New Study on the Informal Economy: Enterprises are not the Problem, the state is

Status-quo led laws and officials and cumbersome procedures are hindering informal businesses to reap the fruits of formal status.

Policy Research Institute of Market Economy (PRIME) – an independent think tank in collaboration with Friedrich Naumann Foundation for Freedom, launched a study titled “State Coercion and the Fledgling Enterprises in Sharaqpur Bazaar: A Survey of Formal and Informal Economy”, by Asad Ullah. The study aims at understanding the dynamics of small scale entrepreneurs as they interact with the government on their path of survival and growth. For this purpose, a survey of small scale commercial enterprises located in Sharaqpur has been conducted to investigate the challenges that fledgling businesses face while confronting the state machinery.

The study raises several important questions such as: in this modern era of technology what leads informal businesses to remain invisible before the state’s eye but still working and growing? Why “informal economy” is termed as “black economy” and their “extra-legal activities” as “illegal activities”? The study found that problem is not with the informal economy, the problem was with the state.

By simplifying regulations, decreasing corruption, debottlenecking procedures, lowering tax rates and making it easier for them to own their business premises, a lot more businesses can be brought into the formal sector, than coercion, penalties, punitive taxes, heavy fines and demolition of buildings with earthmoving machinery can collectively bring because no amount of coercion can outsmart the acumen and ambition of an entrepreneur.

Highlighting the importance of this study, Executive Director of PRIME Institute Mr Ali Salman said that the recommendations of this research indicate the roadmap for unlocking the potential of informal and small scaled enterprises which not only provide job for millions of people but also economic and political independence to these industrious entrepreneurs. Ali Salman also stressed that the government needs to support pilot projects where suggested reforms can be implemented and demonstrated for wide-scaled changes in the regulatory environment governing the business enterprises.

Speaking on this occasion, Dr. Khalil Ahmad, Uzair Ahson, Nasira Taskeen and Raheem ul Haque commented on various aspects of the study and highlighted various recommendations.

This study on “State Coercion and the Fledgling Enterprises in Sharaqpur Bazaar: A Survey of Formal and Informal Economy”.

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