Historical view on informal sector<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
Lea Jellinek, in her book titled, The Wheel of Fortune, the
\nhistory of a poor community in Jakarta (1991), describes the
\nchanging relationship between the formal and informal sectors as
\nfalling into three phases:<\/p>\n
First, from the late-1950s to the mid-1960s, the \"modern\"
\nsector declined while the small-scale sector continued to grow,
\nlargely because of a vacuum in production, retail and transport.<\/p>\n
During this period, both public utilities and large-scale
\nprivate enterprises could not function properly. Government
\nagencies were hampered by too many employees, poorly qualified
\nstaff, irrelevant rules and regulations, extremely low salaries
\nand corruption.<\/p>\n
As the formal sector did not satisfy most people's basic needs
\nfor food, transport, amenities and housing, an estimated 80
\npercent continued to patronize the goods and services of vendors,
\npedicab drivers, messengers and small producers.<\/p>\n
Second, during the initial five to ten years of the New Order
\ngovernment (965\/68 to 1975\/78), both the formal and informal
\nsectors of the economy thrived.<\/p>\n
The rehabilitation of government-owned utilities by the late
\n1970s and the promotion of large-scale private companies resulted
\nin more centralized and efficient food distribution, transport,
\nelectricity, gas, water and telephone facilities. These
\ndevelopments supplanted the need for many informal sector
\nactivities.<\/p>\n
Third, after the mid-1970s, the very growth of the large-scale
\neconomic sector resulted in structural and locational changes
\nespecially at the city center, which undermined the informal
\nsector.<\/p>\n
The rise in incomes during the 1970s caused the expanding
\nmiddle class to change its patterns of consumption. The middle
\nclass could now afford to buy expensive items, such as cars,
\nrefrigerators and large houses. As a result, becak drivers and
\npush-cart vegetable vendors lost a remarkable number of
\ncustomers.<\/p>\n
Changes in customer tastes and technology caused certain
\nproducts to become obsolete, such as banana leaves being replaced
\nby plastic bags, pottery and coconut husks by imported porcelain,
\nfresh avocado and mango juice by mass-produced and bottled tea
\nand beverages.<\/p>\n
But after the economic crisis in 1997, a decline in the
\nformal sector caused a boom in the informal sector. As many
\ncompanies went bankrupt and millions of people became jobless,
\nmany went into the informal sector, which functioned as a safety
\nvalve for the general public.<\/p>",
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