In any Nepali city, you'll find streets lined by barbers, cobblers, waste recyclers, vendors of vegetables and of every other kind imaginable goods. They join the legions of workers that comprise the informal sector, that shadowy part of the economy where companies-if they can even be called that-don't exist on official registers, and workers don't have secure contracts or receive benefits and social protection.

Yet, there's scant data on the informal sector, largely because of its high turnover, the reluctance of informal workers to participate in official surveys and the small size of informal enterprises. This has dealt a death blow to sound policy-making in small economies where the informal sector plays a big role. For example, without taking into account informal activities, estimates of female economic participation rates could be implausibly low, gross domestic product significantly underestimated and the share of population below poverty line overestimated.

The information we do have about the sector was acquired through methods of indirect macroeconomic estimation. But the

figures they yield are inaccurate and hypothetical and give little information about the composition of the informal sector or about the way it functions.

Traditional survey methods will need to be totally overhauled to capture

the full complexity of the

informal sector. The conventional surveys like the census of population and household surveys have not been very successful in netting work, particularly of poor women. It has been observed that the major problem sectors are the subsistence sector and informal work and home based work. Though the 1993 UN Systems of National Accounts include production of goods for self-consumption (i.e. subsistence sector) under the purview of national income, the workers (and some times output) of this sector tend to be excluded from the official work force data. In the same way, workers in the informal sector and home-based workers are also sometimes excluded from the conventional estimates of the work force. In addition, the activities like collection of fuel wood, fetching water etc. which are recognized as a part of a national accounts system are also frequently excluded from the official data on work force.

Standard establishment and labor force surveys usually capture or separately identify only a small fraction of those whose livelihood relies on working in the informal sector or in unprotected jobs. In many developing countries, the informal sector is yet to be integrated into national accounts and less information is available on its contribution to economic growth.

Over the years, with the assistance of International Labor Organization (ILO), many developing countries have started collecting

and working with data

on the informal sector

and informal employment, and accumulated extensive

experience. Among the

|set of data collection

instruments, labor force surveys- for measuring the size of informal employment and monitoring working conditions- and the mixed household enterprise surveys- for collecting comprehensive data about the formal sector- have gained increasing importance.

In Nepal, the 2008

National Labor Force Survey 2008 (NLFS II) has revealed that more than 96 percent

of total employed (aged

15 years and above) were classified as in informal employment (all industries). After excluding agriculture and fishing industries, the number of non-agricultural informally employed persons was found to be well above 86.4 percent of the

total non-agricultural employment. Even though a

labor force survey alone cannot provide complete information on the informal sector, it nevertheless indicates how important the collection of informal sector data in Nepal is.

One approach to estimate the size of employment in the informal sector and its contribution to the economy is by conducting economic census at a regular interval of time. The economic census is an extremely useful source for the compilation of statistics related to the informal sector. However, the Central Bureau of Statistics (CBS) has not yet conducted any economic census in the country. The CBS is one of the few national statistical agencies in the region that has neither conducted specialized surveys on the informal sector nor organized any economic census of enterprises.

The International Conference on Measuring Informal Economy in Developing Countries which is

being jointly organized

by the South Asian Institute of Management (SAIM) and the International Association for Research on Income and Wealth (IARIW) from September 23 to 26, in

Kathmandu, is expected to look at various aspects of the informal economy,

including the problems

and issues in measuring

the informal sector. But, measurement is only useful if it serves the needs of policy makers, and the conference will also consider the more basic questions of what needs to be measured and how measuring the wrong things may lead to bad policy-making.

Pant is Director, CEAS, South Asian Institute of Management