Home business needs support

Handicraft products being dried in the sun in Vi Thang Commune in the southern province of Hau Giang's Vi Thuy District. — VNA/VNS Photo Duy Khuong

HA NOI — It's time for government agencies from developing countries, including Viet Nam, to issue specific support policies to further benefit the informal sector, which has been neglected for a long time, an international conference heard.

Speaking at the opening ceremony, Deputy Minister of Labour, Invalids and Social Affairs Nguyen Thanh Hoa said that the informal sector in Viet Nam had appeared very early on, when the economy shifted from a centrally planned one to a market economy.

The sector, which covers economic activities that are neither taxed nor monitored by the government, helped create jobs for many labourers, thereby eliminating hunger and reducing poverty, especially as the global economic crisis was causing job losses and restructuring the labour force.

Despite its predominant economic weight in developing countries, the informal sector and informal employment were still considered a "huge black hole" in general social and economic knowledge.

According to the General Statistics Office's recent survey on more than 170,000 business households, informal employment, which included all workers not covered by any social insurance scheme, accounted for 82 per cent of the work force.

In Ha Noi and HCM City alone, the informal sector created jobs for one-third of their labour forces, whose average age ranged between 39 and 40 and who had a relatively low educational level.

With an average of 1.5 people, the informal production unit was rather small. Seventy per cent of these businesses employed only one person.

Thirty-seven to 40 per cent of the informal households carried their activities in mobile stations and had no access to basic public services like electricity, water or telephones.

Their income was equal to only two-thirds of the formal sector and very inequitably distributed.

However, the informal sector still made up 12 per cent of the added value of the two cities' economies.

Despite its considerable contributions, the informal sector was regarded as a sideline activity, as it had few connections with other sectors of the economy—75 per cent of its products served the informal households themselves, Le Van Duy, deputy head of the GSO's Institute of Statistical Sciences, said.

The research on the country's two biggest cities showed the importance of the informal sector in generating jobs and contributing to the economy, but it still received little attention from the authorities, Duy said.

Solutions

Another economic reform should be conducted. Traditional tools to regulate the labour market, such as raising the minimum wage and social insurance, were not applicable to the informal sector.

The informal workforce had low levels of education, so proper job training was necessary to raise output and help the workforce switch over to the formal sector, Duy suggested.

Experts from the University of Copenhagen, John Rand and Nina Torm, also highlighted the benefits of formalisation, saying that becoming officially registered led to an increase in firm profits, investments and access to credit.

The status of workers would also be improved when companies shifted out of informality, as the companies would be more willing to invest in their workers with the hope that productivity would be raised and business stability maintained, they said.

However, to encourage firms to register formally, firm owners' awareness of the benefits of the formal sector should be raised and the Government should reduce cumbersome registration procedures, they stressed.

Experts also conducted studies on the relationship between immigrants and the informal sector, finding that the immigrants played an important part in the informal sector.

Huynh Truong Huy from the Centre for Migration and Intercultural Studies at Belgium's Antwerpen University said that the informal sector created jobs for most of the unskilled and immigrant workers in rural areas.

Therefore, policies for vocational training and long-term residence registration were very important for the immigrants to be employed with higher living standards in urban areas.

Other policies recommended by experts were giving them access to credit and bigger markets, encouraging the establishment of associations for informal businesses to share their experiences, collecting taxes to re-invest in the sector and to reduce red tape and avoiding the issuance of policies that would negatively affect the performance of the sector.

The two-day conference was held by the Vietnamese Academy of Social Sciences and the French Institute of Research for Development in partnership with the General Statistics Office, the Ministry of Labour, Invalids and Social Affairs and international organisations. — VNS