TOPIC: The informal economy in Asia reflects the strong entrepreneurial

potential of the region. Argue whether the government should increase

regulation for this sector

GROUP MEMBERS

1. Lưu Ngọc Châu: 31221025795

2. Trác Lưu Bân: 31221024422

3. Nguyễn Đặng Uyên Phương: 31221021148

4. Hoàng Tố Uyên: 31221025239

5. Kiều Minh Thống: 31221023127

6. Trần Huy Tâm: 31221024711

GROUP DEBATE OUTLINE

A. AFFIRMATIVE SIDE:

1. Introduction (Term definition)

- The “informal economy” refers to all economic activities by workers that are

not covered (or insufficiently covered) by formal employment arrangements (

with characteristics such as a lack of protection for non-payment of wages,

retrenchment without notice or compensation, unsatisfactory occupational

health and safety conditions and an absence of social benefits such as

pensions, sick pay and health insurance (International Labour Organization,

n.d.))

- Large informality levels are likely to constitute a major obstacle to developing

countries’ development (Besley and Persson, 2010).

→ There is an urgent need for increasing regulation on this informal sector.

2. Body (Main ideas)

- Informal sector hinder long-term economic growth including decrease in public

sector revenues and poor public finances

+ Lower tax revenue → low investment in public services and

infrastructure

+ More tax burden on formal economy → discourage formal sector firms’

incentives to develop

+ Unsustainable development: low productivity, lack of economies of

scale, unfair competition.

- Governments’ responsibility to ensure people’s living standard including

income, working conditions, job opportunities…

+ Informal workers lack official contracts and social safety, as well as

have a tendency to be less educated → Will be more likely to be

impoverished and receive lower salaries than their counterparts in the

formal sector (International Monetary Fund, 2021)

+ While not all informal employees are poor, poverty is a source of

informality as well as one of its effects, according to two authors of the

ILO report, Florence Bonnet and Vicky Leung (International Labour

Organisation, 2018) → Reduction in the informal sector will tackle

poverty.

+ Informal employees operating outside the legal framework are more

prone to experience hazardous working conditions and harsh treatment

from employers (Kim & Jelloian, 2021) → crucial for designing

appropriate and integrated policies that are tailored to the diversity of

situations and needs (Florence as cited in ILO report, 2018)

⇨ Governments need to facilitate the transition of workers and economic units to the

formal economy, to promote the creation, preservation and sustainability of

enterprises and decent jobs in the formal economy and to prevent the informalisation

of formal economy jobs.

3. Conclusion:

- It is the informal economy that causes some distortion when it comes to tax

burden decreasing the economic welfare and living standard of those living

permanently, even temporarily in a city or a country.

- Governmental intervention is utterly essential to control over the black market

because human rights and social benefits should be prioritized in any society

- Adequate regulation on this sector will assure the welfare between formal

units and informal ones and create a sense of responsibility to maintain

cooperation contributing more to development.

- It's the duty of the government to fulfill their demand and include informal

workers in the mainstream of the society to avoid violation and save them

from marginal condition of living (Hussain, 2019)

B. OPPOSITE SIDE:

1. Introduction (Term definition)

- Term definition like above

- Governments should not impose more laws on the informal economy because

of two reasons: With regard to the economy of a nation, it definitely benefits

from the reduction of laws on black market. The companies, at the same time,

are also better off when the government cuts down on these regulations.

2. Body (Main Ideas)

- Underground economies reduce poverty and inequalities, providing an

opportunity to acquire skills and knowledge to transition to the formal

economy.

+ The informal economy provides employment opportunities, especially

within developing countries, to those who do not have employment

security, work security and social security.

+ It is an easily accessible economy and provides an opportunity to

acquire skills and knowledge to transition to the formal economy.

+ The informal economy has attracted a large workforce → increased

living standard.

● According to BANGKOK (ILO news), 1.3 billion people or 68.2%

of the employed population in Asia-Pacific – earn their living

from informal jobs. More specifically, informal employment is

predominant in rural areas (85.2% of employment) and makes

up for almost half of employment (47.4%) in urban areas.

+ People living in under-developed environments may lack the education

and skills for formal employment or be too poor to access public and

financial services. Therefore, they rely on informal activities as a safety

net to improve their skill and earn a living.

- Small firms will have more chances to recruit better labour thanks to the

easier recruitment procedure when the government cuts down on regulations.

+ No working contracts, no “unnecessary” procedures -> easy to recruit

or sack someone if they violate rules or regulations or are not

demanding enough for the job

 + Be able to hire a very large number of workers with low-cost -> save

the firm’s revenue

● These jobs are often easy and not requires a high level of

education -> firms do not need to pay a high salary for their

employees -> suitable with people from under-developed or

remote areas who are under-educated and have relatively low

living standards

3. Conclusion:

- Black market can remedy the problems of lacking jobs, money, and food for

people in remote areas, and bring more advantages to the whole economy.

- Small companies can gain enormous benefits in profit, thus creating a

long-term optimistic influence on the revenue and their shareholders, their

employees and their customers.

⇨ The government should reduce the number of regulations on the informal sector.

C. REFERENCE LIST:

Alamy. (2016, October 14). How governments can nudge informal businesses to

leave the grey economy. The Economist. Retrieved from

https://www.economist.com/international/2016/10/14/how-governments-can-nu

dge-informal-businesses-to-leave-the-grey-economy

Besley, T. and T. Persson. (2010). State Capacity, Conflict, and Development.

Econometrica 78 (1), 1–34.

Deléchat, C. & Medina, L. (2020, December). What is the informal economy basics?

International Monetary Fund. Retrieved from

 https://www.imf.org/en/Publications/fandd/issues/2020/12/what-is-the-informal-

economy-basics

Gatune, J. (2012, January 11). Global Strategic Foresight Community. World

Economic Forum. Retrieved from

https://www.weforum.org/reports/global-strategic-foresight-community/

Global Forum on Competition. Competition Policy and the Informal Economy. (2010,

March 3). Organization for Economic Co-operation and Development.

Retrieved from https://www.oecd.org/daf/competition/44547855.pdf

Hussain, R. (2019). City, informality and poverty: The polarization of the street

vendors in dhaka city, bangladesh. Italian Sociological Review, 9(3),

0_1,413-430. doi:https://doi.org/10.13136/isr.v9i3.249

International Labour Organization. (n.d.). Informal economy in Asia and the Pacific

(ILO in Asia and the Pacific). Retrieved from www.ilo.org website:

https://www.ilo.org/asia/areas/informal-economy/lang--en/index.htm

Kates, R. W., & Parris, T. M. (2003). Long-term trends and a sustainability transition.

Proceedings of the National Academy of Sciences, 100(14), 8062–8067.

https://doi.org/10.1073/pnas.1231331100

Kim, A., & Jelloian, A. (2021, August 6). Why Massive Informal Economy Is

Problematic for the Country. Retrieved from The Heritage Foundation website:

https://www.heritage.org/jobs-and-labor/commentary/why-massive-informal-ec

onomy-problematic-the-country

Mumbai. (2013, October 3). Hidden value. The Economist. Retrieved from

https://www.economist.com/asia/2013/10/03/hidden-value
More than 68 per cent of the employed population in Asia-Pacific are in ... (n.d.).

Retrieved November 22, 2022, from

https://www.ilo.org/asia/media-centre/news/WCMS_627585/lang--en/index.htm

Packard, T. (2012, September 10). Informal = Illegal? Think Again. The World Bank.

Retrieved from https://blogs.worldbank.org/voices/informal-illegal-think-again

The World Bank. (n.d.). The Long Shadow of Informality: Challenges and Policies.

Retrieved from World Bank website:

https://www.worldbank.org/en/research/publication/informal-economy