The ultimate goal of the project on accommodating the urban informal sector (UIS) in the public policy process of urban development planning in Bandung Metropolitan Region (BMR) has from the beginning been two folds. The first is to provide basic information of the socio-economic characteristics of street enterprises in BMR, as well as major features of existing policy measures and legislations relating to the operation of street enterprises in the study area. The second is to use the findings of the research paper to enhance the sound process of public policy making and suggest open and integrated policy measures to public policy administrators concerning the operation of street enterprises within the adequate framework of urban built environment.

A thriving urban small-scale and informal sector has long been recognised by development analysts not only as one of the “indigenous” characteristics of developing countries, but also as a prosperous and significant sector to the economy (Portes, Castells and Benton, 1989; Firdausy, 1995; Azis, 1997; Yankson, 2000; Suharto, 2000; Suharto, 2002). The UIS contributes to urban development in multiple ways. Amongst others, it generates employment for an expanding urban workforce as well as provides much needed flexibility and innovation in the economy. In the absent of social welfare benefits, the UIS can also serves as an informal and natural mechanism of social protection. The findings of the research paper emphasize the heterogeneous and dynamics features of the street vending activities in BMR. Not only are they serving a variety of food, goods and services at affordable prices to the city inhabitants, but also providing a relatively adequate source of incomes to a large number of operators. 

The existence of the UIS, however, is not without problems. As the sector expands, there is bound to be a proliferation of workshops and worksites or an intensification in the use of informal economic locations. As most street trading occupies busy streets, sidewalks, or other public spaces, it often breeds and exacerbates environmental problems, mostly traffic congestion. In response to this problem, both district and municipal governments in BMR have no specific local legislation (PERDA) that is exclusively dealing with the nature and issues of street enterprises. The existing policies toward street enterprises in BMR are partial, permissive and elitist in nature. While the polices emphasise restriction and relocation, they do not take into account the characteristics and opinions of the population and relevant stakeholders. Regulating and monitoring the operation of street enterprises encompassed by the term “locational policy” cannot by no means solve the problems associated with the street business activities.

The fact that the UIS involves a huge number of population and that the sector plays significant roles in curtailing a problem of mass unemployment and poverty, makes it “irrational” to policy makers to ignore the sector. Therefore, the foremost recommendation of this study is that the UIS must be accepted as a reality of urban life not only in BMR, but perhaps in other cities of developing countries as well. Government authorities and urban planners should recognise the need to accommodate the UIS in the policy-making of urban development planning. 

The research project on the UIS in BMR highlights that the UIS should not be excluded from the urban economy. Therefore, there is a need to shift the policy paradigm from locational evictions to educational and structural integration within the framework of participatory urban policy making. This policy paper advises the municipality and district governments in BMR to formulate policies that specifically address and are sensitive to the characteristics and interests of the UIS within the urban built environment. 

1. Drafting of Local Government Legislation (Peraturan Daerah/PERDA) that specifically acknowledges the existence of street enterprises and addresses the problems associated with it.

The establishment of special legislation is the critical factor in the shaping of business environment as well as in creating conditions that are conducive for small-scale and informal business activity in BMR. The existing two main “umbrella” local legislations (Local Legislation No. 06/1995 concerning Law Order and City Cleanliness and Beauty and Local Legislation No.08/1996 concerning Registration of Economic Enterprises) adopt an “outdated” policy paradigm. These legislations have no adequate rules to address the issue of street vending comprehensively. They are mainly directed to enforce security and abolition strategy to the UIS without proper considerations of its conditions and contributions. Too narrow emphasis on removal actions of street vendors mainly in the name of maintaining social order can result in partial and short-term “solution” that account to little more than costly and unproductive government distortions.

The special legislation is therefore needed to address adequately and comprehensively the issue of the UIS. The rules in the legislation can cover main regulations ranging from “stabilising” issue (e.g. formulating permit and licensing procedures, special zoning and time regulation for the UIS operation) to a broader issue of “supporting” the sector (e.g. the provision of suitable workshop sites, the provision of adequate and appropriate shelter and infrastructural services, and the development of access to appropriate technology and credit schemes).

2. Appointing a central agency and authority that has specific responsibility in implementing the PERDA and ensuring the appropriate actions. 

Policies on street enterprises are the concern of different offices in the BMR governmental structures and no central coordinating body is specifically responsible for implementing the policies. The number of different agencies involved in this regard makes the intervention burdensome, as the various bodies involved have overlapping jurisdiction and differing priorities as to the resources available for the approval interventions. In order to streamline and coordinate the planning and development process as well as to minimise possible conflicts, the policy planning and implementation require a central agency that can coordinate a wide range of activities, which cut across traditional government structures. 

Public Security Office, the most powerful agency, is often directed to enforce law and order and thus not concerned with supporting the UIS.  Department of Cooperative and Small-Scale Enterprises Affairs appears to be more appropriate agency in dealing with the sector, but the agency has accentuated the difficulties inherent in the local government bodies involved, as it lacks of legal authority to authorise development of the sector independently.

3. The creation of forum of urban development stakeholders to increase their participation and access to the policy-making process.

The crucial issue identified by research paper is the absence of any effective public participation or consultation in the policy making process. Community participation is regarded as a key to the success of the urban development planning and regularisation of public spaces. The establishment of forum of urban development stakeholders is needed to increase their participation in the urban development planning. The stakeholders may vary from locations to locations, but they ideally involve street trader associations, academia, mass media, NGOs, think tanks and other respective local organisations. The forum can be used as a vehicle for different stakeholders to have access to the policy-making process on typical urban development issues in general and on the UIS in particular. While the forum can serve as crucial sources of policy input for local governments, it can act as a public caucus to monitor closely the implementation of new policies and regulations.

The importance of public participation is closely in line with the recent application of decentralisation policy throughout Indonesia. It is also recognised under the new decentralisation regulations with new increased autonomy and responsibility of district and regency governments. Although the stakeholders’ role here is consultative rather than decisional, this supports the suggestion that the public should be ensued a role in the policy planning. Decisions about infrastructure provision and services, for instance, can remain in the hands of government officers and members of local parliament (Dewan Perwakilan Rakyat Daerah/DPRD), but the stakeholders can play an active part in the procedure. Lobbying for issuing aspirations, assisting the preparation of the initial socio-economic zoning of business sites and public areas, drawing up infrastructure plans and sorting out boundary and title disputes are some examples of roles that can be played by members of the forum. 

4. Facilitating the empowerment programmes to improve the performance of the UIS through the provision of micro credit and technical assistance for small business advancement.

Shortages of economic resources are considered as a major constraint for small enterprises. As the UIS in BMR is also the case, one important policy initiative should be directed to enlarge access to small loans or micro credit. This can be arranged at market interest rates or alternatively at subsidized rates depending on the careful needs assessment. Other programmes to empower the small-scale business in the informal sector can be done through capacity building addressing internal constraints of the firm, such as little capital, lack of management capacities, outdated and rudimentary technology, and inadequate knowledge of markets. The empowerment programmes will not only improve the advancement of small-scale business in the informal sector, but also can be used to stimulate gradually and “naturally” the UIS to become small-scale business in the formal sector.

It needs to be stressed here that studies show that direct assistance programmes by government are not an effective way to develop the UIS. Even with the best programme design possible, it is unlikely that government bureaucracies could implement such programmes effectively as they often face inherent limitations in achieving adequate impact on the UIS as a whole. Therefore, the programme delivery should involve strategic alliances as a mechanism of transmitting credit, information, and technology to and amongst street enterprises. Strategic alliances are referred to as networks of informal, but relatively long-term, trust-based business relationships of the three parties; that is, government, NGOs and street trader associations. While government can provide the economic resources, for instance, NGOs and street trader associations can work together to initiate and develop an appropriate credit scheme or training programmes.

5. Recognising the diversity and dynamism of the UIS.

As elsewhere, it was found that the UIS in BMR is not living in poverty and that most street traders are not always the poorest of the urban society. The UIS is also much more dynamic and responsive to markets than generally assumed. It was observed that a few of street vending features in BMR still inherit vulnerability. This includes insecure premises, volatile incomes, limited economic resources, inadequate technology for advancement, and lack of access to formal financial services. In aggregate and average, however, they demonstrate characteristics of the successful merchants who tend to operate small enterprises successfully and earn relatively high revenues and household incomes from the business. 

A number of studies has long been consistently pointing to the fact that the UIS operators tend to have entrepreneurial character (Evers and Mehmet, 1994; Thomas, 1995; Tinker, 1997; Suharto, 2001; Suharto, 2002). They can respond successfully to open and competitive markets. The surprisingly rapid response of many street enterprises in Indonesia to new opportunities and more open market conditions created by the recent crisis also underlines the flexibility and dynamism of the UIS management. 

Recognising such diversity and dynamism of the UIS is the crucial strategy to choose the most appropriate interventions. In this regard, policy should not take a heavy regulatory and “welfare-based” approach to this sector. Rather, it should pursue a more “growth-oriented” strategy. Plans to help those amongst the poorest should be differentiated from those amongst the better-off vendors. For example, safety net polices are still vital, particularly to “surviving” traders living in substandard conditions. However, policies should not be focused only on the provision of social welfare services in a narrow sense. The provision of infrastructural and institutional facilities, such as business sites, electricity, licensing, and access to appropriate technology and credit at relatively lower costs, are some suitable examples for the more “thriving” micro-enterprise needs. 

The project on accommodating the UIS in the urban development planning, particularly the case study on street enterprises in BMR, is yielding some important insights about how small-scale and informal business might best be supported by appropriate policies. It suggests that not only should the policies be sensitive to the characteristics of street vendors but also be participative in the making. This strategy can ultimately improve the lives of the vendors without breeding and exacerbating environmental problems, which are often associated with the operation of such urban informal economic activities. The policy recommendations indeed refer to a case study of specific policy issues in BMR. Yet, with further research and appropriate adjustments, the model of policies can be applied and developed in other similar metropolitan regions in Indonesia, such as Jakarta and Surabaya metropolitan regions, as well as in some other cities of developing countries, such as in the Asia and Latin America regions.

• Azis, Iwan Jaya (1997) “The Increasing Role of The Urban Non-Formal Sector in Indonesia: Employment Analysis within a Multisectoral Framework” in Gavin W. Jones and Pravin Visaria, Urbanization in Large Developing Countries: China, Indonesia, Brazil, and India, Oxford: Clarendon Press, pp.143-159 

• Evers, Hans Dieter and Ozay Mehmet (1994), “The Management of Risk: Informal Trade in Indonesia”, World Development, Vol.22, No.1, pp.1-9 

• Firdausy, Carunia Mulya (1995), “Role of the Informal Service Sector to Alleviate Poverty in Indonesia”, The Indonesian Quarterly, Vol.XXIII, No. 

• Portes, Alejandro, Manuel Castells, and Lauren A. Benton (1989), “Introduction”, in Alejandro Portes, Manuel Castells, and Lauren A. Benton (eds.), The Informal Economy: Studies in Advanced and Less Developed Countries, Baltimore: Johns Hopkins University Press, pp.1-7 

• Suharto, Edi (2000), The Informalisation of Indonesian Economy during the Crisis, 1997-1999: Some Evidence from Kakilima Street Enterprises in Bandung, paper presented at the First Conference of Indonesian Students in New Zealand held at Canterbury University, Christchurch, 15 – 16 November 

• Suharto, Edi (2001), How Informal Enterprises Cope With the Economic Crisis? The Case of Pedagang Kakilima in Bandung, Indonesia, paper presented at New Zealand Asian Studies Society 14th International Conference held at Canterbury University, Christchurch, 28 November – 1 December 

• Suharto, Edi (2002), Profiles and Dynamics of the Urban Informal Sector in Indonesia: A Study of Pedagang Kakilima in Bandung, PhD thesis, Massey University, New Zealand 

• Thomas, J.J. (1995), Surviving in the City: the Urban Informal Sector in Latin America, London: Pluto Press

• Tinker, Irene (1997), Street Foods: Urban Food and Employment in Developing Countries, New York: Oxford University Press

• Williams, Collin C. and Jan Windebank (1998), Informal Employment in the Advanced Economies: Implications for Work and Welfare, London: Routledge 

• Yankson, Paul W.K. (2000), “Accommodating Informal Economic Units in the Urban Built Environment: Petty Commodity Enterprises in the Accra Metropolitan Area, Ghana”, Third World Planning Review, Vol.22, No.3, pp.313-334