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THE CHALLENGES OF DEVELOPING THE URBAN INFORMAL SECTOR FOR INCLUSIVE URBAN DEVELOPMENT IN ETHIOPIA [Abstract ID: 0304-01]
In recent decades, Ethiopia has recorded high rates of economic growth. While this growth has led to reductions in poverty, there are still concerns that it has not been inclusive in that it has happened in parallel with an increase in the number of people living in poverty and an increase in inequality. It has not generated sufficient jobs for millions of young and educated people who enter the labor market each year. Indeed, the slow growth of employment in the formal sector, coupled with the rapidly growing rural-urban migration, has forced the large majority of the workforce to join the informal sector. To address the problems of unemployment and poverty as well as to foster inclusive development, the Ethiopian government has implemented a range of policies and strategies. The various policy documents reiterated the importance of microenterprise development programs. Although improvements have been made, the performance of microenterprise development programs has fallen short of expectations. The programs have failed to focus on the very poor and to reach operators in the informal sector. This study explores the causes and forms of informal activity. It also examines why informal sector operators prefer to remain informal despite the existence of microenterprise development programs. The study was conducted in Addis Ababa and focused on street vendors, as they represent the most visible form of informality. It took a qualitative approach and data were collected through key-informant interviews and focus group discussions. The findings show that there are four types of informality, characterised by different reasons for joining the sector. The study also revealed that a failure to understand the nature and demands of informal activities – lack of adequate working premises; growth oriented business areas set by the government; the involvement of multiple institutions and excessive paperwork; low levels of service capacity and inefficiency; corruption and bureaucracy; inaccessibility of decision makers and little delegation to front office workers; business registration and licensing fees and taxes; fear of accepting change and resistance to formalisation – are among the challenges in developing the informal sector and achieving inclusive urban development. The study concludes that microenterprise development programs should pursue a flexible approach in their service delivery and should attend to the needs and priorities of informal sector operators. This calls for a participatory approach, which involves workers in the informal sector, policy makers and policy implementers, in designing interventions targeted at the poor and services that seek to achieve inclusive urban development.