ILO emphasises on need for integrated strategy for transition to formal economy

Kathmandu, November 24

The International Labour Organisation (ILO) has stressed on the need for an integrated strategy for Nepal’s transition from an informal to a formal economy.

Addressing a media roundtable in the Capital today, Frederic Lapeyer, head of Informal Economy Unit of ILO, said that informal economy is a huge reality in Nepal and other nations, which should be tackled through an integrated strategy by each nation.

“Shifting the informal economy to a formal one is a path to reduce both poverty and inequality. Thus, this formalisation has to be core objective of national development strategies,” said Lapeyer. “Formalisation of economy should ensure opportunities for income security, livelihoods and entrepreneurship as the informal economy in which people are involved is not by choice but due to lack of opportunities in formal economy.

According to him, economy formalisation can be achieved by formalising economic units by registering all economic units, increasing compliance and by extending application of labour and social security regulations.

Similarly, Lapeyer said that informal jobs can be formalised by extending application of labour regulation and coverage of social securities. “Besides, productive job creation in formal economy is another means to achieve economy formalisation,” Lapeyer added.

Integrated strategy, the ultimate solution to economy formalisation, should aim to facilitate the transition of workers and economic units from informal to formal economy and promote the creation, preservation and sustainability of enterprises and decent jobs in the formal economy, according to Lapeyer.

Prakash Sharma, national project coordinator of ILO Nepal, said that the informal economy is massive in different sectors in Nepal, which ranges from agriculture, trading, craft work, construction, micro enterprises, transport and tourism.

“Informal workers and economic units in Nepal are exposed to high vulnerability, which includes inadequate and unsafe working conditions and exclusion from social protection schemes,” Sharma said.

On the occasion, Jeevan Kumar Rai, under secretary at Ministry of Labour and Employment (MoLE), said that the government has been running different skill-development projects across the country to promote micro entrepreneurship, which will contribute in economy formalisation. Informing that Nepal has policy provisions to shift informal economy and workers to formal, Rai stressed on need to implement existing policies to achieve formalisation goal.

However, Khil Nath Dahal, chairman of Joint Trade Union Coordination Centre, said that the government should ensure social security and generate enough job opportunities in country to bring all economic units and jobs to formal channel. As per Dahal, 96 per cent of jobs and economic units of Nepal are informal.