'Entry barriers key reasons for people to remain in informal sector'

Speakers at a discussion forum on 'The Informal Enterprise in Pakistan: Challenges for Growth' said that the informal sector in Pakistan has grown more rapidly than the formal economy over the last three decades, and the size of the informal sector is not less than one-third of Pakistan's GDP.
The discussion forum was jointly organised by the Centre for International Private Enterprises (CIPE) and Karachi Chamber of Commerce and Industry here on Monday. The forum participants said that the policy environment surrounding the informal sector is characterised essentially by three parameters--taxation, regulation and private property rights.
"Property rights and tax reforms are needed at the policy level in Pakistan for encouraging informal businesses to become formal, considered as the most important challenges faced by the business community", they added. They agreed that the debate on the informal sector should move beyond the traditional referral to 'black economy' that may imply criminality and should acknowledge that the informal enterprises may be classified as 'extra-legal'.
As many as 36 key private sector stakeholders, including representation from Chamber of Commerce and Industry, State Bank of Pakistan, microfinance institutions, informal businesses and the media attended the discussion. Speakers included Moin M Fudda, Country Director, CIPE Pakistan, Siraj Kassim Teli Chairman of the Businessmen Group, Abrar Ahmed President KCCI, Andrew Wilson Regional Director CIPE Washington and Ali Salman from Alternative Solutions Institute.
Siraj Kassim suggested that private sector has got together on one platform to say that collective action is needed to encourage that informal sector must follow standards, which will help their graduating into formal business. Andrew said that research has consistently shown that entry barriers, such as lengthy registration requirements, licensing and inspection requirement and complicated taxation policy, are the key reasons for people remaining in the informal sector.
The participants suggested to form a discussion forum to initiate an in-depth dialogue between the government and the private sector. Similar roundtables may be held with the bureaucracy, regulators and other relevant government agencies to apprise them of the dynamics of the informal enterprises.