An Approach to Formalization of the Informal Economy in Jamaica

Formalization Meeting on Experiences in Latin America and the Caribbean under the FORLAC Programme

20-21 April, 2015, Lima, Peru

Presented by Kelvin Sergeant, Specialist, Sustainable Enterprise and Job Creation Specialist

Why was Jamaica Chosen?

The Jamaican economy is characterised by persistent stagnation with an annual growth rate of 0.53% over the period 1999-2014The Economic crisis of 2008 affected sectors such as bauxite, aluminium; it caused declines in remittances and affected the tourism sector as well during that period.While tourism has rebounded in terms of arrivals and revenue, the other sectors have not done wellUnemployment is now approximately 14.2%. Youth unemployment is over 35% ( see chart)Large fiscal deficit and debt ( over 100% of GDP) continue to affect the governmentThe informal sector has fluctuated between 45% - 54% for decades.

Economic Growth of Major Industrialised Economies

Source: Global Economy

Economic Growth: Real GDP Change

Source: The Global Economy

Jamaica Unemployment Rate

Jamaica Youth Unemployment

Source: STATIN

Youth Unemployment

Source: STATIN

Informal Sector in Relation to GDP between 1966-2000

Source: IADB

Why Jamaica (con’t)

The Honourable Minister of labour and Social Security in his address to the 103rd Session of the ILC in Geneva in June 2014 indicated:

“ We are also working to regularize and formalize our significant informal economy estimated to be approximately 45 per cent of GDP. Tax reform and enhanced social protection measures are an important part of this initiative.”

The Minister also indicated that the GOJ was taking practical steps to achieve dynamic efficiency in the economy by improving access to credit, facilitating ease of establishing business, pursuing labour market reform, developing venture capital framework, promoting innovation and reducing bureaucracy.

Parallel Studies on FORLAC

The ILO had also convened a number of studies on Forlac in 2013, these were:

Policies and Schemes to promote the formalization of SMEs – Trinidad and TobagoGood practices in reducing informal employment in LAC – The case of St LuciaForlac- Survey of employers in the formal sector and other stakeholders in SurinameSt Lucia’s Informal economyInformal Employment in Jamaica

The Jamaica RBSA

• The ILO in July 2014 allocated US$325,000 from its RBSA to Jamaica under the work of the ACI’s on formalization of the informal economy

• The implementation deadline for this RBSA allocation is 30 September 2015. The RBSA is designed to support capacity building of local communities to foster employability and better jobs. The programme is linked to national policy as well as local policies

• Under the ILO- CPO, Jam 104-Constituents have taken initiatives in policy areas that facilitate the transition from informality to formality

The Jamaica RBSA

• The Project is designed whereby two communities have been selected – one urban (Granville) and one rural Horseguards/Garlands).

• It is a pilot project• It will enable programmes to be tailored to address the actual

situation at the local level

It involves inter-alia:• research • practical measures for skills development and financial support• practical measures to support entrepreneurship and SMEs • capacity development of tripartite institutions to foster

employability and deliver more and better jobs (hence social dialogue)

• studies on social protection and capacity building

Activities Conducted under FORLAC in Jamaica since 2014

Between September 30 – October 3, 2014, the ILO led a high level Mission to Jamaica . The Mission also met with a number of Institutions and high level persons, including the Minister of Labour.The objectives of the mission were to:

• Obtain buy-in on the part of a broader group of national stakeholders to ensure their involvement and commitment

• Identify a focal-point designated by MLSS (who is expected to co-ordinate project implementation), as well as identify members of a Stakeholder Oversight Committee

• Ensure that the linkages with existing and planned ILO interventions in Jamaica were maintained and corresponded to national needs

• Identify two communities for project implementation• Identify Institutions, consultants and Local Oversight Committees for each

of the two communities so as to ensure that the project implementation takes into consideration the needs of the communities

• Have an understanding of the diagnostic information available, in particular data on the communities

Activities (con’t)

• Tripartite Steering Committee formed and the FORLAC policy initiative was adopted in October 2014

• Terms of Reference were designed for EXCOLS• Three consultants were selected:

1. Data Collection and Analysis2. National coordinator3. Local economic development Consultant

Activities Conducted (Con’t)

• Twenty-one participants

First Entrepreneurship Skills Training Workshop was held for informal

SMEs of Granville on 18-20 November 2014

• 28 persons trained (16 males; 12 females)• 10 farmers• 7 Shopkeepers• 2 Electricians• 3 chef/Bakers• 3 dressmakers• 3 hairdressers• 2 welders

Second Entrepreneurship Skills Training Workshop was held for informal SME of Garlands/Horse guards on 26-28 January 2015

Activities (Con’t)

The third activity was conducted in collaboration with the ACS and the OASIt involved the formation of the Regional Network of Artisans in Tourism of the Greater Caribbean in Montego Bay on March 23, 2015Participants represented included Jamaica (20) St Lucia (1), Barbados (1), Mexico (1), Panama (1), Colombia (1), Nicaragua (1), Guatemala (1), Dominican Republic (1)Participants were also exposed to ILO’s Capacity Building tool –SIYBParticipants were exposed to issues surrounding the ease of doing businessGuest participants were invited to share experiences on how to be a successful entrepreneurParticipants were also exposed to material on the legal aspects of business required to move from informal business to formal ones

Local Economic Development Coordinator of FORLAC Project presents to informal SME Owners (Garlands) in

Montego Bay in January 2015

Participants of Entrepreneurship Skills Training to informal SMEs in Garlands/ Horseguards and Environs

Local Presenter on Forlac in Garlands/Horseguards

Meeting of the Regional Network of Artisans in Tourism of the Greater Caribbean

Presenter at Entrepreneurial Skills Training Network for Artisans in Tourism discussing use

of Technology in Formalization

Discussions at the Enterprise Skills Training Session and Formalization for Artisans in Tourism

Some products of Artisans in Tourism sector of Jamaica on Display

Future Activities under the project in 2015

• Collection of up to date and relevant statistics in the pilot community

• Training of trainers in entrepreneurship• Research and awareness raising on MNE declaration for

enterprises in the tourism sector and forming linkages with SMEs.

• Strengthening of the police force to tackle child labour and informality in St James

• Training on cooperatives for youths in agriculture and services in Granville and Garlands

• Assessment and recommendations for MOL to improve local employment services

Future Activities under the project in 2015

• Enhanced capacity of employers’ and workers’ organizations on formalization

• Technical Assistance to Jamaica Apprenticeship Board members - Study tour of German Apprenticeship system – Tripartite representation

• Capacity building workshop on social protection for tripartite constituents

• Gender- sensitive policy initiative to facilitate formalization to be developed

• Dissemination Seminar on FORLAC• Communication and publication

Results achieved

Technical capacity of informal SMEs in pilot community have been enhanced

SME artisans in tourism trained in entrepreneurship skills and marketing

Collaboration between ACS and OAS

Network formed

Further Initiatives

Network of SMEs to be formed

Linkages to be formed with local SME lending company and other financial institutions

Policy initiatives from workers’ and employers’ organizations to support Formalization to be developed

Continued policy reform by MOL and other government agencies (Ministry of Trade, Heart Trust NTA) to contribute to formalization of the informal economy

Any questions?