Carlo's Think Pieces

Reflections of a Filipino in the Netherlands

Integrate the Informal Economy

Posted by butalidnl on 10 September 2011

Squatters have gained some kind of legitimacy as a result of the Philippines’ political process. In exchange for electoral support, many mayors protect squatters in their municipalities from demolition.  Economically, however, squatters and others who take part in the ‘informal economy’ are far from being integrated. This means that the country does not get the maximum possible benefit from their economic activities.

Rent
It may seem strange to collect rent from squatters. Local Government Units (LGUs) don’t collect rent from those squatting on government land because they fear that by doing so, squatters acquire some sort of right to stay.  They also feel that this is an added burden on the poor people.  Reality does not support the latter argument. Gangs regularly collect ‘rent’ from squatters, and the people readily pay them. They have the money to pay rent.

Collecting rent does not bestow renters a right to stay indefinitely. People who rent rooms or apartments can be told to leave, and so should people who rent land. The municipal government could make it clear that the land could still be used for another purpose, and that it will give something like a 3-month notice if it decides to do so. Collecting rent, however, changes the status of people from ‘squatters’ to renters; and this makes it easier to deliver other services to the area.  Part of the rent collected could also be shared with the local barangay (perhaps 1/5 of the rent). They could help ensure that nobody else collects rent from the people. The share of the rent could partly be used to pay for part-time barangay tanods to help police the neighborhood (who, among other things, would make sure that the gangs don’t collect ‘rental’ money anymore).

Vendors
Street vendors of all types should be licensed. And the license fee should be rather high; after all, it would not be possible to collect VAT or business taxes from them. With the license, the vendors will no longer be harassed by the police. Corrupt police regularly milk vendors, and if they don’t pay they are arrested. The license fee will be welcomed by vendors, just to avoid paying the informal tax to the police. Licensing vendors also clears the way for the government to enforce health standards for food sales and some other regulations.

Public Parking
Many people suffer from the hassle of street kinds forcing their ‘Watch Your Car’ services on them. If you don’t pay the kids, something bad may happen to your car. In Cebu City, the government issues parking ticket booklets, which are sold through street kids. The kid who sold you the parking ticket also watches over your car; because the moment your car leaves, another car would need to be sold a parking ticket. The city gains money from this arrangement, and so do the street kids. And the car owners at least have a structured way of making sure that someone is watching over their car. I think that this is an example that other cities could emulate.

Water and Electricity
Extending water and electricity services to slums helps to improve the quality of life in slums, and greatly reduces illegal taps on water and electricity lines. But measures need to be made to make this work well. The barangay, or a barangay-level organization, should ‘buy’ electricity and water from the wholesale providers and distribute these within a given slum area, and collect the payments. The cost of illegal taps or leaks will effectively be distributed among neighbors, providing people with an incentive to report illegal taps, and to demand action against these.

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