When it comes to Nigeria’s vast informal sector, Nigerian public officials can be astonishingly candid. The executive director of the Nigerian Export Promotion Council (NEPC), David Adelugba, said at a recent press conference that most of the Nigerian products sold outside the country are not officially exported out of the country.
“Most of the trade done in the export sector are done through the informal means and this affects the level of development in the sector because the government does not have a record to know how the sector is thriving and how much it can contribute to the nation’s development,” Mr. Adelugba said. (“The numbers don’t add up,” 234Next.com, October 21, 2009)
On average outside the OECD, it takes 36 days, eight procedures, and fees adding up to over three times average annual income per capita just to register a business, according to the World Bank’s Doing Business 2010 Report. In India, average registration takes thirteen procedures, 30 days, and nine times annual income per capita – to say nothing of bribes. Fortunately, the human spirit’s resiliency isn’t keen on surrendering to such prohibitive barriers. Unregistered enterprises have long been ubiquitous in emerging markets such as India. It should come as no surprise then, that despite India’s accolades for growth and development, according to an International Labor Organization (ILO) report 93 percent of India’s workforce remains in the informal sector.
With headlines coming daily about an apparent Taliban resurgence in Afghanistan, raising comparisons to past conflicts with terrorist movements, it’s worth remembering how such movements were successfully undermined in the past:
In 1966, Roy Prosterman, then a professor of property law at the University of Washington, published a paper called “How to Have a Revolution Without a Revolution.” It proposed small-plot land reforms to help the rural poor. At that time, U.S. policymakers were watching how easily the Viet Cong was able to recruit landless peasants. They tapped Prosterman and brought him to Vietnam, where he drafted legislation that provided land ownership to 1 million tenant farmers. Implemented between 1970 and 1973, the “land to the tiller” program came too late to stop the war–but it cut Viet Cong recruitment by 80% (emphasis added)….read the complete article from Forbes.com
The same strategy worked to undermine the Shining Path Movement in Peru, as documented in The Other Path. People aren’t born violent, but too often they’re born into conditions that leave them no other choice to voice opinions and satisfy needs. Property rights and markets are a gateway to choices beyond violence, through which former terrorist foot soldiers have marched en masse before. Will they get the chance to do it again?
This week, The Jakarta Post posted a story about Indonesia’s trash. Thanks to Indonesia’s entrepreneurs, much of that waste quickly turns into wealth for Indonesia’s blossoming recycling sector. As the story reports, Indonesian manufacturers produce 2.1 million tons of raw virgin polymers per year while producing 3.8 million tons of plastic final products per year. The remaining tonnage of raw polymers for production come from two sources: imports priced according to exchange rates and the global price of oil, and recycled polymers from local producers. Much like most developing markets, formal institutions haven’t caught up with the people they govern, leaving the all the action to the informal sector:
Entrepreneurs and leaders are a special breed of people who by the virtue of their existence, keep our world going round. Since I discovered the nature of entrepreneurship some ten years ago, I have been fascinated by entrepreneurs and entrepreneurship….There are certain attributes of entrepreneurs that can never be taught. The entrepreneur acquires it along the way. These traits are confidence, courage, tenacity, risk taking, hard work, honesty and determination. No one can teach you these traits. You learn them along the way. And only those who get them succeed.
The words above come from Saeed Mahmoud Jajah of Ghana, out of his first place winning essay in the category of “Entrepreneurship and leadership,” in CIPE’s 2009 International Youth Essay Contest. When the 2009-2010 academic year is complete, Mahmoud will have a B.S. in management studies from Central University in Accra, Ghana. When the 2009-2010 academic year is complete, Mahmoud will continue to live out the challenges he puts forth to his fellow Ghanaian youth, through his winning essay.
At a project cost of less than $20 per student (including administrative overhead), the Tashabos program reached 9,500 students throughout 24 high schools in 2008. In 2009 the program is slated to reach over 22,000 more students in 44 high schools in Kabul and neighboring provinces. A majority of these students are female.
Oftentimes the Tashabos textbooks are the only ones that Afghan students can keep for themselves—although they certainly don’t keep the knowledge and skills they’ve acquired to themselves. Students return home to help family businesses or start new ones, putting their classroom experience immediately to use in the real world, again and again.
Tashabos exemplifies CIPE’s model of putting skills and tools at the hands of people in developing and conflict-ridden countries, helping to unleash their own ideas and solutions to development and reconstruction. And, as you can tell by the feature story below from Britain’s Sky News daily newscasts, women and girls are not backing down despite the unique obstacles they face.
For many households around the world, living paycheck-to-paycheck is a luxury out of reach. When household income is $2 a day or less, very rarely does it come in regular increments. Such households must be creative in how they manage to put food on the table every night and pay for other assorted necessities. A glimpse of their balance sheets or assets won’t provide sense of their financial creativity. The turnover in cash flows from savings to loans and back again doesn’t register; there are far more transactions per day that don’t ultimately end up on a balance sheet. Not that anyone has time to write things down – until recently.
A quartet of co-authors actually did manage to write everything down—every wage earned, every payment, every deposit, every loan, every financial transaction. Using interviews with over 250 households twice a month for about a year each, the quartet constructed detailed financial diaries documenting what life is like on $2 day. The first and most important conclusion was that when these households do receive income, very rarely is it ever spent as soon as it is earned. Human creativity reaches a high watermark in how these households use mostly informal financing to smooth out consumption for daily needs, insure against risk, and save for major expenses.
The CIPE Development Blog provides coverage of the Center for International Private Enterprise and its partner network at work -- highlighting successes, drawing out lessons from failure, and exploring the broader issues of political and economic development. For more information visit CIPE.org.