. Such identification and documentation can furthermore become one of the bases for more appropriate intervention by local governments as well as by the civil society in general. While the ILO-URDI study is expected to provide sufficient information to the aforementioned project preparation on the roles of local governments in reducing decent work deficit in the informal economy, there is however one important feature still lacking in the current process: the identification and documentation of civil societys (communitys and formal private sectors) support to the informal economy. While some local governments provide financial assistancesuch as subsidized micro-creditsto the informal economy operators, their main role is actually to provide legal institutional support for the creation of more conducive or enabling environment for the informal economy operators to gradually improve their own working and living conditions. However local governments cannot work alone in such an undertaking: local civil society, the communities and the formal private sector also have some significant roles in creating the enabling environment, such as through NGOs assistance technical or other kindsfor the informal economy operators, development of formal-informal partnerships and the like.
Aim of the Study

The aim of this study is to document the experience of NGOs and the private sector in supporting the informal economy in Indonesia, and from these experiences draw important lessons learned or good practices that can be used for further dissemination.
Methodology
Because this study focuses on the experiences of NGOs and the private sector in building partnerships with the informal sector, a qualitative approach was chosen. Selective case studies of several NGOs and private companies were analyzed to understand the factors underlying the success of their partnerships with the informal sector. The data collected is mainly through the compilation of secondary data on the organization and programs of the NGOs and private sectors, and interviews with the major actors involved in the design and implementation of these programs.
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Scope of report
The activities in conducting this study consist of selection of institutions for case studies, data collection (interviews, secondary data review), analysis and report writing. There are several constraints in conducting this study. The first constraint concerns the limited time to select the appropriate institutions, collect data and conduct interviews with the respondents. Not all institutions are willing to assist our study. In addition, conducting interviews in such a short time schedule is very difficult, because most of the respondents already have a tight work schedule. The second constraint concerns the level of information willing to be disclosed by the institutions and private companies participating as case studies.
Understanding the Informal Economy

The informal sector is not exactly a sector as commonly understood in the formal terms such as agriculture, finance, or manufacturing sectors. Instead, informal activities exist in many economic sectors. Therefore the term informal economy has been increasingly used in the literature. The dichotomic view of formal vis--vis informal sector (herinafter referred to as the informal economy) has received criticism mainly because of the difficulty of drawing a clear boundary between them. The formal economy is usually seen as the largescale, capital intensive and wage-earning economy. On the other hand, the informal economy is seen as an economy composed of small scale, self-employed people that are often associated with unregularity and illegality. Some scholars argue that the informal economy is generally seen as an inferior alternative to formal sector employment in terms of earnings, security and protection from exploitation regarding labour standards (Losby et al 2002). Hernando de Soto (1989) characterizes informal economy activities as having legitimate ends for fulfilling basic needs and yet often using illegitimate means because some formal codes are disregarded. We need to look more carefully at the criteria for determining whether certain activities can be classified as formal or informal. Some of these criteria include administrative status (registered-unregistered, regulated-unregulated), legal status (legal-illegal), acceptance by shared norms (licit-illicit) and permanency (permanentnon permanent). In many developing countries, the economic actrivities have a mixed combination of these criteria. Certain economic activities might have clear domiciles, regularly paying certain taxes to the state for particular services, but are still considered to be informal by the state because of the absence of legal status. The strong linkages beween the informal and formal economies also contribute to the vagueness of its boundaries. There is a wide range of informal economy activities that can be grouped into the following sectors: trading, manufacturing, construction, transportation, agriculture and services.5 The informal activities in each sector can develop their own linkages with the formal economies. Home-based
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industries as an example may channel their products to formal business entities with or without formal contracts. Some formal commericial property owners allow informal food vendors to operate in designated areas within their premises (Figure 2-1a). In the trading sector, some informal sidewalk food-stalls (Figure 2-1b) or other small-enterprises are actually operated by a business enterprise that could not be regarded as small enterprise, and should have afforded to become a formal economic entity. Therefore, the formal-informal dualism of economic activities should be seen more as a continuum rather than as a dichotomy. Aside from the many theoretical uncertainties in defining what the informal economy really is, the problems as well as the potentials related to the informal economic activities are real, enormous and in many cases, clearly visible in most cities of the developing countries including Indonesia. Yet, many developing countries have not given the informal economy significant attention except as occasional indications under broad development policy statements. Some countries even consider informal economy activities as marginal or economic backwardness, and the growth of informal economy activities are only a temporary phenomenon that will diminish with the growth of economy. Government attitudes towards the informal economy vary, ranging from hostile attitudes by evicting and restricting the informal economy actors from conducting their business activities in the city, to accepting and accommodating them in the urban environment. In his research on the informal sector in the built urban environment, Perera (1994) argued that the informal economy should be supported not only with economic accommodation but in particular with physical accomodation in the urban builtenvironment. So far, credit and technical assistance in production methods, marketing skills and infrastructure facilities have been the main government intervention to support the informal economy.6 Lack of appropriate physical space for informal economy activities has caused the informal economy actors to create their own spaces in public or private spaces. Street hawkers occupying sidewalks and other public spaces are a common site in many cities of developing countries, and are considered a major problem by the municipal authorities. The reasons are mainly because these activities are considered an eyesore and are causing environmental pollution, health and safety hazards and traffic congestion. In Pereras opinion, the environmental and physical problems generated by the informal economy stem from the problem of lack of working space and environmental services. Therefore, providing permanent working spaces at suitable locations within the city would be necessary to improve the productivity and conditions of the informal economy. Amin (1991 as cited by Perera 1994:121) suggested three major themes to be considered by policy-makers to suport the informal economy: creating a desirable legal environment, creating a desirable institutional environment and creating a desirable work environment. De Soto (1989) proposed that the state remove institutional barriers that are hindering the efficieny of the informal economy. To create a desirable work environment requires a physical accommodation approach of the informal economy. According to Perera, an integrated approach to develop urban voids (unutilized or ill-used areas such as old railway depots, dilapidated neighbourhoods, or left-over waste land) could facilitate the informal economy. However, this approach should also include providing security of tenure to assure
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the long-term certainty for investment in the business actitivities of the informal economy, and reduce the risks of undesired removal.
The informal economy in Indonesia

The Jakarta Planning Board (Bappeda Jakarta 1991) identified several advantages of the informal economy that are related to urban management and governance. The informal economy is considered as a sensible solution to cope with the unemployment problem, in particular unskilled labour. With its ease to entry, the informal economy has become the main alternative for migrants from rural to urban areasespecially through their communal networksa process that helps ease economic tensions in rural areas. The informal economy also offers affordable goods and services to many urban inhabitants (who may or may not work in the formal economy). Studies have showed that more than 75% formal workers in Jakarta are using the services of the informal economy (such as food vendors, motor taxi, and informal settlements). Some studies have mentioned that street vendors and hawkers (which are commonly acknowledged as the main face of the informal economy) indeed play a significant role in the distribution of agricultural products, factories and household industries. Finally, the informal economy is actually one potential resource in generating local own revenue (Pendapatan Asli Daerah or PAD) for local governments, although local governments have generally overlooked such potential. In her book The Wheel of Fortune: the History of a Poor Community in Jakarta (1991), Jellinek describes Indonesias informal economy as able to secure communitys needs when the formal economy failed to provide services and goods. It operates as a safety valve at the time of economic crisis because of its ability to create job opportunities. The situation reflects the flexibility of the informal economy in supporting national economy and provides some basic necessities to the general public. However, in the same observation over a period of 15 years, she also witnessed how formal physical urban development could fundamentally destroy a cohesive community that had vibrantly lived from working in the informal economy. While the number of formal sector employment was estimated by the Central Bureau of Statistics (BPS) as 60 percent of the totalformal and informalemployment in 1999, a latest survey by the agency indicates that out of 89.7 million people employed in Indonesia, about 62 percent (55.6 million people) work in the informal economy. It also indicates that of the people working in the cities, nearly 40 percent work in the informal economy. Moreover, out of the estimated 97.6 million people employed and seeking employment (the total labor force), 8.2 million has been estimated by the agency as unemployed. However, due to the evidently high numbers of disguised unemployment and underemployment, some experts have estimated the unemployment figure at more than 40 million. The above figures show the importance of the informal economy in Indonesia, in particular since the economic crisis. Academics have suggested that the Indonesian government accommodate and support the informal economy by providing the
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necessary infrastructure. Their concern is that without sufficient support from the government, many actors of the informal economy would eventually become unemployed. At the national level the problems and needs of the informal economy have not received sufficient attention. Policies concerning the informal economy are fragmented amongst different institutions and amongst different levels of government. In addition the local policies on the informal economy are often inconsistent overtime. The Head of the Jakarta Urban Design Advisory Team (Tim Penasehat Arsitektur Kota, or TPAK), Danisworo, and several NGOs suggest that the problem of street vendors requires the intervention of the central government. The problem of the informal economy is complex because it involves dealing with poverty issues and urbanization, explained further in the section below.7 Programs to support the informal economy by the State Minister of Cooperatives and the Ministry of Social Welfare, such as extending credit to small enterprises and street vendors (pedagang kaki lima or PKL) have become less significant because of local government policies to regulate and evict the informal economy from urban areas. Although there have been programs to combine the development of informal settlements through a comprehensive approach, Tribina (physical infrastructure, social and economic development), there have been problems in providing longterm certainty to residents in informal settlements. As an example in some parts of Jakarta the pressure for urban land has caused some settlements to be demolished, even though they had already received the Kampung Improvement Program (KIP). The lack of land in desirable locations has been the main obstacle to accommodate the informal economy in urban areas. Most informal entrepreneurs cannot afford to rent formal business spaces and thus, occupy public places or simply occupy unutilized land without permission from the land owner. Some cities have designated certain areas for the informal economy. In Yogyakarta the municipal government decided to maintain the street vendors on Malioboro, the major street of the citys central business district. The municipality allocated a separate lane for informal para-transite modes and provided space along the pedestrian lane for the street vendors. In their view, the street vendors are an essential part of the street life. The vendors pay a special fee (referred to as pajak retribusi) to the municipal government, depending on the area of space they use. The Jakarta local government has designated areas for particular informal vendors such as the flower bouquet market, bird and fish market and food vending around major market areas and commercial districts around the city (Figure 2-2). The Jakarta government has allocated hundreds of locations for the informal economy. In 1996 there were about 247 locations for the informal economy.8 The government regulates the use and operating hours of these areas. Vendors operating in these locations must pay taxes to the local government, and are considered as legitimate street vendors (Kompas, 3 December 2002). Another example is the small-scale industrial village in East Jakarta, which was a pilot project for developing small-scale enterprises. The project is located
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in close proximity to the Pulo Gadung Industrial Estate. The area covers 44 hectares, part of the area were originally deteriorated kampung settlements. The developer is the Pulo Gadung Estate Development Company that was established by the Jakarta Metropolitan Government. The type of informal economy in this estate is manufacturing (garment, leather goods andfurniture). The developer provides the site, services and shelter (about 2,000 units from 36 m 2 to 48 m2 that could house 3 to 10 workers). The occupants pay a rent according to the size of the unit and a maintenance fee to use the common facilities. A study on the estates development by Zainuddin (1988 cited by Perera 1994) found that almost 75% of the informal entrepreneurs experienced upward mobility. However, 50% of the entrepreneurs could hardly make a net saving due to the high service fees. The number of locations to accommodate the demand of space by the informal entrepreneurs is insufficient, as the migration of rural villagers continues to grow in Jakarta. Forced evictions of street vendors and sellers (asongan) along busy streets are frequently conducted by the municipal security guards (pamongpraja) to maintain a clean and orderly environment.9 Considering the shortage of land to accommodate the informal economy and also the concern of the Peoples Regional Representative Council (DPRD) that there was insufficient space to accommodate the informal economy, the Jakarta local government issued Local Regulation Perda no. 2/2002 that regulates the use of private market places. According to this regulation, the private sector must allocate 10 to 20% of its effective commercial space for the informal economy. In 2003 the Governor issued a decree, SK Gubernur 44/2003 on Implementation Guidelines for Private Markets in Jakarta to complement Perda no. 2/2002. The Decree stipulates that the developer can only charge up to 75% of the normal service fee to the informal tenants. Although Indonesias economy has been improving, only a few of the many newly constructed shopping centres and malls conformed to Perda No. 2/2002. The regulation and decree proved to be difficult to implement. Furthermore, the Local Government of Jakarta has not imposed sanctions on those who have not complied with the regulation. The regulation, and in particular the Governors Decree received protests from the association of real estate developers, Real Estate Indonesia (REI) and other private associations. In their opinion, the regulation and decree are a burden to them because they have not fully recovered from the economit crisis. Developers believe that the informal economy would be unable to pay the service fees in the formal market place. REI also objected the policy-making mechanism as they were never invited by the Jakarta local government or the DPRD to discuss the regulation. According to REI there should be other alternatives in supporting the informal economy, among others by paying a compensation fee to the local government. However, this suggestion has been rejected by DPRD because in their opinion it would open opportunities for corruption amongst government officials (Sinar Harapan, 25 July 2003).10
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In June 2003, Real Estate Indonesia (REI), Asosisasi Pengelola Pusat Belanja Indonesia (Association of Shopping Centre Management Indonesia) and the Asosiasi Pengusaha Ritel Indonesia (Association of Retail Business Indonesia) filed a law suit against the Governors Decree no. 44/2003 on the grounds that the decree was not supportive towards the private sector. They argued that the decree restricts their rights to manage their property and can cause them to lose the trust of their investors (Kompas, 8 Januari 2004). In their law suit, they demanded that the Decree be removed and the support towards the informal economy be substituted by other means, such as by donating compensation funds or land. On April 21st, 2004 the Jakarta Administrative Court declared that the Decree be removed. However, the decision has been appealed by the Jakarta local government.
The role of civil society in Indonesia

There has been a worldwide trend of the growth of the numbers and influence of civil society organizations in development. This trend has also occured in Indonesia during the past two decades. Scholars have commented that the 1990s marked the beginning of the rise of Indonesias civil society, where various student networks and peasant movements supported by NGOs, initiated more open confrontation with the government. 11 There are a number of definitions of civil society. One definition from the London School of Economics (LSE) is that: Civil society refers to the set of institutions, organisations and behaviour situated between the state, the business world, and the family. Specifically, this includes voluntary and non-profit organisations of many different kinds, philanthropic institutions, social and political movements, other forms of social participation and engagement and the values and cultural patterns associated with them. While the LSE excludes the business community from their definition of civil society, within the United Nations context the phrase civil society has been a source of some controversy, as its meaning also includes businesses as well as private voluntary organisations. Examples of civil society institutions include nongovernmental organizations, private voluntary organizations, community-based organizations, human solidarity groups, professional associations, research institutions, academics, trade unions, women groups, youth groups, religious institutions, the media, cooperatives and foundations. Excluding the business community from civil society is quite problematic, because many charity groups and philanthropic institutions are often established by the business community. On the other hand, the role of civil society in the informal economy cannot be limited to the discussion of non-governmental organizations, because as the research will show, the private sector is also playing a major role in supporting the informal economy. The following sections elaborate the development of NGOs in Indonesia and government policies affecting their development. -
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The role of NGOs

Although there are many types of civil society organizations, the most visible sector of civil society and also widely studied are the groups known as the nongovernmental organizations (NGOs). The discussion of the role and the development of NGOs overtime will provide an illustration of how civil society assocations operate under the changing political conditions and government attitudes toward these associations. The term NGO can be literally translated in the Indonesian language as organisasi non-pemerintah, which gives the connotation of being opposed to the government. Therefore, the Indonesian government encouraged the term lembaga swadaya masyarakat (LSM), or self-reliant community institutions, and lembaga pengembangan swadaya masyarakat (LPSM), or institutions for developing community self-reliance. The term LSM was originally proposed by Mangunpranoto, an activist of Taman Siswa (an institution promoting education based in Yogyakarta) and former Minister of Education and Culture. The origins of LSMs in Indonesia can be traced from traditional co-operative associations, such as paguyuban and gotong-royong (mutual self-help), as early as the 1900s. Budi Utomo, a movement for spiritual and intellectual enlightment was founded in 1908 to promote a better understanding of Javanese culture. Their activities included establishing education programs, scholarships and co-operatives. Taman Siswa was founded by Ki Hadjar Dewantoro in 1921 to develop an education system based on realistic synthesis between Indonesian and Western culture. Another LSM is Rukun Tani (The Farmers Assocation) that grew from Persatuan Bangsa Indonesia (the Association for the Indonesian Nation) in the 1930s. Their activities included the farmers cooperative movement that emerged in the late 1950s.12
Models of NGOs
There are several categorizations of NGOs, but basically they are similar. Elliot (1987) distinguished NGOs based on three different approaches. The first is the welfare approach, which focus on fund-raising activities and delivers services to specific groups (famine relief, the poor, the disabled etc). They are not interested in community empowerment. The second is the developmental approach, which focus on supporting developmental projects. They tend to improve the capacity of local communities so they can provide for their own basic needs. The third approach is the empowerment approach. NGOs in this category see poverty as a result of a political process. Their goal is to train or empower communities to enter the political process. According to Elliot, most NGOs move along a spectrum from welfare, to developmental and finally empowerment. Mansour Fakihs (1996) study on civil society in Indonesia distinguished three types of NGOs. His classification is similar to Elliot (1987) and Korten (1990) shown in Table 2-1. The first type is the conformists, who tend to play safe and abide by the rules. Most of the programs are charity-based. The second type is the reformists that focus on increasing the productive activity of the poor, by providing training in entrepreneurship, management or particular skills (farming, handicraft), and also
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provide micro credit. This type is similar to Kortens second generation and Elliots developmental NGO. The third type is the transforming NGOs. They believe that poverty is a result of a political process and NGOs should help the marginalized communities in building their awareness and mobilizing them to challenge the structures that are causing their poverty. The third type is similar to Elliots empowerment model and Kortens third generation of NGOs.
Table 2-1 Comparison of NGO models Elliot (1986) Welfare Developmental Empowerment Korten (1990) First generation Second generation Third generation Fakih (1996) Conformist Reformist Transformist
Looking at the relationship between civil society and the Indonesian government, Eldridge (1995) distinguished four major paradigms of NGOs. The first model is described as the High-level cooperationgrassroots development. The NGOs in this category focus their efforts on small-scale programs at the village level and seek to enhance community participation into official development programs. These NGOs have no interest in intervening in the political process. The second model is the High-level politicsgrass roots mobilization. NGOs in this category participate in official development programs, but also act as a support base for advocacy at the policymaking level. Two examples are Lembaga Studi Pembangunan (LSP or Institution for Development Studies) and Lembaga Penelitian, Pendidikan dan Penerangan Ekonomi and Sosial or LP3ES (Institution for Research, Education, and Information on Economy and Social). The third model is described as the Empowerment from Below. They focus on building awareness of rights than on efforts to change policy, by building confidence and skills to enable people to conduct their own negotiation. Eldrige also notes that although these three models of NGOs differ in approaches, they share several basic goals that are to strengthen community groups and commit to ideals of popular participation in defining and implementing their programs. The fourth model is the radical critics. This group is characterized by the emergence of new groups and movements led by aggressive and youthful leaders. They are critical towards established NGOs that they consider to be centralistic, bureucratized and have lost their mission/vision in finding aternative models of development and building movements to represent the poor. Examples of this model include the Kedung Ombo movement and the student movements in the early 1990s. The above models are useful to understand how NGOs operate, but should not be used to limit their roles, because NGOs can shift between different roles and approaches depending on their capacity and the institutional, social and political context. Government attitudes towards NGOs in the New Order era (1966-1998)13 Until 1971, the government held a laissez-faire attitude towards NGOs. The Ministry of Social Affairs (Departemen Sosial) provided moral and institutional support, but did not intervene in the operational level of NGOs. Since then there
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have been new laws and regulations that seem to regulate and control the role of civil society. The Ministry of Home Affairs established the Directorate General of Village Development (Pembangunan Desa or Bangdes) in 1971, which took over the community development programs previously held by Depsos. Bangdes had limited understanding of community development. As an example the term swadaya (selfreliance) was adopted as the highest stage of village development (the other being swasembada or self-sufficiency and swakarya or self-development), which could be achieved if certain facilities were in place. This limited understanding led to conflicts with NGOs/LSMs. In 1973 the government also issued a regulation that required overseas NGOs to sign agreements with relevant government ministries before undertaking any negotiations within in Indonesia. The law required NGOs/LSMs to be registered with a notary as a foundation (yayasan) in order to become a legal body. In 1985 the government issued the Law on Social Organization (Undang-undang Organisasi Kemasyarakatan or Ormas). According to this law, all organizations must put the nations Five Principles, Pancasila in their objectives as the soul foundation for guiding their activities. The law also required organizations to report gatherings involving more than 50 people to the local authorities. The law caused controversy among many civil society organizations, particularly Moslem organizations. The law also gave the government the right to disband organizations whose activities were considered to be detrimental to the values of social harmony. Many NGOs were able to avoid abiding to the the law on their justification that the ORMAS acronym refers only to mass organisations (organisasi massa) that have membership. Todung Mulya Lubis, a lawyer and human rights activitist noted that NGOs reactions towards the Ormas Law could be divided into two groups: a) those that were cooperative and b) those that were non-cooperative and confronted the government.14 In his opinion, the Ormas Law was the New Orders attempt to dominate civil society. In the 1990s the Ministry of Home Affairs issued regulations and instructions to provincial and district authorities that they should acknowledge the role of NGOs/ LSMs in assisting peoples participation and self-reliance, and the NGOs status as mitra pembangunan (development friends or partners) of the government. This instruction required provincial governments to conduct an inventory of all NGOs in their area, which include membership, activities and foreign aid, as well as supervise their activities. This ambigious view towards NGOs was typical of government officials during that period. Foreign funding has been an issue that caused tension within the NGO community as well as between the government and NGOs. In the past, some political decisions on foreign aid had significant impact on NGOs. As an example, when the Indonesian government banned all aid from the Dutch government in 1992, many NGOs were forced to rethink their approaches to funding. Alternative sources to foreign funding include among others, government funding, private sponsors or donations, local income-generating programs, and support from the beneficiary communities (labour, material and participation in group decision-making). The
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government was also worried that NGOs access to the international community might increase international pressure for democracy and on Suhartos authoritarian rule (Hadiwinata 2004). Many academics noted that during the 1990s there was a growing tension between NGOs and the government. The positive relations developed during the 1980s seemed to deteriorate. Popular resistance began to grow and many political leaders felt threatened by the mobilization activities of NGOs, which in their opinion had become political. The economic crisis of 1997-1998, popularly referred to as krisis moneter or krismon, demonstrated the significance of NGOs in providing relief and support to the poor, as well as in assisting the government in the disbursement of the Jaringan Pengaman Sosial (social safety net) program during 1998-2000.
New opportunities in the post-Suharto era (1998-present)

In the post-Suharto era, regulations controlling and restricting organization activities such as the Ormas Law had been removed. New laws have been issued that seem to increase the role of civil society and opened up new opportunities. The Law no. 22/1999 on Regional Autonomy has allowed local governments to play a more important role by devoluting and decentralizing power previously held by the central government. The Law on Freedom of Public Speech guarantees freedom of expression and organization. Also the introduction of a new anti-coruption law ensures more accountability and transparency in public as well as private organizations. These changes have led to a significant increase in the number of NGOs. While there is no accurate data on the exact number of NGOs, the Indonesian Statistics Bureau report (BPS 2000) noted that the number of NGOs in Indonesia was about 70,000 in 2000, a significant increase from 10,000 NGOs in 1996. A significant problem with the high growth of NGOs is maintaining trust with donors. There are incidences when some overnight NGOs become engaged in fraud. One example is the fraud and corruption during the disbursement of social safety net funds that resulted in poor performance of the program, as well as criticism and protests by several NGOs in Jakarta, such as the Urban Poor Consortium. Eventually, the World Bank cancelled the second round of social safety nets for the poor. Therefore, maintaining accountability to the public and transparency in carrying out programs becomes a challenge for NGOs in this era. According to a study by PIRAC (2002) on philanthropy activities in Indonesia, an enabling factor for NGOs is the new provision for tax reduction on the social budget.15 During the New Order era, the government did not provide any incentives, such as tax deductions for non-profit sector development. According to Law no. 7/1993 all foundations that provided social services in the fields of religion, health, education and culture were eligible for tax exemption. However, Law no. 10 of 1994 stated that tax exemptions are restricted to grants, donation, gifts, inheritance and government subsidies.
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In the post-Suharto era, significant changes were made through Law no. 38/1999 on Zakat Fund Management and Law no. 17/2000 on the Third Revision of Law no. 7/1983 on Income Tax. Both laws asserted that zakat (Islamic donations for social purposes) is not a tax object and that zakat (from income) may reduce taxable income. Therefore, there are tax dispensations for income spent on social purposes. This means that there are better opportu nities for the private sector to be involved in philanthropy. PIRACs research identified four types of corporate participation in philanthropic giving in Indonesia: 1. Direct corporate involvement in social activities through its public affairs division. 2. Corporate involvement through the establishment of its own foundation 3. Involvement by a consortium where companies get involved in philanthropy by establishing or participating in a social organization. The company choses to support intermediary groups rather than operate social programs on their own. 4. Involvement of employee organisations where corporations in addition to consortium involvement) involve their employees in various social and humanitarian activities. General Electric (GE) through their GE Elfun Indonesia chapter, and Citibank through their Citibank PeKa Community Centre, have adopted this approach to support their social activities.
NGOs Support for the Informal Economy

This section discusses the programs of four NGOs in assisting the informal economy. Each NGO bears its own uniqueness in terms of their background, funding, programs, means and mechanisms of support to the informal economy. The NGOs discussed in this chapter are Bina Swadaya, Dompet Dhuafa Republika, Yayasan Mitra Usaha and Yayasan Dharma Bakti Parasahabat (YDBP). Yayasan Bina Swadaya was selected because they have succeeded in combining informal and formal economy activities in their programs. In terms of funding, Bina Swadaya has been successful in building a partnership between a formal financial institution and an informal financial institution through their Program Hubungan Bank dan Kelompok Swadaya (PHBK), or Self Sufficient Group and Bank Partnership Program. Dompet Dhuafa Foundation, was chosen because they have applied principles of good governance in implementing their social programs. Within a short period they have been able to gain the attention and support of the public, in particular the business community. Their funds originated from Islami methods of charity, zakat, infak and sadaqah. Yayasan Mitra Usaha has been successful in implementing an Indonesian version of the Grameen Bank model to support informal economy, particularly for women. Yayasan Dharma Bakti Parasahabat (YDBP) was selected because of their success in providing credit to street vendors, in particular, women without collateral. The data presented for each NGO consists of an overview of their organization, their basic philosophy and programs. The final section concludes the chapter with an analysis of the NGOs support of the informal economy.
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Yayasan Bina Swadaya

Yayasan Bina Swadaya was established in 1981, but its historical roots date back to the 1950s. During the 1950s Indonesia was hit by a wave of poverty and famine. However, the primary agenda of the elite was the general election and gaining a dominant position in the parliament. The political segregation in society only worsened the economic and social condition of the people, particularly the low economic groups such as farmers, fishermen, and labourers. This terrible condition drew the attention of several community leaders and youth activists to initiate a community service movement, which focused their activities on assisting vulnerable groups and poor people without being trapped in the ideological war that was going on between the political parties. The movement was known as Gerakan Pancasila, or the Pancasila Movement, which gained sympathy and the support of other organizations such as Ikatan Petani Pancasila (abbreviated IPP, or Pancasila Farmers Association), Ikatan Usahawan Pancasila (Pancasila Entrepreneur Association), Ikatan Paramedik Pancasila (Pancasila Paramedics Association), and Ikatan Nelayan Pancasila (Pancasila Fishers Association). The dynamics of this movement prompted several activists and members of the Pancasila Farmers Association (IPP) to establish a formal institution, Yayasan Sosial Tani Membangun (YSTM), or the Developing Farmers Social Foundation on May 24th 1967. The establishment of this foundation was necessary to support the effective implementation of certain activities within the Pancasila Farmers Association. In the long run this policy proved to be a strategic move because the goals of YSTM were the continuation of Pancasila Farmers Association objectives.16 The founders of YSTM were: Bambang Ismawan (at that time still a public servant at the Department of Water Resources), Ignatius Sajogo Soemoprawiro (an activisit of the Pancasila Farmers Association), Stefanus Oey Siok Hie and Antonius Suradiman (staff of the Department of Public Works). Over time the activities of YSTM expanded, and it was considered necessary to establish an operational agency to manage their various activities. The operational agency was called Badan Pengembangan Swadaya Masyarakat (Community Selfreliant Development Agency), or Bina Swadaya, which was founded on June 1st, 1981. In 1985 Bina Swadaya became a yayasan or foundation, Yayasan Bina Swadaya (YBS or the Self Reliant Development Foundation). Yayasan Bina Swadayas main mission is to empower poor communities so that they could free themselves from poverty. The teachings of Paolo Freire in Paedogogy of the Oppressed (1970) have inspired the activities of Bina Swadaya (Sularto 2003).17 According to Freire, building conscientization or consciousness (in Indonesian, penyadaran) is the first step towards empowerment. Self-reliance through collective social enterprise has become part of Bina Swadayas intervention in poverty alleviation. Community-based organizations are provided access to education, information, capital, raw materials and the formal market for their products. Bina Swadaya also believes that as an NGO they should be self-reliant and not dependant on donor funding, so their activities could become
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more sustainable. To generate income for their activities, Bina Swadaya decided to publish TRUBUS magazine (Figure 3-1). When Bina Swadaya began publishing Trubus in 1979, many NGOs criticised Bina Swadaya of being a business rather than an NGO. Bina Swadayas justification for publishing Trubus was to support their organization to become a self-reliant organization, so that they could conduct their own programs without being dependent on foreign or government aid (refer to Box 3-1). In addition, the magazine also served the needs of their target group (farmers) and the public for information and knowledge on agricultural development. The magazine proved to be a success and in 2001 Bina Swadaya established PT Trubus Swadaya, a company to publish Trubus magazine in a professional manner. Box 3-1 Bina Swadaya on Self-reliance and Business Bambang Ismawan is one of the founders and director of Yayasan Bina Swadaya. Ismawan encouraged the self-reliance of NGOs in Indonesia. Self-reliant fund raising was not popular amongst NGOs during the 1960s. Ismawans support for establishing the magazing Trubus grew from his concern that to provide continuous services to the community, their institution should be self-reliant and have a strong financial foundation, independent of donor aid. According to Ismawan when Bina Swadaya first published Trubus, many NGOs considered Bina Swadaya was no longer an NGO because they were involved in commercial activities. This view grew from the traditional understanding that NGOs were only incolved in social activities, which depended on donor institutions. Nowadays, the experience of Bina Swadaya has been replicated by many other NGOs. Ismawan asserts that Bina Swadaya is neither a profit-making organization nor a non-profit organization, but rather a not for profit making organization. Any profit they receive is not for the personal gain of its founders or shareholders, but rather for investment in new activities. About 90% of Bina Swadayas income comes from their own business, while 10% are supported by donors. Bina Swadayas involvement in commercial activities grew from the concept that their organization was not only playing a role in a social movement, but also in a social-economy movement. Their activities should be sustainable to assure that the target groups could become self-reliant and improve their social-economic welfare. Source: translated and summarized from Kemiskinan dan Kemandirian: Catatan Perjalanan dan Refleksi Bina Swadaya (Primahendra, Nggao and Martono, 2003: 19). Long before the concept of social entrepreneurship was coined, Yayasan Bina Swadaya was already promoting income-generating projects (IGPs) to support the social activities of community-based organizations. Bina Swadaya changed
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the pattern of DonorGrantee relation into one of partnership. Funding agencies were seen as working partners instead of patron. PT Trubus Swadaya is one of the business units of Bina Swadaya that support activities to increase community empowerment. Other companies formed under Bina Swadaya are the Pusat Pelayanan Keuangan Mikro (PPKM) or Micro Finance Service Center; Pusat Pendidikan dan Latihan (Pusdiklat) or Training and Education Center (the campus referred to as Wisma Hijau or the Green Residence); PT Pustaka Pembangunan Swadaya Nusantara (part of Trubus Group), a publishing company that focuses on books about agriculture and farming techniques; Bina Swadaya Tours, a company formed to provide alteranative tourism such as plantation tours and mountain hiking; PT Niaga Swadaya, a company to handle the marketing of all Bina Swadayas programs; and the Unit Aksi Kemanusiaan or Humanity Action Unit.18 Currently Bina Swadaya manages 23 representative offices in various cities throughout Indonesia such as: Lampung, Metro Lampung, Bogor-Bekasi, DKI Jakarta, Indramayu, Bandung, Garut, Pekalongan, Boyolali, Magelang, Kebumen, Klaten, Yogyakarta, Banyuwangi, Lamongan, Ngawi, Kupang, Kolonuhu, Wamena, Takalar and Pangkaraya. Bina Swadaya also arranged partnerships with several local NGOs to conduct training and humanity activities.
Bina Swadayas approach to poverty alleviation

Bina Swadayas approach to poverty alleviation adopts a holistic approach, which involves several components that are the foundations for Bina Swadayas programs: institutional building, acess, welfare, consciousness and political participation. These are described below. Institutional buiding involves the social structure and system that plays a role in shaping the livelihood of society. For the poor, it is important to form groups because it is almost impossible to survive on their own. Through the group activities they are able to build integrity and synergy to achieve greater things. The establishment of Kelompok Swadaya Masyarakat (KSM or Community Selfreliant Groups) is the basis of learning and solving problems together, as well as the structure for interacting with the business community, financial institutions and government. Access is important because it is very obvious that in many developing countries, the poor are denied formal access to credit, information and the market because they have no legal status, no collateral, limited knowledge and capacity to enter the formal market. The oligopolistic or monopolistic nature of the market can also place constraints on the poors access to the market. The poor are forced to use informal micro financial institutions, such as tengkulak or rentenir (the local phrase for informal money-lender) that often charge interest fees much higher than formal financial institutions. Access to information has also placed the poor in a vulnerable position because they become easily exploited by those who have more knowledge of a particular situation and its opportunities.
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Welfare can be achieved by the poor if their basic needs are fulfilled. This depends on the governments role in providing adequate social security and the poors own ability todevelop productive economic activities. Bina Swadaya tries to support the micro business by providing technical assistance and social security through the self-reliant community groups or KSM (Kelompok Swadaya Masyarakat), which will be explained futher in this chapter. Consciousness or conscientization is aimed at building the critical awareness of the poor so they are able to identify the root of their own problems and come up with alternative solutions to deal with their problems.19 Political participation is the condition where the poor are able to influence public policies that have a huge impact on their livelihood. To realize full political participation, Bina Swadaya believes in the process of self mobilization as the ideal form of political participation.20
Bina Swadaya Programs

There are several programs organized by Bina Swadaya to support the empowerment of the poor and vulnerable groups throughout Indonesia. These programs focus on supporting small and micro-scale businesses (Usaha Kecil dan Mikro, abbreviated UKM). According to Bambang Ismawan (2002), developing small and micro scale businesses at the grassroots level are important to achieve sustainable growth. The forms of activities to nurture their growth should not be short-term rather they should be continuous in the form of counseling and accss to financial support, information and the market. Ismawan rejects the idea of a special unit for UKM under Indonesias Chamber of Commerce, KADIN. Bina Swadayas major programs include:
1) Kelompok Usaha Bersama (KUB) or Mutual Business Groups

In 1973 Bina Swadaya began to develop Kelompok Usaha Bersama (KUB, or mutual business groups). KUB are groups of people who share mutual interest to develop and improve their social and economic status. These groups are encouraged to put their income into saving accounts. These savings can then be developed into productive businesses, such as the production of tofu and tempe (soybean cake), home industry crafts, animal husbandrydepending on where the KUB is located and the interest of the group.
2) Training courses
The large number of Mutual Business Groups (KUB) prompted Bina Swadaya to develop education and training programs for community counselors. Over time this program has become one of Bina Swadayas major activities. The clients of the training courses include NGOs, government institutions, as well as the business societyreaching a number of 1,425 institutions with more than 6,000 alumni. The substances of these courses support the knowledge and skills necessary for supporting community empowerment. Currently the Training and Education Center manages 26 various training courses, such as micro finance, NGO management, community leadership, small enterprise development, advocacy, household economy, strategic planning, fund raising, PRA (Participatory Rapid Appraisal), and project management.
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3) Micro-Finance System
Bina Swadaya serves around 2,332 KSM (Kelompok Swadaya Masyarakat, or Community Self-reliant Groups), which comprise of more than 55,660 poor families.6 Each family is provided not only with micro financing support, but also with direct and continuous guidance through Area Group Offices in various locations throughout Indonesia. In addition, thousands of people are granted services through Bank Perkreditan Rakyat (BPR) or the Peoples Credit Bank, which was also set up by Bina Swadaya. There are three payment models developed by Bina Swadaya to support self-reliant community groups (KSM): a) financing from and by the community, b) financing for the community, and c) financing with the community. The first model, financing from and by the community, is basically the development of the traditional community rotating fund, arisan. In this model, community groups are encouraged to develop their own financing institution. Bina Swadaya supervises the management of this rotating fund and provides technical support. Several supervised KSMs had been able to accumulate a significant amount of funds that could be used to provide services for its group members, as well as other groups. The second model, a community financing model, involves a bank or a nonbank institution. Presidents Decree (Keputusan Presiden) no. 38/1998 provides the legal basis for a foundation (yayasan) to set up a bank. Bina Swadaya has established four Bank Perkreditan Rakyat (BPR) or Peoples Credit Bank to serve the communitys need to access credit.21 However, because BPR is obliged to comply with Bank of Indonesias regulations, the poor community (consisting mostly of the informal economy) cannot gain access to this credit. Instead, BPR can only serve small and medium enterprises. In the form of non-bank institution, Bina Swadaya has attempted to develop Lembaga Keuangan Mikro (LKM or Microscale Financing Institution to serve under-privileged groups. However, this has not been easy task because managing finance and empowering LKM require different expertise. The third model, community financing, is represented by Pusat Pengembangan Keuangan Mikro (PPKM), or the Micro-scale Finance Development Center. PPKM is the new name for Lembaga Pengembangan Usaha Mikro (LPUM), or Microscale Business Development Institution.22 PPKM manages the area offices of Bina Swadaya in 21 locations throughout Indonesia. The main activity of these area offices is to provide micro-scale financing service through self supportive groups in the community and provide supervision for the development of the groups. This financing service is implemented in a partnership with a formal local financing institution such as the Peoples Credit Bank (BPR, or Bank Perkreditan Rakyat) or other common banks. The following section provides a more detailed description of one of Bina Swadayas successful programs to support the informal economy, Program Hubungan Bank dan Kelompok (PHBK).
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PHBK, the Bank and Group Partnership Program

The Program Hubungan Bank dan Kelompok (PHBK) or the Bank and Group Partnership Program has been successful in integrating informal and formal financing institutions to support the informal economy. PHBK was introduced in 1988. This program grew from Bina Swadayas concern that the poor (in particular the informal economy) could not gain formal access to the banks financing service, because of Indonesias banking regulations on credit security. As a result, the poor could not improve their economy. This situation required a new approach where the banking institution as a formal entity should be able to communicate with the informal sector. A partnership was formed between Bank Indonesia, Bank Rakyat Indonesia, GTZ (the German Aid and Development Agency) and Bina Swadaya to develop a model for channeling credit to the informal economy. After over a hundred meetings between the bank (Bank Indonesia and Bank Rakyat Indonesia), Bina Swadaya and community informal sector groups such as Kelompok Usaha bersama (KUB) and Kelompok Swadaya Masyarakat (KSM), the concept of PHBK was finalized. This program has been going on for more than 12 years. Compared to the average bank credit programs the PHBK has a better performance, with 97% credit return rate, which was achieved even during the economic crisis. PHBK applied two models of services, the direct model and indirect model:
Direct Model
The bank directly gives credit to the Self-reliant Community Groups (KSM, refer to Figure 3-3), while LPSM Lembaga Pengembangan atau Pendampingan Swadaya Masyarakat, or Community Self-reliant Development Insitution) provides training to the KSMs. Bank 33%/year KSM 44%/year Member
Figure 3-3 Direct model of credit The credit risk is the responsibility of the bank, as credit provider. In this model, the credit application is prepared by KSM and submitted to LPSM, which will convey the application to the bank. LPSM and the bank evaluate the credit feasibility of the subjected KSM. The credit clearing is carried out by the corresponding bank, in which the KSM is represented by three committee members (the head of KSM, secretary, and treasurer). The process from credit application to credit clearing generally takes 5 to 10 days.
Indirect Model
In this model the credit application is prepared by KSM and sent to LPSM, which evaluates the feasibility of their credit application. LPSM then applies for credit to the bank (Figure 3-4). The bank seeks clarification by inviting LPSM and the KSMs. Credit clearance is done at the bank, where LPSM is represented by two members (the head of LPSM and staff from the financial division). Credit clearing can also be
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done in the office of the KSM of LPSM. If it is held at the LPSM office, the KSM is represented by 3 members. The process from credit application to credit clearing generally takes 5 to 10 days. Bank 22%/year LPSM 33%/year Figure 3-4 Direct model of credit The interest rate of 44% per year is lower than the interest rate charged by a private individual money-lender, who normally fixes the interest rate at 5% to 10% per month (totaling 60% to 120% interest per year). The data on PHBKs performance is quite impressive. According to the statistics from a report prepared by Bank Indonesia for September 2001, PHBK involved 360 banks (129 are active). 831 BPRs (582 are active), 257 LPSMs (85 are active), and 34,277 KSMs (12,766 are active). KSM savings include 10,066 accounts, totalling IDR 29,521,300,000. The total credits are 11,425 accounts, totalling IDR 68,150,500,000. The total accumulated credit clearance is IDR 330,568,400,000, with 97.3% rate of return (Bank Indonesia, September 2001). KSM 44%/year Members
Supervision strategy to connect KSM and financing institutions

Based on Bina Swadayas experience, there are several steps to connect the selfreliance community groups (KSM) with a financing institution, bank or non-bank institution. These steps are as follows: (1) Group forming, where Bina Swadaya nurtures existing groups and assists in forming new groups. The groups are formed based on business similarity of proximity of residence. (2) Group development, where newly formed KSMs go through a series of training and information sessions in human resource development and consultation. The human resource development program includes education and training in financial management, household economic, small scale businesses and maintaining a relation between the bank and groups. Consultation and information involves credit analysis and credit application techniques, program exposure to groups and publishing inspiring books and magazines for business development. (3) Connection to financing institution after the groups had undergone training, which usually takes up to six months. After training, the groups must open a savings account, prepare a business proposal and make an agreement amongst themselve to be mutually responsible for the actions taken by the group. (4) Continuous supervision during the initial years takes the form of a teacherstudent relationship, where Bina Swadaya supervises proactively in an attempt to empower the groups. However, over the years the relation between the KSM and the supervisor develops into a partnership in developing micro-scale economy.
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Bina Swadayas support of small-scale businesses is based on their view that the poor are economically active and therefore, should not be discriminated against in gaining access to the market and to financial support. Bina Swadaya believes that the business community is a strategic partner in empowering the poor, and their activities should not be considered as bearing a social cost.
Dompet Dhuafa Foundation23

As mentioned in the beginning of this chapter, Dompet Dhuafa Foundation has been able to gain the trust and support of the public to collect and manage funds collected through zakat, infak and sadaqah (abbreviated ZIS). Zakat, Infaq and Sadaqah are Islamic customs of charity, to support social activities and in particular, the livelihood of the poor. Zakat is obligatory for those that have reached a certain level of income, while sadaqah and infaq are voluntary donations, regardless of level of income. Infaq is similar to sadaqah, except that the donation can only be used as dedicated by the giver. Many institutions can manage ZIS in Indonesia. A special board referred to as Badan Amil Zakat, Infaq dan Sadaqah or Bazis has been established by the Indonesian government in each province, from the village to the provincial level. Bazis distributes the funds to mosques, orphanages, and other social institutions. Religious institutions such as mosques, orphanages and foundations also collect ZIS to support their social activities. Several newspapers in Indonesia also set up bank accounts when a natural disaster occurs, such as famine, floods, earthquakes or landslides. The public can transfer their donations to that account and the newspaper will distribute the funds to the victims. Four journalists from RepublikaParni Hadi, Haidar Bagir, Sinansari Encip and Eri Sudewoinitiated the Ikatan Silaturahmi Republika (ISR) an informal association of Republikas employees, to collect funds for the people of Gunung Kidul, one of the poorest regions in Indonesia, suffered from famine in early 1993. The employees agreed to allocate 2.5% of their monthly paychecks to the organization. This is based on Islamic teachings and customs that require Moslems who have reached a certain level of income to donate as much as 2.5 % of their annual net savings for charity.24 The collected funds were donated to the people of Gunung Kidul, one of the poorest areas in Indonesia, who were hit by famine. However, during the disbursement of these funds, the employees learned that their donation was not enough. A substantial amount of funding was needed by the local community of Gunung Kidul. The management of ISR decided to involve the readers of Republika newspaper to collect more funds for their cause. On July 2, 1993, the editors gave ISR a daily column in Republika to appeal for donations from their readers. The column was called Dompet Dhuafa, translated as a purse for poor people. Their motto was Can you sleep soundly while your neighbor is suffering from hunger? The column proved to be an effective mechanism to gain the attention of concerned citizens and funding for their cause. On the first day of its launching, Dompet Dhuafa collected IDR 425,000 and by the end 1993, the funds had amounted to
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IDR 88 million, which included an aditional IDR 2 million of monthly charity from the Republika employees. The publics enthusiasm became a challenge for ISR to manage the institution professionally. The temporary institution did not survive. After a year ISR was dissolved and in its place, a legal institution was established. On September 14th, 1994, the Authorized Notary Office of Abus Yusuf issued the Articles of Association of Lembaga Dompet Dhuafa Republika. The name of the new institution was taken from the column in Republika. At that time, Eri Sudewo, the former coordinator of ISR was appointed as executive director.
Table 3-1 Income of Dompet Dhuafa 1993-1999
Total Income from ZIS Year 1993 1994 1995 1996 1997 1998 1999 Income (IDR) 88,748,149 506,110,484 496,635,558 1,130,608,355 1,541,716,814 3,054,290,757 6,079,320,283
Source: PIRAC (2002: 67)
Caring, empowering and networking

Caring, empowering and networking reflect Dompet Dhuafas commitment to serve society. As their donations grew, Dompet Dhuafa expanded their activities to include poor communities in other areas of Indonesia. There are three major programs of Dompet Dhuafa: charity, economic development and human resource development. Programs under charity include: relief to victims of natural disasters (earthquakes, famine, flood, landslides, social riots etc). Dompet Dhuafa also collects qurban (meat sacrifices) for the annual Islamic celebration, Idul Adha. The program is called Tebar Hewan Qurban (discussed further in this section). The donations are distributed nationwide to those eligible. Layanan Kesehatan Cuma-Cuma (LKC or Free Health Services) is another program to support poor commuities, which are funded by waqaf (donations). Economic development programs include micro-finance, agricultural development and small-scale enterprise development. Dompet Dhuafa established a cooperative, Baitul Maal wat Tamwil (BMT), which serves as a financial, producer and social
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development institution based on the Islamic system of Syariah.25 There are 59 organizations joined as a network under BMT. Dompet Dhuafa also works together with Bank Perkreditan Rakyat Syariah (BPRS or the Peoples Syariah Credit Bank) to provide a profit-loss credit sharing system. To support this program, Dompet Dhuafa established a regional representative, Forum Economi Syariah (FES) or the Shariah Economic Forum. FES main role is to create synergy between Dompet Dhuafa and the organizations coordinated under BMT, such as farmers associations and Human resource development programs include scholarships for underprivileged university students; the establishment of SMART Ekselensia, a school for gifted children that is free for underprivileged children; and Magang Pemberdayaan (Inhouse Training for Empowerment) a program for partners of Dompet Dhuafa. The locations for training are in areas near to communities that are receiving guidance from Dompet Dhuafa. Networking is part of Dompet Dhuafas strategy to empower their partners. Jejaring Aset Reform (JAR, or Asset Reform Networking) was set-up to support communication and share information amongst its members. In their annual meetings, JAR conducts evaluations and strategic planning to enhance business development. The following section discusses two programs of Dompet Dhuafa that support the informal economy, namely Ternak Domba Sehat and Tebar Hewan Qurban.
Ternak Domba Sehat (TDS or Healthy Sheep Farming)

Ternak Domba Sehat (TDS) or the Healthy Sheep Farming, is a partnership program with sheep breeders. The sheep/goat farm is located in Caringin, Bogor (West Java). Until May 2003, TDS owned 49 male sheep, 520 ewes, 71 male baby sheep, 83 baby ewes, and 100 sheep for consumptive purpose. TDS asset is appraised at around IDR 550 million, excluding pastures, cages, and other inventories. Based on these assets, since October 1993 TDS had put its mature male sheep cadres into the market. Jejaring Asset Reform suggested that these male sheep cadres be cultivated into plasma sheep breeders. They also suggested that besides Bogor, Sukabumi, Cianjur, and Garut, plasma breeders should be cultivated also in villages where the Masyarakat Mandiri (self-reliant community) program was being executed. In particular for the Garut area, this program also supported the sheep breeders empowering program carried out by an NGO, Amoseas. Since November 2003, TDS has succeeded in managing its own budget independently. However, they still depend on funding from Dompet Dhuafa (IDR 150 million) to develop its activities. In building the company image, expanding the sheep cadres market, and making additional income, TDS conducts training courses for the public, and in particular the Animal husbandry local offices throughout Indonesia. The training is held every two months. TDS also conducts seminars and workshops on sheep breeding. The attempt to make the public see TDS as a visionary investment includes empowering and providing supervision services for the public. The counterpart personnels are appointees outside of TDS and the fees are exclusive of TDS budget.
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Tebar Hewan Kurban (THK or Animal Offering Distribution Program)

Tebar Hewan Kurban (THK, or Animal Offering Distribution Program), began as Menebar 999 Hewan Qurban in 1994. During its first year, the program was able to collect 644 goats and 8 cows. In 2002, they were able to collect 6,230 goats and 163 cows. The meat was distributed to poor communities throughout Indonesia. The program is conducted in partnership with the members of Jejaring Asset Reform (JAR). Since 2004, THK developed a new program for the public, the direct sales of goats/cows for consumption and offerings, which come from TDS program. They also formed a partnership with haj management offices throughout Indonesia to distribute animal offerings to those in need.
Fund Raising
Starting with only several book-keeping staff, by 1995 Dompet Dhuafa grew to have four divisions: social affairs, public relations, fund raising and micro credit. In 1996 the organization moved into its own building. In 1998 the fund raising division became the marketing division, which included promotion activities. Fund raising is essential to Dompet Dhuafa, especially to connect the donors and recipients of the funds. Dompet Dhuafa needed to be more proactive by approaching and lobbying potential donors. Therefore in 2000 Dompet Dhuafa restructured its organization and promoted its Marketing Division as a Directorate of Fund Raising, which consisted of two divisions: corporate marketing and retail marketing. The most effective method of obtaining funding is through corporate marketing, when a particular company agrees to finance a Dompet Dhuafa program or become a regular donator. Dompet Dhuafa prepared donor profiles. Dompet Dhuafa proposed activities that were adjusted to the profiles of the donors and location of a specific program. The proposal was presented at seminars, workshops, exhibitions, or at offices like banks, government offices, etc. Information came from professional associations, residential areas, or social organizations such Jamaah Haji Indonesia. In retail marketing the targeted groups are categorized into two income groups, under IDR 5 million/month and over IDR 5 million/month. For each target group Dompet Dhuafa uses a different marketing strategy. For the higher income group, Dompet Dhuafa arranges special programs, such as music concerts, painting exhibitions, and auctions to collect funds. Dompet Dhuafa advertises its program through the media and opens outlets for donations in shops, such as Walisongo Book Shop and Al-fira Muslimwear, who are also members of the network (JAR). Dompet Dhuafa joined with Bank International Indonesia Syariah to launch Kartu Waqaf Investasi Dompet Dhuafa or the Dompet Dhuafa Waqaf Investment Card. This card serves as a credit card (Mastercard), a DD membership card, debit card and ATM card. Cards users can transfer their donations directly to Dompet Dhuafas account at BII Syariah. Dompet Dhuafa also appointed former model Ratih Sanggarwati as their spokesperson. They work with TV stations to market their program through talk-shows.
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Yayasan Mitra Usaha (YMU)

Yayasan Mitra Usaha (YMU) or the Partners of Business Foundation was founded on September 7th, 1993 by academics and NGO activists among others, Dawam Raharjo (a university professor and writer), Wimar Witoelar (at the time a lecturer, a columnist and a talk show host), Zumrotin (Indonesian Consumers Organization, YLKI), Tini Hadad (Indonesian Consumers Organization, YLKI), Agus Purnomo (Indonesian Forum for the Environment, WALHI) and Muchtar Abbas (an NGO activist and coordinator of GAPRI, the Coalition for Anti-Impoverishment). The background for the establishment of this foundation was the concern that most of the poor population (in particular women) did not have access to and control over resources that are necessary to support their livelihood. Most communities from the informal economy had limited access to formal credit because of the various requirements, such as owning collateral or filling lengthy administration forms. Most of the poor are illiterate and live in remote areas that are far from formal financial institutions. For women the situation is worsened, because many banks only grant loans to male heads of the household or require the signature of a husband if a woman applies for a loan. Informal money lenders have been the only means of credit. However, these money lenders usually charge a high interest fee. YMU aims to increase the role and power of NGOs and kelompok swadaya masyarakat (KSM) or self-reliant community groups in economic development so that they could improve the peoples economy. The two major programs of YMU are 1) the development of an informal sector institution in the form of a micro-finance institutions based on the Grameen Bank model (tailored to suit the situation and conditions of the Indonesian people); and 2) public policy advocacy that focuses on improving the welfare of poor communities. YMU is a member of the Microcredit Summit and Grameen Trust. Besides obtaining funds from the Grameen Trust, YMU receives support from international institutions, such as NOVIB (the Dutch Organiation for International Development Co-operation).26 Their area of operation covers the provinces of West Java, Yogyakarta, Maluku, South Kalimantan, East Nusa Tenggara and Central Sulawesi.
Supporting micro-finance 27
In accordance with their mission to improve the welfare of the poor, YMU established a micro-finance institution (Lembaga Keuangan Mikro or LKM) that adopted the Grameen Bank model. Mitra Usaha Mandiri (MUM) literally translated as Selfreliant Business Partners, was designed to provide poor communities with easy access to credit. The model prioritizes female customers and the poorest of the poor. A pilot program was launched in the coastal village of Kecamatan Babelan, Bekasi (West Java) in 1998, which was soon followed by similar programs in other villages in West Java, in particular Kabupaten Indramayu, Kabupaten Subang and Kabupaten Karawang. Grameen Bank became a model for YMUs micro-finance institution. Grameen Trusta not-for-profit organization created to promote awareness and action for
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the elimination of poverty and hungeroffers training and consultancy services for organizations working to set up and implement micro-finance programs in any country of the world. Currently, there are seven organizations from Indonesia that are receiving assistance from Grameen Trust. Yayasan Dharma Bhakti Parasahabat (YDBP) is the largest Grameen replication program in Indonesia, followed by Yayasan Mitra Usaha (YMU). Grameen Trust sends a technical mission to audit, provide technical assistance and evaluate the performance of Grameen Trust partner organizations. They also conduct international dialogues in Dhaka, where participants can observe the operation of Grameen Bank in the field. As the final step of the dialogue process, participants prepare action plans that outline their follow-up activities after they return to their own countries.28 The total funds from Grameen Trust disbursed by YMU are USD 581,053 covering 8,075 members. The funds are received through Grameen Trusts local partner, Citigroup Foundation and Citibank Peka.29 There are several policies for the micro-finance instutution if they were to remove the limitations that restrict access to banks. First, the poor should be exempt from having to provide collateral. Second, the micro-finance institutions should be set up close to the poor communities. Third, the poor should be exempt from having to fill complicated administrative forms. Finally, women should be given priority to obtain credit. There are a number of regulations that a member must follow before being considered as a self-reliant business partner (Mitra Usaha Mandiri or MUM). They must: a. Attend and pass a five-day training course b. Be part of a five-person group. Three to five groups will form a rembug. c. Participate in weekly rembug meetings (referred to as minggon, the Javanese word for weekly) held at one of the members house. The micro-finance institution should make sure that the group members have similar backgrounds in terms of: social status, education level, income, occupation, and house quality. These criteria are applied to ensure an equal and democratic atmosphere among the participants and to allow the group to develop a selfmonitoring mechanism. Till the end of July 2003, there were about 12,000 members (mostly women) of Mitra Usaha Mandiri in nine branches. Based on the experience of YMU, the rate of return of credit is almost 100%. The interest rate is 28% for a period of 50 weeks (1 year). Most of the MUMs managed to reach a break-even point in 2 years, which meets the main requirement to sustain its existence and independence. The term independent means that all expenses incurred by employing workers/staff will be taken out of the cash flow. Apart from that, the independence of an institution can be measured by its ability to cover all expenses (Break Even Point or BEP). In their public policy advocacy program, YMU initiated a network with a number of NGOs, known as Gerakan Anti Pemiskinan Rakyat Indonesia (GAPRI) or the Peoples Anti-Poverty Movement. Members of GAPRI include INFID (Indonesian NGO Forum), Bina Desa, Asosiasi Perempuan untuk Usaha Kecil (Womens Association for Small
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Enterprises) and Oxfam GB. GAPRI has proposed a strategy paper with the World Bank to overcome poverty in Indonesia. Their recommendations include political restructuring, redistribution of wealth and reforming the role of donors.
Yayasan Dharma Bhakti Parasahabat (YDBP)

Yayasan Dharma Bhakti Parasahabat (YDBP) was founded in Jakarta on April 21st, 1999 by Ir. TP Rachmat, Ir. Benny Subiantoro and Ir. Palgunadi T. Setyawan, who were retired executives of several major companies in Indonesia and also close friends. The foundation intended to facilitate peoples economic activities in micro-sized businesses, along with increasing the womens role in improving family welfare. Several conditions served as the setting for the establishment of YDBP. Since the monetory crisis of 1997 the number of poor population and employment had reached an alarming state. Although micro-scaled economy actors fared better than others, there were still limited opportunities for these businesses to develop because of the constraints of gaining access to capital resources in formal financial institutions. Those who could get capital usually had to borrow from money-lenders, who gave credit with very high interest rates. The organizations vision is to improve the quality of life of the poor by facilitating micro businesses through a Grameen Bank model. Women and underprivileged families in rural areas are the major focus of YDBP (Figure 3-5). Their programs consist of 1) providing capital for trade, home industry, services and fishery; 2) providing guidance and training in entrepreneurship, health and environmental awareness, and spirituality; and 3) developing partnerships with national, regional and international institutions to support policies for improving the welfare of poor communities and gender issues. YDBP receives funding from Grameen Trust. As mentioned earlier in this chapter, YDBP is the largest recipient of funds in Indonesia and has the best performance. Up till 2003 they have been able to disburse USD 2,049,739 covering 23,492 members in 10 regions that are mostly women.30 YDBP sent two of their regional staff to attend the Grameen Bank Basic Training Program in January 2002. In August 2002 YDBP participated in the International Dialogue held by Grameen Trust. This meeting is attended by all partners of Grameen Trust worldwide. The disbursement of credit for micro-businesses are done in the following stages: A regional survey (survei wilayah) is performed to determine the areas suitable to execute operational activities. The survey is carried out in two stages; the first is gathering secondary data from related government bodies, such as Badan Pusat Statistik (BPS), or Statistic Center Agency, Badan Koordinasi Keluarga Berencana Nasional (BKKBN), or National Family Planning Coordination Agency, and Local Government offices. Second is a field observation on the selected areas. The key indicators of the survey include: the number of poor families, the type of businesses, the available facilities and infrastructure and topography. The analysis will determine whether a particular area is eligible to become YDBPs operational region.
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A general meeting (pertemuan umum) is held as soon as a region had been declared as an operational region. The meeting is carried out in several stages, starting from the government officials at the kelurahan office to the community level. YDBP gives a presentation of their programs. During the meeting, interested members of the community can sign-up for membership. However, before they can become members, they go through an assessment. An assessment (uji kelayakan) is conducted by a field officer on the future members at each of their homes. There are four indicators for the assessment: housing index, asset index, land index and income index. YDBP uses the maximum index to determine whether a candidate is eligible for credit. A training session (latihan wajib kumpul) is a series of meetings for five consecutive days. The meetings are only one to two hours per day. It is compulsory that all candidates go through this training session and pass the group assesment, before being declared as eligible to obtain credit. The substance of the training include: procedures for obtaining and returning credit, rights and obligations as members, group formation, group consolidation and group exercises. One of the exercises that the group must pass is their ability to save IDR 1,000 per day per member, and also take note of all the serial numbers. Weekly meetings (minggon) are regular group meetings of groups that have passed the training session and attended by the YDBP field officer. In these meetings the groups can apply for credit, liquidize their credit, pay back the installments, conduct savings transactions and obtain guidance and advice from the field officer. There are several types of savings encouraged by YDBP: training exercise saving, a compulsory saving of 5% of their credit, minggon saving of IDR 200 per week and intentional saving. By June 2002, the funds accumulated from members savings amounted to IDR 1.039 billion. Since 2002, the amount of credit given to each member is IDR 350,000. The credit scheme follows a 2-2-1 system. Two members are provided with credit. The term of the credit is up to 50 weeks with an interest fee of 2.5% per month. After these two members pay back their credit, the next two members can obtain credit. After they have completed their payment, the last member (who is usually the head of the group) can obtain credit. YDBP members must promise to work hard, be honest, use the loan so they have an income for a better family life, encourage their children to continue their education, help other members, participate in discussions with members in need and promptly pay the weekly installments. Since its operation in June 1999 YDBP began with 2,250 members. By June 2002 the members of YDBP have grown to 16,959. By June 2003 YDBPs fund reached IDR 3.962 billion, and the amount circulated was IDR 9.678 billion. To serve its members YDBP employs 120 personnel: 20 personnelswork at the headquarters and 100 others are field officers. The divisions in YDBP include information technology (IT), Training Center, Human Resources, Accountancy and Finance, and Internal Control.
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YDBPs target for 2005 is serving 20,000 members, with an addition of at least 1,000 members per year.
Conclusions
The analysis of NGOs should several similarities among one another. First, each NGO shares the commitment to empower the poor. Their concern that the poor have limited access to formal credit/market has triggered their activities to support the informal economy. Their support is not only in the form of micro-credit, but includes enhancing the skills and knowledge of the poor, and building partnerships and networks with small enterprises. Women in particular, have received priority amongst most NGOs because their condition is worse and less fortunate than the poor in general. Second, leadership and professionalism plays a major role in maintaining and fulfilling their commitment to the poor. As an example, in Bina Swadaya Bambang Ismawan played a major role in keeping the organizations mission and vision focused on poor farmers, despite the major changes in the organization structure. The foundation also realized that it was important to manage their affairs in a professional manner by setting up companies to professionally manage certain affairs, such as marketing, tourism and publishing. Dompet Dhuafa was also successful in obtaining the support of the public by maintaing their accountability in manageing donations. They also developed from a small column in a newspaper to become a large organization with several units to manage their affairs, and networks with large companies as well as hundreds of small-scale businesses. In YDBP, their success in nurturing groups is because they have been able to develop a democratic and transparent environment in managing funds and providing accessible credit. Their success is also supported by dedicated field officers that are willing to work together with communities. The community is not imposed with administrative paperwork, rather they are guided through a system that suits their level of education and social conditions. Third, NGOs are showing their interdependency of foreign aid. They are able to find alternative ways of raising funds, which also complement their programs to support community empowerment. One example is the publishing of Trubus magazine and books on agriculture development by Bina Swadayas publishing house. These are useful not only to the farmers but also the public at large, who are interested in agricultural development. Dompet Dhuafa has also been creative in marketing their program to obtain funds by approaching private companies and using the media to attract the publics attention of their program and awareness of donating to the poor. The image of being a trustworthy and reliable institution is also important to maintain steady donations and distribution. Many innovative gestures had been created involving many parties, such as banks, companies, breeders, and the general public. The effort to prepare thorough reports of the accounts builds up the company image and creates a sense of security for donors contributing their money for social causes; and the concrete realizations of their donations.
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The Private Sectors Support for the Informal Economy

The analysis in this section provides details on the private sectors support for the informal economy. The private sector is mostly associated with philanthropic activities that are part of their social responsibility to society, or even to create a positive image of their company. However, the analysis shows that some private companies have gone beyond charitable work to activities that empower and foster the informal economy. Some of these activities are the responsibility of a division within the company, but others purposely establish a foundation solely dedicated to handle such affairs, or work in a partnership with other foundations that specialize in supporting informal economy actors. The private companies discussed in this section are PT ISM Bogasari Flour Mills, Hero Supermarket and Citibank Peka. PT ISM Bogasari Flour Mills was selected as one of our case studies because they had succeeded in turning small-scale business into medium scale businesses, with annual incomes reaching billions of Rupiahs. The employees of Citicorp established Citibank Peka. They have launched many social programs to support education and micro-credit, which include building partnerships with other foundations and NGOs. PT HERO Supermarket Tbk maintains good cooperation with local farmers who are considered as their business partners. Two additional examples of small-scale partnerships are discussed, that of snack vendors in Keris Galeri, Mal Puri Indah (West Jakarta) and Ragusa Ice Cream Parlour in Central Jakarta.
PT Indofood Sukses Makmur Tbk, Bogasari Flour Mills31

Bogasari is one of the largest flourmills in Indonesia. It produces 3.6 million tons of flour annually, the largest production in the world in a single location. Bogasari opened their first mill in Tanjung Priok, North Jakarta in 1971, followed by a second mill in Tanjung Perak, Surabaya in 1972. For almost three decades, Bogasari has served the needs of Indonesias population with its three famous brands of flour: Cakra Kembar, Kunci Biru, and Segitiga Biru (Figure 4-1a). These three products are widely used in the industry of noodles, breads, and biscuits in large and small-scale businesses, as well as home consumption. Apart from that, Bogasari also produces by-products, such as cake and doughnut mixes (Figure 4-1b) bran and pollard for animal feed, industry flour for plywood factories. Aside those two flour mills, Bogasari also holds 3 other divisions: the Pasta division (Figure 4-1c) and two support divisions: packaging (formerly their textile division) and maritime. The pasta factory was established in December 1991, and produces 60,000 metric tons of long and short pasta, of which 80 % is export commodity. Bogasari Packaging Division was established in 1977 in Citeureup, West Java to produce flour sacks from cotton and polypropylene. It currently produces 4.5 million sacks per year. To ensure continuous supply of wheat, the Bogasari Maritime Division operates 3 cargo vessels and three barges as inter-island ferries. These vessels had received an international award in AMVER (Automated Mutual Assistance Vessel Rescue).
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Bogasari owns various technical support facilities, both for its own use and for the public, such as a laboratory, harbour, a Milling Training Center and Baking Training Centers in major cities throughout Indonesia such as Jakarta, Surabaya, Bandung, Cirebon, Denpasar, Yogyakarta, Palembang, Malang, Surakarta, Medan, Samarinda, Banjarmasin and Manado. The Baking Training Centre is open to the public who wish to enhance their knowledge and skills in the cooking and baking industry. The courses offered include cakes and pastries, bread and noodle making. Till December 2003 there were about 30 Baking Training Centres with 20,000 alumnae. The flour laboratory is furnished with modern equipments to do analysis on qualities of wheat and flour, and a research facility to develop new products. The Jakarta mill retains two harbors; the one completed in 1997 is one of the best harbors in the world, while Surabaya mill holds one harbor. The three harbors are equipped not only to manage wheat cargos but also to handle all kinds of grains. Since June 30, 1995 Bogasari became one of the divisions of PT Indofood Sukses Makmur (Indofood), the premier processed food company in Indonesia. Indofood has leading domestic market shares for most of its products, which include instant noodles, wheat flour, cooking oils and fat (such as margarine), baby food, snacks and seasoning products.
Bogasari partnerships: supporting small and medium scale businesses

Bogasari adopts the basic principles of Panca Bhakti (literally Five Dedications). It consists of integrity, strength, care, togetherness and open-mindness. Every Bogasari employee should be sincere and responsible to their customers, to the community and their business partnersalways caring for them and providing them with strength (support). This should be done in the spirit of togetherness (teamwork) and openmindedness (positive attitude, two-way communication, sharing information). These principles are applied by Bogasari to support the informal economy. Bogasaris target group consists mainly of small-scale and medium-scale businesses that are related to or support the food industry. Since 1981, Bogasari paved the path to establish partnership programs with these enterprises. One of the examples is the partnership with a small textile business in Majalaya, West Java to produce unbleached cloth (calico) to make flour sacks. The partnership was extended in 1992 by embracing small-scale tailors to sew flour sacks. This demonstrates Bogasaris commitment in empowering small and medium businesses and cooperatives, bearing the concept of growing together. However by supporting these businesses, Bogasari would also gain through increased sales of their products. Small and medium scale enterprises use up to 70% of the total amount of flour products. Various programs have been implemented to support and empower these businesses, as explained in the following sections:
a. Training
Training programs are Bogasaris direct involvement in human resource development. These activities are carried out through small groups that are partners of Bogasari, Usaha Kelompok Mandiri (UKM or Self-reliant Business Groups). The substance of
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training includes technical training on bread and noodle-making, management training and apprenticeship in Bogasari factories. Bogasari has built Pusat Pelatihan Makanan Berbasis Makanan or Training Centre for Flour-based Food. Currently there are 21 training centres in major cities throughout Indonesia. Some cities have several baking centres. In Jakarta there are three training centres located in North Jakarta, South Jakarta and Central Jakarta. In Surabaya there are two training centres, one located at the Faculty of Industrial Engineering, Universitas Negeri Surabaya and the other near the central business district. Another training centre within a campus was also established at Universitas Soegijapranoto in Semarang. Bogasari utilizes printed and electronic media for remote teaching. Since February 2001, Bogasari published Wacana Mitra, a bi-monthly magazine that contains information and useful tips for those pursuing business in the food industry. This magazine is free and is distributed to all Unit Kelompok Mandiri (UKM), university libraries and business partners. Bogasari also works jointly with publishing companies to publish books on business skills such as Peluang Bisnis Makanan Berbasis Tepung (Business Opportunities for Flour-based Food) (Figure 4-2). They also employed an indirect teaching method through the electronic media, such as the Maskum Show on TV-RI and Sajian Bersama Bogasari on RCTI. Maskum in the abbreviation of Masalah dan Kiat Usaha Mitra, or Problems and Tips for Business Partnerships. This show is broadcasted nationwide every Sunday afternoon. Sajian Bersama Bogasari, or Cooking with Bogasari is an on-air cooking competition using flour as the main ingredient. The public can compete in the competition and demonstrate their expertise in cooking and baking, as well as sharing their cooking tips to a wider audience.32 Table 4- List of Bogasaris partners Noodle Partners 1 2 3 4 5 6 7 8 9 Pamas (Paguyuban Pengrajin Mie Surabaya Parimas (Paguyuban Pengrajin Mie Surakarta) Members 32 noodle makers 800 vendors 41 noodle makers
Pamiyo ( Paguyuban Pengrajin Mie Ayam 32 noodle makers Yogyakarta) Parimba ( Paguyuban Pengrajin Mie Ayam 22 noodle makers Bandung) Pamal (Paguyuban Pengrajin Mie Ayam Malang) 20 noodle makers Pu m a s ( Pa g u y u b a n Pe n g r a ji n Mi e Aya m 12 noodle makers Banyumas Papmirma (Paguyuban Pengrajin Mie Ayam Madiun) 37 noodle makers Tunggal Rasa Cirebon (Paguyuban Pengrajin Mie 36 noodle makers Ayam Cirebon) Tunggal Rasa Gemilang (Paguyuban Pengrajin Mie 12 noodle makers Ayam Magelang)
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Bread Partners 1 2 3 4 5 6 7 KOPERJA (Koperasi Pengusaha Roti Jakarta) KOPERTA (Koperasi Pengusaha Roti Tangerang) Koperasi Boga Sanjaya (Wonogiri) KOPERYO (Koperasi Roti dan Mie) Bandung
Members 70 bakers 23 bakers 33 bakers 31 bakers
Koperasi Susu Warga Mulya (Pakem, Sleman, 495 bakers DIY) KPSP (Koperasi Peternak Sapi Perah) Setia 6350 bakers Kawan, Pasuruan Jawa Timur Jabung (Koperasi Agroniaga Jaya Abadi Unggul) 3679 bakers -Malang Noodle Partners KUD (Regional Cooperative ) Members 163 farmers
1 2 3
KUD Sri Sedono, Tulung Agung
KUD Dewi Sri Bahagia, Cigugur, Kuningan - 1567 farmers Jabar KUD Pasir Jambu, Ciwidey - Jabar 1325 farmers
Source: http://www.bogasariour.com accessed 1 April, 2004.
b. Providing easy access to credit

To support small-scale businesses in the food industry, Bogasari provides credit to their business partners (UKMs). The credit can be used to purchase baking equipment, and vending vehicles (minivans and carts). The current partners of Bogasari consist of groups (referred to as paguyuban) of noodle-makers, bread makers and cooperatives (Table 4-1). The criteria to become a partner among other things are that they have conducted business in a flour-related industry for a minimum period of one year and possess their own business.
c. Bogasari Mitra Card (BMC) E-wallet

Bank Permata and PT Indofood Sukses Makmur (the Holding Company of Bogasari Flour Mills) have signed an agreement to issue the Bogasari Mitra Card (BMC) ewallet. This card is intended to be used by UKMs that are under the guidance of Bogasari. According to F. Welirang, Director of Indofood Sukses Makmur Division of Bogasari Flour Mills, the BMC e-wallet card is an initial step for cross selling at the UKM level (Sinar Harapan, 18 October 2003). Eva Rianti Hutapea, CEO of Indofood Sukses Makmur and also Head of the UKM Division in the Indonesian Chamber of Commerce (KADIN), confirmed that the partnership between Indofood and Bank Permata supports Indofoods strategy of Permata Indofood (literally Indofoods Jewel), which means that every person in Indonesia, regardless of their income
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level, are considered valuable customers to Indofood. Through this partnership, Hutapea hopes that small entrepreneurs could enjoy banking facilities and develop their business (Sinar Harapan, 18 October 2003).33 This card has mutual benefits for the UKM, as well as for Bogasari and the Bank. The card serves as a an identity card for a Bogasari partner, which can also be used as a discount card when purchasing Bogasari flour at places bearing the logo Mitra Penyalur (distribution partner). The card is intended to provide informal economy actors access to credit. By using the BMC E-wallet card, every business transaction will be recorded, showing the amount of flour purchased that will be an indicator of business scale and their ability to pay back credit. According the Director of Bank Permata, Agus Martowardojo, the type of partnership developed by Bogasari with UKMs can assist the Bank in identifying which entrepreneur is worthy of receiving credit without collateral. There are two types of cards: gold and platinum. Platinum card-holders consume 350 flour sacks each month. For each sack of flour purchased, Bogasari partners will obtain one point that is used for a lucky draw. To obtain a bonus, they must be able to purchase 500 sacks of flour per month.
Citibank PeKa
The Citibank Peka Program was initiated by a group of Citibank employees led by Ditta Amahorseya, the corporate affairs head of Citigroup Indonesia in December 1998. Their concern grew from the banks image as an ivory tower (Warta Ekonomi, 11 August, 2004). During that time, Indonesia was hit by the economic crisis that affected many people, in particular the poor. Employees of Citibank volunteered their time and energy to assist in social activities in the form of education and community development for the poor. The success of the Citibank Peka Program relies mainly on the effectiveness of their volunteers. Peka is the acronym of PEduli and berKArya, roughly translated as caring and working, while the word peka means sensitive, in this case being sensitive to the needs of others. This is the theme carried by all Citibank Peka programs for the community. Unlike other caring programs, this program does not only provide support in financial terms, but also by involving its employees to actively participate in the programs. The success of Citibank Peka depends fully on the effectiveness of the volunteers activities that help developing the education programs. Citibank Peka is a long-term program, intended to encourage various foundations and NGOs to construct and strengthen education and community programs. It was introduced to its employees in December 1998, and the activities started in February 1999. Citibank Pekas programs focus on community empowerment and increasing the knowledge of poor communities.
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Focus of Citibank Peka for 1998-2003

a. b. c. d. Street kids, a partnership with three NGOs to work for street kids and poor children. Mobile library, a partnership with Yayasan Pustaka Kelana that manages a mobile library for children Electronic dictionary for the blind, a partnership with Yayasan Mitra Netra, to help the blind to be able to read and gain knowledge Micro credit, a partnership with Grameen Trust, to provide credit and training for developing micro-scale business in Indonesia.
In the past five years, Citibank Peka had allocated USD 905,000 and their employees to be volunteers in the programs. The Citibank Peka Street Kids and Mobile Library programs had supported 7,000 street kids in gaining knowledge and education.
Focus of Citibank Peka for 2004-2006

- Citibank Peka Education Program 1) A joint program with the Faculty of Economics, University of Indonesia (FE-UI), by giving three credits for the subject of Banking Management as part of Citibank University Banking Course. Senior staff of Citibank act as volunteers and teach undergraduates at the FE-UI. The program started in September 3, 2002. A joint program with Hope Foundation-Indonesia, the CitiSuccess Fund program challenges teachers to think creatively and provide opportunities to implement their creative ideas. Launched in May 2003, the program provides cash funds to implement creative ideas that encourage two-way communication and partnerships between teachers and students, and also improve students social knowledge and responsibility.
2)
Citibank Peka Management Certicificate Course for NGOs

Citibank Peka, together with the National Democratic Institute for International Affairs and PACIVIS-UI arranged a capacity development course for 30 NGOs. The course focuses on three main issues i.e. financial management, network management/funding, and mechanism for voluntary work.
Citibank Peka Community Center

Citibanks sincerity in implementing its community program is shown by establishing Citibank Peka Community Center located in the 4th floor of Citibank Tower. The Community Center serves as communication, information, and administration center for all Citibank Peka programs.
Citibank Peka Volunteers

Since the program was launched in February 1, 1999; on the average 650 Citibank employees are listed as Citibank Peka volunteers annually. Citibank allows its volunteers to set aside 2 manhours for every two months to work as Citibank Peka volunteers.
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Volunteers Activities
Field Volunteers Citibank senior personnel give lectures at the Faculty of Economy, University of Indonesia for two hours in Banking Management for one semester Citibank volunteers work together with teachers and students that were awarded the CitiSuccess Fund. Volunteers ensure that the activities are implemented according to the approved proposal. Support Volunteers Support volunteers will coordinate Citibank Peka everyday activities through the Community Center. To make sure that everything goes smoothly activities and schedule of volunteers are managed in the Community Center. Volunteers activities for Education Program in 1998-2003 (Street Kids, Mobile Library, and Electronic Dictionary for the Blind) The volunteers who work in education program for street kids/poor children will help the foundation in giving additional teaching such as singing, drawing, story telling, etc. The volunteers also help clean the schools, identify schools needs, develop a communication both with the foundation and parents as well, and prepare reports on school development. The volunteers who work in Pustaka Kelana Mobile Library will help with the library administration and coordinate activities at stopover locations. They can also ride in the Citibank Peka Mobile Library vehicle and help the children to choose books that interest them and read books to the children. The volunteers for Mitra Netra Foundation work in the Community Center to translate various books in English to Bahasa Indonesia, feed dictionary data into the computer and to be converted into Braille letters, and develop electronic dictionary for the blind. Citibank Peka also works together with several foundations, which provide micro-credit to the informal economy actors. Citibank Peka provides fund in the amount of USD 190,000 awarded to micro-scale credit foundations: Grameen Trust, Yayasan Dharma Bakti Parasahabat (YDBP), Yayasan Mitra Usaha (YMU), Yayasan Pokmas Mandiri (YPM), and Yayasan Siti Khadijah (YSK). Citibank Peka through funds acquired from the Citigroup Foundation supports two micro-scale credit foundations in IndonesiaBangun Karya Central Java Project in Surakarta and Yayasan Paluma, with the total amount of funding USD 72,500.
Grameen Trust
Grameen Trust was founded in 1989 as a response to the huge success achieved by Grameen Bank in embracing and serving the poor community by giving credits. The Grameen Trust was intended to help NGOs that wish to repeat the success of Grameen Bank in giving micro-credit and training to community groups.
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Yayasan Paluma
Established in 2000, the foundation had given credit to 44 persons, with the average credit of IDR 500,000 since it received support fund from Citibank Peka in 2001.
Yayasan Dharma Bakti Parasahabat (YDBP)

YDBP was founded in April 21, 1999. The foundation received funds from Grameen Trust (USD 100,000) for micro-credit projects in Sukatani Village (in Bekasi) and Pedes Village, Karawang (West Java). The project will provide credit to 1,200 borrowers in Sukatani Village and 1500 borrowers in Pedes Village within the period of 3 years.
Yayasan Pokmas Mandiri (YPM, or Foundation for Self-reliant Communities)

YPM was founded in Medan-North Sumatra and received USD 30,000 from Grameen Trust for a project in Galang, North Sumatra, with a target of 785 borrowers for the period of two years.
Yayasan Mitra Usaha (YMU, or Foundation for Business Partners)

YMU was established in 1988 in Jakarta, and received funding from Grameen Trust in the amount of USD 30,000. The fund is used to finance a project in Taruma Jaya village in West Java, with a target of 640 borrowers within the period of two years.
Yayasan Siti Khadijah (YSK)

YSK was founded in Jakarta in 1993. YSK was granted USD 30,000 by Grameen Trust for a project in Mijen, Semarang-Central Jawa. The target is 750 borrowers within the period of two years. Most of the borrowers are women vendors (selling food, cloth, and traditional medicine) and dressmakers.
PT Hero Supermarket Tbk: establishing partnerships with local farmers34

PT. HERO Supermarket is one of major supermarkets in Indonesia with branches in major cities all over the country. Partnership programs with farmers, cooperative, and UKM is the companys commitment based on HERO Supermarkets need for their products, especially vegetables, fruits, traditional food, cleaning equipments, and others. HERO Supermarket always puts quality above everything else, and thus in order to get products of good quality continuous partnership between supplier and the company would have to be maintained. The objectives of HERO Supermarket Partnership Program are to develop partnerships with UKMs to gain mutual benefit, access UKMs best quality products, improve UKMs human resources and management, and support the development of UKMs business education and motivation
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There are two types of partnerships established by HERO Supermarket, mitra bina and mitra usaha 1. Mitra Bina (Development Parnerships): partnership that emphasizes management and human resources development, without business partnership, such as development training on small retail business, minimarket business, and standardizing horticulture quality for supermarket. 2. Mitra Usaha (Business Partnerships): partnership through management and human resources development, and establish mutually beneficial business network, such as the partnerships with many village cooperatives as suppliers of vegetables, fruits, fish, meat, traditional foods, and others. Since 1991 HERO Supermarket had established an agriculture business partnership with KUD Sinar Jaya, KUD Pasir Jambu (both in Bandung Regency), and Kelompok Tani (Farmers Group) Pacet Segar (in Cianjur Regency), as vegetables suppliers to the supermarket. On the demand of several parties such as small retail business, minimarket, cooperative, university, and others, since 1995 HERO Supermarket increased their partnership program by setting up the Minimarket Management Training for small and medium retail businesses. Minimarket Management Training is held around ten times annually to give guidance to UKM (community groups) in several cities in Indonesia. During the last few years the focus of interest lies in retail business development, because this has been the main business line of HERO Supermarket. PT HERO Supermarkets development assistance to retail business concentrates on human resources through training, technical assistance, consultation, and periodical supervision, with the intention that they can solve together problems faced by these retail business partners based on Hero Supermarkets experiences. The other partnerships involve agriculture, food industry, and home industries. Hero maintains a network with existing partnerships. The reason is that it is hard to find partners possessing good sense of entrepreneurshipmost prospective partners were daunted when presented with the high standard of products required by the supermarket, or with the rules and competition between suppliers. From the above partnerships, Mitra Bina is more supportive of the informal economy, because many of its participants are mini-market owners that have just started their own businesses. In the second type of partnership Mitra Usaha, HEROs partners are vegetable farmers and cow breeders. To keep up with the required standards of HERO Supermarket, HERO develops the ways and guidance to induce knowledge on them on matters such as plant seeds, packing process to maintain freshness of products, etc. The criteria used by HERO in selecting business partners are that they should possess a strong drive and motivation to strive in producing goods up to the
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standard required by HERO, and be able to provide the goods continuously in the amount required by HERO In Mitra Usaha HERO does not offer financial support, rather they tend to focus on developing the partners skill and knowledge to produce good quality products. HERO requires products in large quantities, therefore partnerships with groups of farmers, rather than individual farmers can support their huge demands. One of the farmer groups engaged in a partnership with PT HERO Supermarket is Kelompok Tani Pacet Segar.35 Their partnership started in 1991, when HERO was on a field survey to select a vegetable supplier. The group, which consisted of 20 vegetable farmers during that time, was then chosen as a HERO partner, At the beginning of the partnership, the farmers were given complete guidance from selecting good seeds all the way to packing method to produce vegetable according to the required standards of HERO. Gaining additional knowledge in producing better fruits and vegetables were one of the advantages enjoyed by these farmers. They also benefited in marketing, because there was a definite buyer and also in obtaining bank credits, because HERO provided reference for them. However, apart from the advantages above, the relationship between HERO and the farmers group remains a common business relationship. There have been drawbacks for the farmers because of changes in technology and the increasing number of competitors in the same business. The members are decreasing because some of them are lured to sell their land to property developers. Currently there are only 10 members in the group, which has made it more difficult to meet the production quantity and quality required by HERO. It has been difficult to increase their profit margin because, among other things, the high demand to improve the quality and packaging, which resulted in escalated operations costs.
Small scale partnerships between shops and vendors

Two examples of partnerships in small-scale enterprises are provided below:
Snack vendors in Keris Galeri, Mal Puri Indah

Keris Galeri Puri Indah provides the space to sell snacks around the sitting lounge on the ground floor. The effort to set up the sitting lounge is intended to improve their services for customers. Various merchandises are sold around the sitting lounge, including snacks. Previously there were many vendors selling traditional cakes and sweets such as gulali, moulded sugar, kue pancong, kue ape, and kue cubit. However, only one vendor remains that of kue pancong. The rest of the vendors have stopped their business. Our interview with this vendor revealed that he had previously worked as a street vendor selling kue pancong. He was approached by one of his customers (apparently one of the managers of Keris Galeri) to move his business to Keris Galeri in Mal
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Puri Indah. The space allocated is 1.2 m x 1.5 m (1.8 m2). He has to provide his own display cart and cooking equipment. He has been selling the snack in the mall for five years. He earns roughly 5 times more than he earned as a street vendor. As an example he sells one cake for IDR 1,500, while the price at the street vendor is around IDR 300. According to the business agreement with Keris Galeri, as long as he sets aside 30% of his earning to Keris Galeri, they wont charge him for the rent.
Ragusa Ice-cream parlour

This is an example of where a formal business (ice cream parlour) can work together with an informal business (food street vendors). The legendary Ragusa Ice Cream Parlour, located in Jalan Ir H Juanda, Central Jakarta has established a partnership with informal economy actors for almost a century. There are four street vendors in front of Ragusa Ice Cream Parlour selling traditional food: satay, mie juhi and asinan Betawi (squid noodle and Betawi salad), otak-otak (fish cakes), and gado-gado (mixed salad with peanut sauce). Ragusa Ice Creak Parlour only sells ice cream and visitors can order food from the street vendors mentioned above. The partnership has been going on for a long time that is has turned into a historical relationship handed down from generation to generation, not only within the management of Ragusa, but also within the management of the street vendors. This is a mutually beneficial relationship between a formal and informal business. The street vendors pay an agreed amount of rent to the ice cream parlour for using the seats of the shop. Customers usually order ice cream from Ragusa and order their food from the street vendors. These street vendors are quite happy because Ragusa is a very popular ice cream shop with many faithful customers. The front of the shop is a good location for these street vendors. The four street vendors control the place, assuring that there are no other vendors and maintaining the cleanness of the area. Besides paying rent to Ragusa Ice Cream Parlour, they also pay a retribution fee to the local government of Jakarta.
Conclusions
The discussion above shows that the role of the private sector in supporting the informal economy is quite significant. The activities can range from philanthropic activities to pure business activities. Mutual benefit was present in all the case studies. However, they differ in form. In charitable activities that are beneficial for the target group (the poor and disadvantaged groups), the donator also benefited. As shown in the case of Citibank Peka, the social activities helped increase the public image of the bank. Also, by acting as intermediary agencies and by assisting Grameen Trust, Citibank Peka
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was able to increase their range of activities and number of target groups. NGOs also benefited from this arrangement, because they were able to obtain funds and also training from Citibank Peka. In the other case studies, business opportunities were dominant yet provided a win-win situation for both parties. By becoming a partner of HERO, local farmers were able to increase their knowledge and skills in farming, gain access to credit and enter the formal market for their products. On the other hand, HERO gained better quality products at reasonable prices for a long-term. In the case of Indofood, the various programs (training, BMC E-wallet card) helped small and informal entrepreneurs to enter the formal market. These case studies show that the private sector plays a major role in the transition of small entrepreneurs from informal to formal economies. Another significant factor is partnerships between the formal and informal economy. Although some programs may have begun as charity, the approach of the private sector towards the informal economy tends to be as partners (mitra).The partnership approach is deemed to be more empowering for the informal economy players than the donor-beneficiary approach.
Summary
This study has documented the experiences of civil society organisations, in particular NGOs and the private sector in supporting the informal economy. It has exemplified important lessons learned or good practices that can be used for further dissemination. In general, civil society organisations have played an important role in empowering poor communities and supporting their shift from the informal economy to enter the formal economy. The visions and missions of NGOs are mainly to conduct social activities to serve and empower the community, in particular the poor and women. Their activities included building skills and knowledge in small-scale business development through training and technical assistance, and providing credit to established groups (KSM and MUM). This study identified three patterns of how NGOs generate funding to support their programs for the informal economy. The first pattern is building self-reliance by integrating economic interests in their social activities as the example set by Bina Swadaya. Their activities include not only providing training and credit to local farmers, but also publishing Trubus magazine and conducting agro-tourism programs that benefit the public. The second pattern is gathering and managing funds from the public, as well as from private companies that are used to assist poor communities. This approach was used by Dompet Dhuafa by collecting charity and distributing it to those in need. Gaining the trust of the public was a key factor in gathering funds. Without trust, it is unlikely that the public would donate their charity regularly to this organisation. The third pattern is working together with donor agencies. This approach is different from the donor-grantee relationship,
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because donors are now considered partners. NGOs join in networks with donor agencies such as Grameen Trust and the bank (through PHBK) to support their cause and activities. While NGOs focus mainly on social activities, the private sectors activities in supporting the informal economy range from charity-based to community empowerment. The principle of mutual benefit is always the basis of their partnership with the informal economy, even though it will not be difficult for companies with strong financial ability to establish a pure socially oriented effort. These benefits are not only direct benefits such as the increased sales of products (as an example Bogasari Flour) or the guarantee of a buyer (for the farmers selling to Hero), but also indirectly such as the projection of a positive image for the company. For Citibank Peka, the social activities created a positive image for the company that they were not an ivory tower. Citibank Peka also worked together with NGOs because they could reach a wider target group without having to set-up their own specialized institution. The informal economy also benefited from these partnerships. By joining in the BMC-E wallet card program and becoming a partner of HERO, they were able to gain credibility of the bank. This was also a process of transition from the informal economy to the formal economy. In executing these social activities, private companies applied three difference institutional arrangements. The first is by assigning an internal division of the company to deal with their social activities. In some cases this division is the marketing or the external relations division of the company. The second arrangement is by establishing a foundation/organization to manage their social obligations, detached from the parent company. This was adopted by Citibank through the establishment of Citibank Peka. The third arrangement is by entrusting the management of social funds or activities to a competent institution. Citibank Peka distributes funds from Grameen Trust to NGOs that are competent to distribute credit to informal economy actors, and works together with Yayasan Mitra Usaha to conduct capacity building training for NGOs. Other factors were also present to support the sustainability of CS support. For Bina Swadaya, besides their self-reliance as a financially independent institution, the strong leadership and commitment demonstrated by Bambang Ismawan was also a key factor to the sustainability of their organisation. The long-term commitment of its founders and members is also key in supporting sustainability. As an example, Citibank Peka involves its employees as volunteers in their programs, which has been the key factor in the success of their programs. Another strong factor for the sustainability is networking, such as developed by Dompet Dhuafa with small-scale business partners. Over time, this network has assisted many small-scale and informal businesses to grow and develop. These examples have demonstrated the significance of the role of civil society in supporting the informal economy. Civil society organisations can play various roles in supporting the informal economy, depending on their resources and the socialpolitical environment. It has also shown the intertwined relationship between civil society and the market economy that needs to be acknowledged when formulating policies and creating programs to assist the informal economy.
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Endnotes
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This report uses the term informal economy rather than informal sector. Refer to discussion in on page 76 Understanding the informal economy. The numbers are taken from SAKERNAS (Central Agency of Statistics Labor Force Survey) 1998 as cited in SMERU, Labor Market Adjustment as a Response to the Crisis, No. 07/August 1999. For comparison, citing the BPS data, William House (Decent Work Deficits in the Informal Economy in Indonesia, 2003) reports that of the total 89.5 million work-force in Indonesia in 2000, 33% (29.5 million) work in the formal economic activities while the other 67% (60 million) earn their living from the informal economy. The data come from SAKERNAS 2001 as cited in Bappenas, Upaya Penanggulangan Kemiskinan di Perkotaan: Potensi dan Penanganan Sektor Informal di Kota Besar, 2002. Some experts as well as government officials have indicated that the national economy has to grow at least 7% to be able to absorb the annual new workforce, and at even higher rate to be able to also absorb those who currently unemployed or underemployed. The types of employment in the informal economy in each sector vary in each country. In Indonesia street vendors referred to as pedagang kaki lima (abbreviated PKL) and the trading sector, street (street vendors, asongan), manufacturing (repair shops, garment), construction (mandor, tukang), transportation (becak, ojek), agriculture (buruh tani) and services (scavengers, house helpers, newspaper boys, car jockeys, umbrella boys). Perera 1994 citing Lubell 1991. Sinar Harapan, 3 October 2003. In 1996 there were 80 locations in Central Jakarta, 48 locations in West Jakarta, 25 locations in North Jakarta, 53 locations in South Jakarta and more than 41 locations in East Jakarta. These actions are justified by Local Regulation, Perda no. 11/1988 on Public Order, which stipulates that public space (riverbanks, pedestrian ways, streets, parks) are forbidden for trading activities or housing. ibid. Source Eldridge (1995) and Budiman (1998) Source: Eldridge (1995) and Hadiwinata (2004) Source: Eldridge (1995), Hadiwinata (2004) and Budiman (1998) T.M. Lubis (1993) In search of Human Rights: Legal-Political Dimensions of Indonesias New Order, 1966-1990, PT Gramedia, Jakarta. PIRAC (2002) Investing in Ourselves: Giving and Fund Raising in Indonesia, Public Research and Advocacy Centre with support from Asian Development Bank, The Asia Foundation, Nippon Foundation and USAID, Philippines. Gerakan Pancasila or the Pancasila Movement is a civil society movement in the late 1950s to support social-economic activities and build the social cohesiveness of civil society, which had been politically segregated. Sularto (2003) Bina Swadaya, LSM dan Masyarakat Warga Kait-mengkaitnya secara sepintas in Kemiskinan dan Kemandirian,k catatan perjalanan & refleksi Bina Swadaya, Primahendra, Nggao and Martono (eds), Yayasan Bina Swadaya, Jakarta. Source Bina Swadaya website <http://www.binaswadaya.org> There are several types of consciousness: a) Passive consciousness: people know what is happening to them and around them as something they must accept b) Questioning consciousness: people are aware of what is happening to them and around them but question why it has happened to them instead of to others.
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Analytical consciousness: people not only question but also analyze the questions that they had been asking themselves. d) Active critical consciousness: is followed by a moral position to accept or refuse what has happened and whether it is an advantage or disadvantage to the wider community. This consciousness is followedby critical attitude and how to organize actions to support their position. Other types of participation may include: token participation, passive participation, participation by consultation, pariticpaiton for material incentives, functional participation, and interactive participation. The highest form of participation is selfmobilization. Source: http://www.binaswadaya.org accessed 1 June 2003. Formerly referred to as LPUB (Lembaga Pengembangan Usaha Bersama) or the Mutual Business Development Institution. References for Dompet Dhuafa are from their website http://www.dompetdhuafa.or.id, PIRAC (2002) Investing in ourselvesGiving and Fund Raising in Indonesia, and The minimum requirement to be eligible to pay zakat is if the person has an annual savings equivalent to 85 grams of gold. Syariah is an agreement between parties for managing money or funding a business based on Islamic laws. The basic principals of syariah banking are partnership and profit-sharing. Novib, the Dutch Organisation for International Development Co-operation, works to ensure that poor people have access to basic rights by means of structural poverty alleviation and emergency aid. Novib co-operates as much as possible with local organisations across the world. Novib sees microfinance as an instrument to eradicate poverty and empower the poor. It is of the opinion that income generating activities are often better served by a tailor-made financing approach that comprises of instruments such as loans, guarantees and other securities. The Novib Financial Services Unit predominantly finances viable microcredit institutions and has beneficiaries in 25 countries in Asia, Eastern Europe, Latin America and Africa. Source: SMERU newsletter Edition 7/2003 http://www.smeru.or.id/newslet/2003/ed07/ 200307brief.htm Source: Grameen Dialogue Newsletter, Issue 54, April 2003 http://asp.grameen.com/dialogue/dialogue54/regularfl2.htm Source: Citibank Peka website: http://www.citibank.com/indonesia/gcb/english/aboutus/home.htm Source: YDBP website:http://www/ydbp.com. The ten regional offices are located in: Sukatani and Pebayuran in the Bekasi regent; Batujaya and Pedes in the Karawang regent; Aryawinangun, Babakan, Cileduk and Losari in Cirebon regent; and Banjarsari and Pangandaran in the Ciamis regent. Interview with Sukwanti, SME Development Assistant Manager PT. Indofood Sukses Makmur Tbk, Bogasari Flour Mills Rasyad, Retnowati and Purba (2003), Peluang Bisnis Makanan Berbasis Tepung, Lengkap dengan Cara Pembuatan, Gambaran Usaha dan Pusat Pelatihan, Elex Media Komputindo, Bogasari and Kelompok Gramedia, Jakarta. Sinar Harapan (18 October 2003), Bank Permata dan Indofood sepakat kembangkan UKM (Bank Permata and Indofood agree to develop UKMs), Rubrik Usaha Kecil dan Menengah. Interview with Untung Kartika, PT HERO Supermarket Tbk Interview with Parman (farmer), partner of PT. HERO Supermarket Tbk
c)
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e would like to thank the following partners for their efforts in implementing the award winning projects. As a result of their dedication and indomitable spirit, we have been able to map out the road to improving lives in the informal economy, creating options for local governments, private sector and civil society organizations in supporting and improving the conditions of living and working within the informal economy. Our sincere gratitude goes out to: The UNDP Country Office Team in Malaysia The UNDP Country Office Team in the Philippines The UNDP Country Office Team in Sri Lanka The UNDP Country Office Team in Pakistan The UNDP Country Office Team in Bangladesh The UNDP Country Office Team in Indonesia The UNDP Country Office Team in Thailand Richard Leete, Resident Representative, UNDP Malaysia Maxine Olson, Resident Representative, UNDP India Anis Yusal Yusoff, Assistant Resident Representative, UNDP Malaysia Anwar Fazal, Senior Regional Advisor, UNDP-TUGI Erna Witoelar, Senior Regional Advisor, UNDP-TUGI Sri Husnaini Sofjan, Programme Manager, UNDP-TUGI Leo Fonseka, Management Resources for Good Governance (MaRGG), Sri Lanka Bernadia Irawati Tjandradewi, Programme Manager, Citynet Sunil Kumar Singh, Director, Ministry of Urban Development & Poverty Alleviation, India Somsook Boonyabancha, Director, Community Organisations Development Institute, Thailand Evi Hermirasari, The Urban and Regional Development Institute, Indonesia Geraldine R. Matabang, TAO-Pilipinas, the Philippines Ruhan Shahrir, Universiti Bangsar Utama, Malaysia Sumaira Gul, The Alfalah Development Organization, Pakistan Jesse M. Robredo, Mayor, City Government of Naga Reuel Oliver, Executive Director of the Naga City Investment Board, Philippines Sanjay Jaju, Collector and District Magistrate, West Godavari District, India Wenceslao Pewee Trinidad, Mayor, Pasay City Government Mr. Rolando A. Londonio, Cooperative Development Officer, Pasay City Government Asif Farooki, Principal Officer, Waste Busters, Pakistan Rogelio P. Antalan, Mayor, City Government of the Island Garden City of Samal Cleto Bravo Gales, Jr., City Administrator, City Government of the Island Garden City of Samal Syed Arif Haider, Bangladesh Mohammad Ali Hossain, Bangladesh Dari Nuk Sudarsih, Financial Coordinator, Kembangpala, Indonesia Prathueng Chauykliang and Chamniern Woratchayphun, Institute for Social Research and Action, ISRA, Thailand Vinay D. Lall, Director, Society for Development Studies, India Wicaksono Sarosa, The Urban and Regional Development Institute (URDI), Indonesia K.A. Jayaratne, President of SEVANATHA Urban Resource Centre, Sri Lanka
The Urban Governance Initiative (TUGI) was a regional project developed and funded by the United Nations Development Programme (UNDP). The implementation phase of the project spanned from October 1998 to December 2004, and was built upon an additional 6 years of investment in good governance via the Asia Pacific 2000 project and Urban Management Programme in Asia and the Pacific (UMPAP). TUGI was an action-oriented initiative that promoted better urban governance through: Institutional capacity building; Providing policy advisory services; Enabling innovations of tools and methodologies for improved urban governance; and Ensuring the dissemination of information and promotion of collaborative networking on all of the above, within and between cities in the Asia Pacific region. TUGI worked with mayors, governors, civil society organizations, city administrators, private sector agencies and other city stakeholders towards improved urban service delivery. TUGI promoted the five principles of livable and sustainable cities, being: Social Justice, Ecological Sustainability; Political Participation; Economic Productivity and Cultural Vibrancy. The Urban Governance Initiative (TUGI) concluded its project period as of 31st December, 2004.
For further information, please contact:
The Governance Practice Team Leader Regional Centre in Bangkok United Nations Service Building, 3rd Floor Rajdamnern Nok Ave. Bangkok, Thailand Email: regionalcentrebangkok@undp.org Phone: (662) 288 2129 Fax: (662) 288 3032 Mailing Address: Regional Centre in Bangkok c/o UNDP, GPO Box 618 Bangkok 10501 Thailand

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The Urban Informal Economy

Initiatives Innovations Inspiration

Book & Layout Design : Michael Voon <amx@tm.net.my> and

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INITIATIVES, INNOVATIONS, INSPIRATION

Contents Foreword by Anwar Fazal

Chapter 1 Chapter 2 Chapter 3

The Urban Informal Economy

Senior Regional Advisor The Urban Governance Initiative (TUGI)

INITIATIVES, INNOVATIONS, INSPIRATION

The Urban Informal Economy

INITIATIVES, INNOVATIONS, INSPIRATION

Chapter 1 The TUGI Awards

The Urban Informal Economy

INITIATIVES, INNOVATIONS, INSPIRATION

The Urban Informal Economy

INITIATIVES, INNOVATIONS, INSPIRATION

Chapter 2 Why the informal economy?

The Urban Informal Economy

INITIATIVES, INNOVATIONS, INSPIRATION

What are the challenges?

The Urban Informal Economy

INITIATIVES, INNOVATIONS, INSPIRATION

The Urban Informal Economy

What can local governments do?

INITIATIVES, INNOVATIONS, INSPIRATION

The Bellagio International Declaration of Street Vendors

The Urban Informal Economy

INITIATIVES, INNOVATIONS, INSPIRATION

Whos doing what, where and how?

The Urban Informal Economy

ii. iii. iv. v.

INITIATIVES, INNOVATIONS, INSPIRATION

The Urban Informal Economy

2. The International Labour Organization (ILO) 34

INITIATIVES, INNOVATIONS, INSPIRATION

3. The Bretton-Woods Institutions

The Urban Informal Economy

INITIATIVES, INNOVATIONS, INSPIRATION

The Urban Informal Economy

INITIATIVES, INNOVATIONS, INSPIRATION

The Urban Informal Economy

INITIATIVES, INNOVATIONS, INSPIRATION

The Urban Informal Economy

INITIATIVES, INNOVATIONS, INSPIRATION

The Urban Informal Economy

INITIATIVES, INNOVATIONS, INSPIRATION

Legal Issues and Challenges

The Urban Informal Economy

Financial and Human Resource Issues and Challenges

INITIATIVES, INNOVATIONS, INSPIRATION

Thirteen Ideas for Local Government Action

The Urban Informal Economy

INITIATIVES, INNOVATIONS, INSPIRATION

The Urban Informal Economy

INITIATIVES, INNOVATIONS, INSPIRATION

The Urban Informal Economy

INITIATIVES, INNOVATIONS, INSPIRATION

Chapter 4 Lessons learned - Factors to successful up-scaling

The Urban Informal Economy

2. Waste Busters Gujrat Sanitation Project Gujrat, Pakistan (2002)

INITIATIVES, INNOVATIONS, INSPIRATION

The Urban Informal Economy

INITIATIVES, INNOVATIONS, INSPIRATION