Informality In Liberia: Current Status and Progress to date

1. Informality In Liberia: Current Status and Progress to date Edwina D. Vakun-Lincoln Director of Micro, Small and Medium Enterprises Ministry of Commerce and Industry Liberia Informality in Liberia: Causes and Work in Progress

2. The LIBERIA PRIVATE SECTOR • Prior to the Liberian civil crisis, the private sector was a major contributor to the overall economic growth of the country. • More than 85% of Liberians find their livelihood in the private sector (LISGIS). • Although there is no official data to document the national situation, information emanating from the field revealed that the informal sector constitutes about 50% of the private sector. • Women are particularly affected by informality. Almost all women-owned businesses are small, and the vast majority is informal. Informality in Liberia: Causes and Work in Progress

3. Informality in Liberia • Most informal businesses have an average annual turnover of less than US$ 5,000 • They do not conform to any labor practices, do not pay any form of taxes to government, they lack structure and location. • Principle areas of high informality among businesses are: • Auto repairs • Carpenters and wood workers • Agriculture • Retailing of general merchandise • Real Estate and construction workers • Handicrafts and Artisans • Fisheries Informality in Liberia: Causes and Work in Progress

4. Causes of Informality in Liberia • Culture and attitude of businesses towards business formalization • SMEs see this as a means of tax evasion • Avoidance of labor practices • Lack of easy access to: • registration centers (bad roads, limited registration centers - 3 ), and • registration information • Lack of incentives from central government • Tax Returns • Tax Break/Holiday • Some factors leading to high informality of women businesses are - Lack of incentives/motivations - Single-Parenthood - Lack of awareness Informality in Liberia: Causes and Work in Progress

5. Costsof Informality in Liberia Government • Lost tax revenue limits the scope of the state to provide services, and increases dependence on aid. • If a high proportion of business activity operates outside the scope of regulation and policy interventions, governments are unable to shape macro-economic outcomes through policy. Informality in Liberia: Causes and Work in Progress

6. Costs to Informality in Liberia Informal Businesses Informality comes at a cost… • Vulnerable to tax agent and municipal authorities. • Lack public trust • Lack access to business support services • Access to Training and Finance • Protection from government • Informal businesses have a limited access to legal rights, finances and other services. • Absence of predictable, enforceable rules, which increase risks, and corruption • Red tape • Bribing authority to avoid formalization and tax payment • The act to stay ‘under the radar’ thus restricts the potential for firms to grow Informality in Liberia: Causes and Work in Progress

7. Work in Progress: • New Liberia Business Registry ( reduced registration from 99 days to at most 5 days) • Commercial Court– to fast track commercial disputes • Implementation of the MSME Policy (Legal and Regulatory Framework) • National Standard Lab • Cancellation of the Business License Fees of L$4,200.00 • Stimulus package in terms of Loan to businesses by the Government. Informality in Liberia: Causes and Work in Progress