Does the informal economy benefit the poor?
Women Roadside Sellers in Madang Province of Papua New Guinea
Author: Tomas Freitas
Introduction
The tendency for rural people to engage in multiple, informal occupations is widespread. Women often take on small business training and technical assistance, are encouraged to form stakeholder associations, and to participate in additional community-level activities sponsored by various projects (Asian Development Bank 2002). The proliferation of informal professions in developing countries has been seen both as a phase in the process of development and a negative path leading a country back into underdevelopment (Arizpe 1977).
Both of these positions are often subscribed to by modernist scholars, who prefer the small informal sector to take a step-by-step approach in developing their business, with the possibility of access to more credit, which can be provided by big institutions with high interest. Is it possible that rural women in the informal economy will one day become rich and living in an affluent society? This is unlikely; the reason why many engage in the informal economy is because they are marginalised by the modern economy, which has left them with no choice.
Presenting the case study of roadside sellers in Madang province in Papua New Guinea, this essay will explore a number of reasons for why the informal economy does benefit the poor.
The paper will in particular focus on the way that the informal sector provides economic benefit to women in rural areas.
Definition
The informal economy has been described in various ways. Writing about the informal sector in Sri Lanka, Sandaratne (2002) explains that the informal economy has various definitions including,
the ‘unorganised sector’, ‘unregistered economy’, ‘third economy’, ‘parallel economy’, ‘non-institutional’, ‘bazaar economy’, ‘lower circuit’, ‘black economy’, ‘shadow economy’, ‘underground economy’, ‘peasant form of production’, ‘peddlers’, ‘the unremunerated’, (Sandaratne, 2002,4).
This paper will adopt a definition of the informal economy which applies to the case study of roadside sellers in Papua New Guinea, and will refer to the informal economy variously as the ‘unregistered economy’, ‘non-institutional economy’ and as a ‘peasant form of mode of production’ as described by Karl Marx in his economic model ‘relations of production’, concerned with how people are organised for the purpose of producing goods and services (Marx, cited in Stilwell, 2002). ‘Unregistered economy’, refers to the characteristic of the informal economy as being mobile, moving from one place to another, making registration or documentation of their existence difficult (Kari, 2005) and ‘non-institutional economy’ because they are not institutionalised, or integrated into any legal entity in the form of big institutions. Some, however, have organised themselves into small cooperatives whose members are composed of families and neighbours (Gustafsson, 2002); these small cooperatives have existed in the rural economy as a type of social protection (Ratuva, 2010). A peasant form of ‘mode of production’ according to Karl Marx is a type of economic structure of a society which focuses only on the social organisational aspect of the production process (Marx, cited in Mackenzie, 1984). In other words, this is a relationship of production which is concerned only with how these rural farmers have organised and produced their crops.
Demographics
Papua New Guinea is a poor country in the Pacific region. According to the census data of 2008, the total population is about 6.468 million, with a growth rate of 2.7%. The annual Gross National Income per person is $1.040 and the real GDP annual growth rate is 4.5%. The percentage of the population below the poverty line is 39.6%. Enrolment in primary education is 63.6%, with the balance of gender parity in primary education 91 girls for every 100 boys. The mortality rate for children under five years old is 69 per 1000 births, and the maternal mortality rate is 733 per 100.000 live of births (Ausaid, 2011). The benefits that the informal economy can bring to poor farmers are substantial.
Social and Cultural Advantage
Most of the Pacific Island communities such as Papua New Guinea, Fiji, Samoa, Solomon Islands, Vanuatu, Tonga, Tuvalu, Kiribati, Nauru, Marshall Islands, and Cook Islands, have a strong dependence on subsistence agriculture, which is closely linked to their social context. The culture of exchange has been practically implemented generation by generation in this society as a means of building social and economic relationships. In Vanuatu about 80 percent of the population is engaged in the informal economy in some way, which is based on commodities exchange and social networking activities (Ratuva, 2010). The informal economy, based on subsistence agriculture, is a strong component of these communities’ social and cultural context. One of the fundamental advantages of the informal economy in these Pacific Island countries is that the majority of the population live on thousands of hectares of land under customary land tenure.
Customary land tenure
Customary land refers to ‘communal ownership’, and land boundaries are normally based on rivers, trees, or even mountains, which have no official demarcation and the land title has not been registered under the formal law. The title is however recognised by custom through the elders, which usually does not allow the sale of land to persons outside the kin group or other than relatives, and also prevents individual or groups selling the land to foreigners (Cooter, 1991).
Customary tenure in PNG accounts for about 97 percent are of the land (47 million hectares). Less than three percent (1.2 million hectares) is alienated land, meaning that it does not belong to the customary landowners. Of this three percent, about 125,000 hectares is owned by missionaries or churches and about 950,000 hectares belongs to the government. The government has also leased to other parties about 120,000 hectares, under 99 year leases (Trebilcock, 1983). The 97 percent of land owned by customary tenure forms the livelihoods of around 85 percent of the 6.7 million people of PNG (Bismarck Ramu Group, 2009). As far back as 1990, about 7 million hectares of land were used for cultivation, which at that time was about 1.5 hectares per person (Anderson, 2006b). In other words, 7 million hectares were utilised for subsistence-based agriculture, which the majority of the people use for plant-food crops.
The existence of customary land tenure has made it possible for many rural farmers to base their subsistence on plant food crops, which is beneficial in a number of ways. Plant-food crops form part of the economic structure of the society; they are important because if at the end of the day the crops are not bought by consumers, they will be consumed at home. In addition, plant-food crops are not for the export market, which means that there is not demand to produce huge quantities, meaning that rural subsistence farmers do not need to borrow a lot of money from microcredit institutions to meet the cost of production.
Women and the informal economy
There are two types of custodianship land applied in Papua New Guinea: the majority have adopted a patrilineal system, however some of the islands have implemented a matrilineal system. Under a patrilineal system, the senior male in the family has the right to determine and distribute land within the family. However, in some of the eastern islands, such as in the region of Milne Bay, only the matrilineal system is recognised, which means that women have control over the land. Men in this context can also have access to the land through their mothers, sisters or wives (Anderson, 2008).
In contrast to the World Bank opinion of traditional women hardly having access to land (Deininger, 2003), the case of customary land in PNG is different. For instance a woman from Madang province has testified that even though she is married to her husband from another province, when she returns to her father’s village she is still respected and still has access to land title, no matter where she is living (Bismarck Ramu Group, 2009).
The advantages of having access to land and the consideration of the culture of exchange as mutual gifts has benefited women in the informal sector in Papua New Guinea, especially rural women in Madang province. Despite utilising four to six hectares of land for oil palm farming, and two to four hectares for vanilla and cocoa plantations, most rural farmers still have one to two hectares just for the cultivation of crops and vegetables (Anderson, 2010). The average cash income from palm oil Palm is around 4,000 kina per year, which is less than cocoa and vanilla cash returns of 14,000-16,000 kina per year, and cash crop returns of around 13,500 kina per year (Anderson, 2006a).
Higher income
Women and men in PNG including in Madang province also have the potential to generate more income by participating in the informal as opposed to the formal economy. Activity in the informal economy has the potential to earn more income compared to national standard wages. In Madang province, a survey has been conducted which focuses on roadside seller activity in eleven different places. The Watta Rais roadside market has 30 sellers, Sausi has 40 sellers, Yakumbu 20 sellers, Usino 50 sellers, Mambu 70 sellers, Four Mile 200 sellers, Maiwara 13 sellers, Pau 120 sellers, Selon 40 sellers, Nagada 10 sellers and Baitabag 20 sellers, and the minimum average income per week in these eleven places is 138 kina higher than the national minimum wage which is only 37.20 kina per week (Anderson, 2008). These particular roadside sellers sell their local produce along the main roads, and target people who are travelling from one province to another (Ausaid, 2010).
According to a rural informal sector survey report, the informal sector income in four other provinces including Central, East New Britain, Morobe, and Western Highlands is three times higher than the normal national minimum wage. Daily activities that these informal sectors conduct are buying and selling fish, local transport, trade store, selling cattle, potatoes, cocoa, coffee, food crops, betel nuts and copra (Sowei, et al, 2003).
It might be asked why these roadside sellers do not want to sell their local produce at the normal local market; the fact is that they do not have a choice - there is not enough infrastructure at the local market that the government can provide to rural subsistence farmers (AusAid, 2000). Due to the difficulty of distance, some of the women who do sell at the marketplace have to organise themselves into groups for walking there together, and carry their produce on their heads to get to there, (Epstein, 1982).
The difficulty of accessing the local market and not having many local markets around is one factor that highlights the importance of the 47 million hectares of customary owned land in PNG. We might ask why the roadside sellers have set themselves up alongside most of the national roads. One of the reasons is because they are tired of fighting for a place in the regular marketplace, and also because many of these sellers live close to main roads, and they don’t have to pay too much for local transport to carry their crops and vegetables.
Interestingly, most of the sellers are housewives, who do multiple tasks by selling their local produce as well as looking after their children (Porter & Porter, 2008). Every day their husbands work in the fields, and some of them have other jobs as well such as working as labourers on construction sites or doing some other informal activity. Roadside sellers primarily sell local produce from their home farms including sweet potato, bananas, taro, coconuts, sugar cane, cassava, yams, sago, peanuts, aibika, betel nuts, eggs, chicken, lamb, pork, and rice.
Price control
Customary land tenure again proves to play an important part in the informal economy as regards price control. As the owners of the land, the roadside sellers are also able to control the price of their goods in the market by controlling the supply, because most of the crops and vegetables are seasonally grown. These roadside sellers also know how much they will charge for each specific crop after deducting their labour costs, including costs for local transport to transport their goods to the market place or main road. Such a system is unusual from a neoclassical economic perspective, which always maintains that prices are determined by consumers, not sellers (Stilwell, 2002).
Sustainability
Inspired by the ability to control the supply in the market, it has given self-confidence to rural farmers to sustain their productivity. In contrast to large farms which use chemicals or fertiliser, these rural farmers only produce their own organic compost which is why they usually produce good quality crops and rarely experience delays in harvesting (Sillitoe, 1998). As a tropical country, typically most of the crops are seasonal, and the rural farmers generally know very well when it is time for them to start planting their seeds (Allen et al, 1995). This activity is repeated season by season and continues year after year, which is why such a system is well maintained and sustainable.
Secure and Protected
Because their system is well maintained and sustainable, it has protected the activity of roadside sellers from external intervention. The women roadside sellers of Madang are different to women in other countries. If we compare to women in Bangladesh, the microcredit institutions have exploited Bangladeshi women and maintained a strong patriarchal system (Karim, 2008). This is not the case in PNG, because rural women in PNG have always relied on their families’ contribution. The culture of exchange has been considered as mutual gifts, and this has become a barrier for external intervention such as the introduction of micro-credit or micro-finance.
The culture of exchange has been a part of rural economy activities, for example canoes are traded as gifts rather than commodities (Gregory, 1982). Such a form of commodity exchange has been discussed many years ago by great philosophers, for example according to Karl Marx (1867) in his social pre-conditions for commodity exchange:
“The reality of the value of commodities differs in this respect from Dame Quickly, that we don’t know “where to have it.” The value of commodities is the very opposite of the coarse materiality of their substance, not an atom of matter enters into its composition. Turn and examine a single commodity, by itself, as we will, yet in so far as it remains an object of value, it seems impossible to grasp it. If, however, we bear in mind that the value of commodities has a purely social reality, and that they acquire this reality only in so far as they are expressions or embodiments of one identical social substance, viz., human labour, it follows as a matter of course, that value can only manifest itself in the social relation of commodity to commodity. In fact we started from exchange value, or the exchange relation of commodities, in order to get at the value that lies hidden behind it. We must now return to this form under which value first appeared to us.” (Marx, 1867; 16).
If we analyse this paragraph and link it into Melanesian communities in Papua New Guinea and other Pacific countries, it shows that commodity exchange depends on the value of the commodity itself, and that this is determined by the social relation between two commodities. The ‘social relation’ in this case might refer to the culture of exchange that has been applied generation by generation as anthropologists referred to in ‘primitive societies’.
Another barrier that has protected this informal activity from external intervention is customary land tenure (Fingleton, 2004). The financial institutions such as microcredit and microfinance prefer to grant credit for individual land ownership rather than communal (Gosarevski, et al, 2004). Despite the existence of individual property rights, many attempts to introduce a land registration system by the government and western institutions have failed (Yala, 2006).
Conclusion
In this paper land has been identified as a fundamental structure of the rural economy, which has empowered subsistence rural agriculture and become a strong factor in economic production. In particular customary land tenure and women’s access to land in matrilineal societies such as that of Madang province in Papua New Guinea has been shown to benefit the poor. Supporting the view that the informal economy does benefit the poor, this essay has explored a number of points that support this view. These benefits are strongly contingent on the large basis of customary land ownership in Papua New Guinea. The informal sector in PNG has been shown to earn more income compared to average national standard wages. Sellers can control the price in the market, which is actually a counter argument to the neo-classical economy which maintains that consumers have the ultimate power in determining price. In addition, due to the basic subsistence agricultural system and the geographic condition of seasonal harvesting in PNG that is repeated year after year, a sustainable cycle of productivity has developed. The culture of exchange has become a barrier of protection from external intervention, and the collective ownership of land title has become an obstacle for financial institutions to implement their programs of borrowing and microcredit. The system of customary land ownership is a strong factor in the benefits that the informal economy can bring to rural subsistence farmers in Papua New Guinea. In some provinces, such as Madang, the matrilineal system that operates has benefited poor women, giving them more control over land and produce.
References
Allen, J, B., Bourke, M, R., & Hide, L, R., 1995. ‘The Sustainability of Papua New Guinea agriculture systems: the conceptual background’, Global Environmental Change, Vol 5, No 4, Pp 297-312.
Anderson, T., 2006a. ‘Oil Palm and Small Farmers in Papua New Guinea’, Report for the Centre for Environmental Law and Community Rights on the economic prospects for small farmers in PNG’s oil palm industry. Available from https://files.pbworks.com/download/dbes3v7EBj/np-net/12638881/Anderson%20(2006)%20Oil%20palm%20and%20small%20farmers%20in%20PNG,%20CELCR.pdf
Anderson, T., 2006b. ‘On the economic value of customary land in Papua New Guinea’, Pacific Economic Bulletin, Vol 21, No 1, Pp 138-152.
Anderson, T., 2008. ‘Women Roadside Sellers in Madang’, Pacific Economic Bulletin, Vol 23, No 1, pp. 59-73.
Anderson, T., 2010. ‘Land registration, land markets and livelihoods in Papua New Guinea’, Aidwatch. Available from http://www.aidwatch.org.au/sites/aidwatch.org.au/files/Tim%20Anderson.pdf
Arizpe, L., 1977. ‘Women in the Informal labor Sector’: The case of Mexico City, The University of Chicago Press. Vol. 3, No.1, pp 25-37
Asian Development Bank (ADB), 2002. Papua New Guinea Country Strategy and Program Update, 2003 – 05, Asian Development Bank, Manila. Available from www.adb.org/Documents/CSPs/PNG/2002 .
Australian Agency for International Development., 2000. ‘Income generation for the rural poor: The Australian aid program’s rural development strategy’, Available from http://www.ausaid.gov.au/publications/pdf/ruralstrategy.pdf
Australian Agency for International Development., 2010. ‘The Socio Economic Impact of AusAID Funded Road Maintenance And Rehabilitation On National Priority Roads in Ten Province of Papua New Guinea’, Available from http://www.pngtssp.com/publications/pdf/SEIS%20Report%20October%202010.pdf
Australian Agency for International Development., 2011. ‘Papua New Guinea: Country Profile’, Available at http://www.ausaid.gov.au/country/papua.cfm
Bismarck Ramu Group, 2009, ‘Defending Melanesian Land’, Available at http://www.youtube.com/watch?v=bmolHFFdNyc
Cooter, R., 1991. ‘Inventing Market Property: The Land Courts of Papua New Guinea’, Law & Society Review, Vol 25, No 4. Available at http://works.bepress.com/robert_cooter/42
Deininger, K., 2003, ‘Land Policies for Growth and Poverty Reduction’, A World Bank Policy Research Report, Oxford University Press, Washington. Available at http://info.worldbank.org/etools/docs/library/34919/landpoliciesexecsummary.pdf
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Flingleton, J., 2004. ‘Is Papua New Guinea viable without customary groups?’, Pacific Economic Bulletin, Vol 19, No 2, Pp 96-103.
Gosarevski, G., Hughes, H., & Windybank, S., 2004. ‘Is Papua New Guinea Viable with Customary Land Ownership?’, Pacific Economic Bulletin, Vol 19, No 3, Pp 133-136.
Gregory, C.A., 1982. ‘Gifts and Commodities’, Academic Press, London.
Gustafsson, B., 2002. ‘Rural Households and Resource Management in Papua New Guinea’, Resource Management in Asia Pacific Program, Canberra.
Kari, S, S., 2005. ‘The Origin and Setting of the National Goals and Directive Principles in the process of writing the Constitution of Papua New Guinea’, Centre for Social Change Research. Available from http://eprints.qut.edu.au/16071/1/Sam_Kari_Thesis.pdf
Karim, L., 2008. ‘Demystifying micro-credit: the Grameen Bank, NGOs and neoliberalism in Bangladesh’. Cultural Dynamics, Vol 20, No 1, Pp 5-29.
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Porter, J., & Porter, J., 2008. ‘The Markets of Madang Papua New Guinea’, Available at http://www.youtube.com/watch?v=96-gA8IGxqo&feature=related
Ratuva, S., 2010. ‘Back to basics: towards integrated social protection for vulnerable groups in Vanuatu’. Pacific Economic Bulletin, Vol 25, No 3, Pp 40-63
Sandaratne, N., 2002. ‘The Informal sector in Sri Lanka: its nature and extent and the impact of globalisation’, International Labour Organization, Geneva. Available from http://ilo-mirror.library.cornell.edu/public/english/region/asro/colombo/download/nmlfml01.pdf
Sillitoe, P., 1998. ‘It’s All in the Mound: Fertility Management Under Stationary Shifting Cultivation in the Papua New Guinea Highlands,’ Mountain Research and Development, Vol 18, No 2, Pp 123-134.
Sowei, J.W., Lahari, W., & Vatnabar, M., 2003. ‘Rural Informal Sector survey Report’, National Research Institute (Social and Environmental Studies Division), Port Moresby.
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Yala, C., 2006. ‘Rethinking customary land tenure issues in Papua New Guinea’, Pacific Economic Bulletin, Vol 21, No 1, Pp 129-137.
Women Roadside Sellers in Madang Province of Papua New Guinea
Author: Tomas Freitas
Introduction
The tendency for rural people to engage in multiple, informal occupations is widespread. Women often take on small business training and technical assistance, are encouraged to form stakeholder associations, and to participate in additional community-level activities sponsored by various projects (Asian Development Bank 2002). The proliferation of informal professions in developing countries has been seen both as a phase in the process of development and a negative path leading a country back into underdevelopment (Arizpe 1977).
Both of these positions are often subscribed to by modernist scholars, who prefer the small informal sector to take a step-by-step approach in developing their business, with the possibility of access to more credit, which can be provided by big institutions with high interest. Is it possible that rural women in the informal economy will one day become rich and living in an affluent society? This is unlikely; the reason why many engage in the informal economy is because they are marginalised by the modern economy, which has left them with no choice.
Presenting the case study of roadside sellers in Madang province in Papua New Guinea, this essay will explore a number of reasons for why the informal economy does benefit the poor.
The paper will in particular focus on the way that the informal sector provides economic benefit to women in rural areas.
Definition
The informal economy has been described in various ways. Writing about the informal sector in Sri Lanka, Sandaratne (2002) explains that the informal economy has various definitions including,
the ‘unorganised sector’, ‘unregistered economy’, ‘third economy’, ‘parallel economy’, ‘non-institutional’, ‘bazaar economy’, ‘lower circuit’, ‘black economy’, ‘shadow economy’, ‘underground economy’, ‘peasant form of production’, ‘peddlers’, ‘the unremunerated’, (Sandaratne, 2002,4).
This paper will adopt a definition of the informal economy which applies to the case study of roadside sellers in Papua New Guinea, and will refer to the informal economy variously as the ‘unregistered economy’, ‘non-institutional economy’ and as a ‘peasant form of mode of production’ as described by Karl Marx in his economic model ‘relations of production’, concerned with how people are organised for the purpose of producing goods and services (Marx, cited in Stilwell, 2002). ‘Unregistered economy’, refers to the characteristic of the informal economy as being mobile, moving from one place to another, making registration or documentation of their existence difficult (Kari, 2005) and ‘non-institutional economy’ because they are not institutionalised, or integrated into any legal entity in the form of big institutions. Some, however, have organised themselves into small cooperatives whose members are composed of families and neighbours (Gustafsson, 2002); these small cooperatives have existed in the rural economy as a type of social protection (Ratuva, 2010). A peasant form of ‘mode of production’ according to Karl Marx is a type of economic structure of a society which focuses only on the social organisational aspect of the production process (Marx, cited in Mackenzie, 1984). In other words, this is a relationship of production which is concerned only with how these rural farmers have organised and produced their crops.
Demographics
Papua New Guinea is a poor country in the Pacific region. According to the census data of 2008, the total population is about 6.468 million, with a growth rate of 2.7%. The annual Gross National Income per person is $1.040 and the real GDP annual growth rate is 4.5%. The percentage of the population below the poverty line is 39.6%. Enrolment in primary education is 63.6%, with the balance of gender parity in primary education 91 girls for every 100 boys. The mortality rate for children under five years old is 69 per 1000 births, and the maternal mortality rate is 733 per 100.000 live of births (Ausaid, 2011). The benefits that the informal economy can bring to poor farmers are substantial.
Social and Cultural Advantage
Most of the Pacific Island communities such as Papua New Guinea, Fiji, Samoa, Solomon Islands, Vanuatu, Tonga, Tuvalu, Kiribati, Nauru, Marshall Islands, and Cook Islands, have a strong dependence on subsistence agriculture, which is closely linked to their social context. The culture of exchange has been practically implemented generation by generation in this society as a means of building social and economic relationships. In Vanuatu about 80 percent of the population is engaged in the informal economy in some way, which is based on commodities exchange and social networking activities (Ratuva, 2010). The informal economy, based on subsistence agriculture, is a strong component of these communities’ social and cultural context. One of the fundamental advantages of the informal economy in these Pacific Island countries is that the majority of the population live on thousands of hectares of land under customary land tenure.
Customary land tenure
Customary land refers to ‘communal ownership’, and land boundaries are normally based on rivers, trees, or even mountains, which have no official demarcation and the land title has not been registered under the formal law. The title is however recognised by custom through the elders, which usually does not allow the sale of land to persons outside the kin group or other than relatives, and also prevents individual or groups selling the land to foreigners (Cooter, 1991).
Customary tenure in PNG accounts for about 97 percent are of the land (47 million hectares). Less than three percent (1.2 million hectares) is alienated land, meaning that it does not belong to the customary landowners. Of this three percent, about 125,000 hectares is owned by missionaries or churches and about 950,000 hectares belongs to the government. The government has also leased to other parties about 120,000 hectares, under 99 year leases (Trebilcock, 1983). The 97 percent of land owned by customary tenure forms the livelihoods of around 85 percent of the 6.7 million people of PNG (Bismarck Ramu Group, 2009). As far back as 1990, about 7 million hectares of land were used for cultivation, which at that time was about 1.5 hectares per person (Anderson, 2006b). In other words, 7 million hectares were utilised for subsistence-based agriculture, which the majority of the people use for plant-food crops.
The existence of customary land tenure has made it possible for many rural farmers to base their subsistence on plant food crops, which is beneficial in a number of ways. Plant-food crops form part of the economic structure of the society; they are important because if at the end of the day the crops are not bought by consumers, they will be consumed at home. In addition, plant-food crops are not for the export market, which means that there is not demand to produce huge quantities, meaning that rural subsistence farmers do not need to borrow a lot of money from microcredit institutions to meet the cost of production.
Women and the informal economy
There are two types of custodianship land applied in Papua New Guinea: the majority have adopted a patrilineal system, however some of the islands have implemented a matrilineal system. Under a patrilineal system, the senior male in the family has the right to determine and distribute land within the family. However, in some of the eastern islands, such as in the region of Milne Bay, only the matrilineal system is recognised, which means that women have control over the land. Men in this context can also have access to the land through their mothers, sisters or wives (Anderson, 2008).
In contrast to the World Bank opinion of traditional women hardly having access to land (Deininger, 2003), the case of customary land in PNG is different. For instance a woman from Madang province has testified that even though she is married to her husband from another province, when she returns to her father’s village she is still respected and still has access to land title, no matter where she is living (Bismarck Ramu Group, 2009).
The advantages of having access to land and the consideration of the culture of exchange as mutual gifts has benefited women in the informal sector in Papua New Guinea, especially rural women in Madang province. Despite utilising four to six hectares of land for oil palm farming, and two to four hectares for vanilla and cocoa plantations, most rural farmers still have one to two hectares just for the cultivation of crops and vegetables (Anderson, 2010). The average cash income from palm oil Palm is around 4,000 kina per year, which is less than cocoa and vanilla cash returns of 14,000-16,000 kina per year, and cash crop returns of around 13,500 kina per year (Anderson, 2006a).
Higher income
Women and men in PNG including in Madang province also have the potential to generate more income by participating in the informal as opposed to the formal economy. Activity in the informal economy has the potential to earn more income compared to national standard wages. In Madang province, a survey has been conducted which focuses on roadside seller activity in eleven different places. The Watta Rais roadside market has 30 sellers, Sausi has 40 sellers, Yakumbu 20 sellers, Usino 50 sellers, Mambu 70 sellers, Four Mile 200 sellers, Maiwara 13 sellers, Pau 120 sellers, Selon 40 sellers, Nagada 10 sellers and Baitabag 20 sellers, and the minimum average income per week in these eleven places is 138 kina higher than the national minimum wage which is only 37.20 kina per week (Anderson, 2008). These particular roadside sellers sell their local produce along the main roads, and target people who are travelling from one province to another (Ausaid, 2010).
According to a rural informal sector survey report, the informal sector income in four other provinces including Central, East New Britain, Morobe, and Western Highlands is three times higher than the normal national minimum wage. Daily activities that these informal sectors conduct are buying and selling fish, local transport, trade store, selling cattle, potatoes, cocoa, coffee, food crops, betel nuts and copra (Sowei, et al, 2003).
It might be asked why these roadside sellers do not want to sell their local produce at the normal local market; the fact is that they do not have a choice - there is not enough infrastructure at the local market that the government can provide to rural subsistence farmers (AusAid, 2000). Due to the difficulty of distance, some of the women who do sell at the marketplace have to organise themselves into groups for walking there together, and carry their produce on their heads to get to there, (Epstein, 1982).
The difficulty of accessing the local market and not having many local markets around is one factor that highlights the importance of the 47 million hectares of customary owned land in PNG. We might ask why the roadside sellers have set themselves up alongside most of the national roads. One of the reasons is because they are tired of fighting for a place in the regular marketplace, and also because many of these sellers live close to main roads, and they don’t have to pay too much for local transport to carry their crops and vegetables.
Interestingly, most of the sellers are housewives, who do multiple tasks by selling their local produce as well as looking after their children (Porter & Porter, 2008). Every day their husbands work in the fields, and some of them have other jobs as well such as working as labourers on construction sites or doing some other informal activity. Roadside sellers primarily sell local produce from their home farms including sweet potato, bananas, taro, coconuts, sugar cane, cassava, yams, sago, peanuts, aibika, betel nuts, eggs, chicken, lamb, pork, and rice.
Price control
Customary land tenure again proves to play an important part in the informal economy as regards price control. As the owners of the land, the roadside sellers are also able to control the price of their goods in the market by controlling the supply, because most of the crops and vegetables are seasonally grown. These roadside sellers also know how much they will charge for each specific crop after deducting their labour costs, including costs for local transport to transport their goods to the market place or main road. Such a system is unusual from a neoclassical economic perspective, which always maintains that prices are determined by consumers, not sellers (Stilwell, 2002).
Sustainability
Inspired by the ability to control the supply in the market, it has given self-confidence to rural farmers to sustain their productivity. In contrast to large farms which use chemicals or fertiliser, these rural farmers only produce their own organic compost which is why they usually produce good quality crops and rarely experience delays in harvesting (Sillitoe, 1998). As a tropical country, typically most of the crops are seasonal, and the rural farmers generally know very well when it is time for them to start planting their seeds (Allen et al, 1995). This activity is repeated season by season and continues year after year, which is why such a system is well maintained and sustainable.
Secure and Protected
Because their system is well maintained and sustainable, it has protected the activity of roadside sellers from external intervention. The women roadside sellers of Madang are different to women in other countries. If we compare to women in Bangladesh, the microcredit institutions have exploited Bangladeshi women and maintained a strong patriarchal system (Karim, 2008). This is not the case in PNG, because rural women in PNG have always relied on their families’ contribution. The culture of exchange has been considered as mutual gifts, and this has become a barrier for external intervention such as the introduction of micro-credit or micro-finance.
The culture of exchange has been a part of rural economy activities, for example canoes are traded as gifts rather than commodities (Gregory, 1982). Such a form of commodity exchange has been discussed many years ago by great philosophers, for example according to Karl Marx (1867) in his social pre-conditions for commodity exchange:
“The reality of the value of commodities differs in this respect from Dame Quickly, that we don’t know “where to have it.” The value of commodities is the very opposite of the coarse materiality of their substance, not an atom of matter enters into its composition. Turn and examine a single commodity, by itself, as we will, yet in so far as it remains an object of value, it seems impossible to grasp it. If, however, we bear in mind that the value of commodities has a purely social reality, and that they acquire this reality only in so far as they are expressions or embodiments of one identical social substance, viz., human labour, it follows as a matter of course, that value can only manifest itself in the social relation of commodity to commodity. In fact we started from exchange value, or the exchange relation of commodities, in order to get at the value that lies hidden behind it. We must now return to this form under which value first appeared to us.” (Marx, 1867; 16).
If we analyse this paragraph and link it into Melanesian communities in Papua New Guinea and other Pacific countries, it shows that commodity exchange depends on the value of the commodity itself, and that this is determined by the social relation between two commodities. The ‘social relation’ in this case might refer to the culture of exchange that has been applied generation by generation as anthropologists referred to in ‘primitive societies’.
Another barrier that has protected this informal activity from external intervention is customary land tenure (Fingleton, 2004). The financial institutions such as microcredit and microfinance prefer to grant credit for individual land ownership rather than communal (Gosarevski, et al, 2004). Despite the existence of individual property rights, many attempts to introduce a land registration system by the government and western institutions have failed (Yala, 2006).
Conclusion
In this paper land has been identified as a fundamental structure of the rural economy, which has empowered subsistence rural agriculture and become a strong factor in economic production. In particular customary land tenure and women’s access to land in matrilineal societies such as that of Madang province in Papua New Guinea has been shown to benefit the poor. Supporting the view that the informal economy does benefit the poor, this essay has explored a number of points that support this view. These benefits are strongly contingent on the large basis of customary land ownership in Papua New Guinea. The informal sector in PNG has been shown to earn more income compared to average national standard wages. Sellers can control the price in the market, which is actually a counter argument to the neo-classical economy which maintains that consumers have the ultimate power in determining price. In addition, due to the basic subsistence agricultural system and the geographic condition of seasonal harvesting in PNG that is repeated year after year, a sustainable cycle of productivity has developed. The culture of exchange has become a barrier of protection from external intervention, and the collective ownership of land title has become an obstacle for financial institutions to implement their programs of borrowing and microcredit. The system of customary land ownership is a strong factor in the benefits that the informal economy can bring to rural subsistence farmers in Papua New Guinea. In some provinces, such as Madang, the matrilineal system that operates has benefited poor women, giving them more control over land and produce.
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