Policy Analysis Paper

Transcription

1 Policy Analysis Paper Policy Name: Formalizing Micro & Small HomeBased Businesses Outside Amman Prepared by: Local Enterprise Support Project (LENS) Date:

2 Table of Contents Introduction... 3 Methodology Problem Definition Policy Goals Policy Options Policy Assessment Recommended Option Action Plan

3 Introduction The aim of this document is to provide an analysis of policy that regulates working from home for outside boundaries of city of Amman. It is prepared to give Local Enterprise Support Project (LENS) tools and information needed to address this topic in collaboration with policy makers at government and or stakeholders. It also aims at assessing options available to pursue this policy and suggest an action plan to implement it. The analysis for this policy includes following elements: 1. A definition of problem that this policy addresses, definition specifies in addition to what problem being discussed is, root causes of this problem. 2. The goals sought after by this policy. 3. The options proposed to address problem as defined. 4. Assessment of each proposed policy intervention option including an assessment of costs and benefits associated with each one, and an assessment of possibility of implementing each option. 5. A specification of suggested policy and reasons of selection. 6. A proposed action plan to purse homebased policy outside Amman including following: Activities Person/entity in charge Timeframe Needed resources, including meetings, workshops, focus group discussions etc. Deliverables 3

4 Methodology The methodology used in preparing this policy analysis constituted of following: Conducting desk research on different models for regulating work from home in different countries around world, se countries included United States of America (including different federal systems), Egypt, United Arab Emirates (Sharjah), Saud Arabia, Oman, Pakistan, Kuwait and Bahrain. The research constituted understanding following elements related to regulating work from home: o Types of allowed o Employment o Signage o Storage o Utilized area o Sales and marketing o Inspection mechanisms Interviews with stakeholders to develop an understanding of problem and its causes, size of problem, and available options to regulate work from home. Interviews were conducted with officials from Ministry of Municipal Affairs, Greater Amman Municipality, Jordan Food and Drug Administration, Municipality of Irbid, and Municipality of Zarqa. A workshop with technical team of LENS to discuss problem definition, policy stakeholders and ir characteristics, priority of policy, policy options and to develop an action plan. Focus group meetings with stakeholders, purpose of those meetings was to collect information about characteristics of that work from home, challenges y encounter, reason for not formalizing and or issues. 4

5 1 Problem Definition As a requirement to obtain a formal trade (vocational) license from municipality in Jordan, entrepreneurs starting up ir are required to submit a leasing contract for a facility in tradezoned areas or in similar zones, according to Instructions issued by Ministry of Municipal Affairs based on Vocational Licenses Law number 28/1999. However, this puts a cost burden on micro and small entrepreneurs in ir start up phase which in many cases lead m eir to quit idea of starting or to work informally and thus deprive m from potential of growth and government from fees and taxes collected from se. This challenge is more visible among professionals who work in knowledgebased activities (such as accounting, graphic design, translating etc.) where type of doesn't affect surrounding tenants or change structure of working areas, and at same time does not require a large or especially designed space to work from. This challenge is mainly visible among women who in addition to extra cost face difficulties in transportation and in staying away from home for long periods, as well as among youth who try to keep ir spending under control especially in critical early stages of ir work. Based on USAID LENS MSE Survey Zarqa governorate in specific has around 535 informal operating from home, 32 of which are registered and licensed, and generally operated by woman. Most of those are found in areas of Electrical/plumbing, manufacturing of wearing apparel, or construction. In 2011, Greater Amman Municipality (GAM) issued legal instructions that allowed certain types of activities to work from home under certain conditions. However, scene outside Amman is vague, because while some municipalities issue licenses for that work from home, it is not clear if this is a legal act and re is no clear set of conditions that regulate issuing such licenses. Greater Zarqa Municipality is currently issuing licenses for home based informally without adopting to instructions published and followed by GAMs professional licensing scheme. Whereas in Irbid, are not allowed to operate from houses, and in cases entrepreneurs who work from home apply for a license y are asked to provide a leasing contract for a property in a zoned area while y can still work from home. This adds extra cost on se entrepreneurs without any clear benefits. 5

6 2 Policy Goals The main goal of this policy is to help formalize and regulate work from home for outside Amman. This will be done through issuing suitable legal tool that allows municipalities outside Amman to issue trade (vocational) licenses for that meet certain conditions, where municipalities will promote adopted regulations to local community and motivate m to become formal homebased. The proposed framework will define following: 1. Types/ sectors of that can operate from home. 2. Conditions for working from home including: a. Zoning b. Area utilized c. Recruitment of labor d. Inspection e. Signage and marketing f. Inventory g. Visitors 3. Restrictions on operating from home. 4. Procedures for applying to a home license. 5. The plan to implement this policy. Doing this will encourage young entrepreneurs and women in ir endeavors to startup, and benefit from growth opportunities by reducing cost burden on MSEs, which would ultimately lead to increased market competitiveness 6

7 3 Policy Options The options available to regulate working from home outside Amman are as follows: Option 1: Allowing all types of micro and small to operate from home, this means any that has up to 10 employees in all sectors. Option 2: Allowing women and youthowned only to operate from home, this means registered that are fully owned by women, and/or by entrepreneurs below a certain age (40 years for example). Option 3: Allowing knowledgebased only to operate from home, this means only that depend on people's knowledge and personal skills and do not use equipment or machinery for manufacturing products or goods. Option 4: A combination of option 2 & 3, where knowledgebased owned by women and/or youth are allowed to work from home under certain conditions. Option 5: Doing Nothing 7

8 4 Policy Assessment In this section, proposed policies will be assessed based on three factors: 1 Cost incurred by implementing proposed policy, in this case cost elements are: a. Loss of revenue by owners of commercial and industrial properties as a result of not renting or selling ir properties to that work from home. b. Cost of inspection by government entities for new that work formally from homes, this includes mainly cost of hiring new inspectors by different government entities in charge outside Amman. c. The revenue lost by nonhome based due to competition from that work from home who have lower cost structure due to circumventing paying rental cost. d. The impact that homebased will have on public interested represented in three elements; health, environment and safety. The assessment of se costs is done using following keys: : High Cost : Medium Cost : Low Cost 2 The benefits from implementing policy, in this case benefit elements are as follows: a. Increase in government revenues as a result of paying registration and licensing fees by formal. b. Increase in taxes paid by that work in formal sector. c. Increase of employment opportunities as a result of higher growth potential of formal. d. Decrease in poverty as a results of increased income which are linked directly by availability of decent job opportunities. The assessment of se policies is done using following keys: +: High Revenue : Medium Revenue +: Low Revenue 3 The possibility of influencing a change to adopt proposed policy, this was assessed using following keys: : Highly unlikely : Unlikely +: Possible : Very likely 8

9 Policy Option 1 Allowing all types of micro and small to operate from home 2 Allowing women and Loss of Revenue Due to sheer new Cost of Inspections Although, number of inspectors will not increase commensur ately due to riskbased nature of inspections Costs Benefits Possibility of Policy Change Revenue Impact on Increase in Increase in Increase Reductio Highly Unlikely= lost by Health, Income tax in Jobs n in Unlikely= nonhome Environme from fees collected Poverty Possible=+ based nt and and Very Likely= Safety municipal revenue This will not lead to increase of new, it will just formalize some of m. Orwise, competitio n is already re Given large and highrisk nature of some of industries, cost of this might be high + Due to sheer new Despite sheer new, yet tax is not equally large due to small size of Although number of new es is to be high, yet size of benefitin g es doesn't allow for hiring a high number of employe es. Although number of new es is to be high, yet size of firms benefitin g from this does not help in generati ng much revenue to househol ds or workers + It is very hard for government to allow opening door for all types of due to highrisk associated with some of sectors, especially in manufacturing and foodprocessing. No or country allowed homebased work for all types of There is a high possibility of abusing system by people who don't actually practice profession, but use it as an investment opportunity or just aim to minimize ir operation costs. 9

10 youthowned only to operate from home 3 Allowing knowledgebased only to operate from home Most of existing informal are owned by youth and women, refore cost is still high but less than opening system for all The in knowledge based sector is still Although, number of inspectors will not increase commensur ately due to riskbased nature of inspections The type of in this sector is usually of lowrisk nature, refore it's need for This will not lead to increase of new, it will just formalize some of m. Orwise, competitio n is already re This will not lead to new, it will just Given large and highrisk nature of some of industries, cost of this might be high Due to low level of risk of in this area, it's impact on public Most of existing informal are owned by youth and women, refore revenue would still be high but less than revenue generate from opening system for all The is not at same level of two or Although number of es is less, yet it's not much less due to fact that most of informal are owned by youth and women and hence tax collected will not be much less The is not at same level of two or + Knowled gebased es are usually not labor intensive Although knowled ge based es are not labor It is very hard for government to allow opening door for such a wide range of due to highrisk associated with some of sectors, especially in manufacturing and foodprocessing. No or country allowed homebased work for such a wide range of There is a high possibility of abusing system by people who don't actually practice profession, but use it as an investment opportunity or just aim to minimize ir operation costs. It is in general acceptable to government to allow service and knowledgebased to work from home, y impose less risk in general and are easier to control. Because if this, GAM allowed 42 professions, most of which are in se areas to operate from home. 10

11 4. A combination of options 2 and 3 Allowing knowledgebased for women and youth (below age of 40) relatively high, but in general ir need for space is less than or types of It is widely believed that most of in this area are already owned by women and youth, refore impact will be similar to inspection is much less The type of in this sector is usually of lowrisk nature, refore it's need for inspection is much less formalize some of m. Orwise, competitio n is already re This will not lead to an actual new ; it will just formalize some of m. Orwise, competitio interest is generally low. Due to low level of risk of in this area, it's impact on public interest is generally low. options, however fees for such types of are generally higher than those of handicrafts and small manufactu ring Because most in this area are already owned by women and youth, impact will be very similar to previous option. options, however se types of usually generate more revenue and hence profit than those of handicrafts and small manufactu ring Because most in this area are already owned by women and youth, impact will be very similar to previous option., refor e y don't generate a lot of work opportun ities. + Knowled gebased es are usually not labor intensive, refor e y don't generate a lot of work intensive usually yet y usually pay higher wages, which offsets lower number of jobs Although knowled ge based es are not laborintensive usually yet y usually pay higher wages, + It is in general acceptable to government to allow service and knowledgebased to work from home, y impose less risk in general and are easier to control. However, limiting it to women and youth might make it subject to abuse by those who don't fall under this category, yet y will use it to bypass ir inability to start ir own 11

12 5 Doing Nothing previous option In general, a lot of people prefer to work in informal sector to minimize cost of operation which space rental constitutes a major part of, refore keeping current status will not incentivize m to work formally There won't be an cost of inspection in this case n is already re The informal already exist and ir competitio n impact on ones who work informally will remain same The in informal sector work without any form of monitoring, refore ir impact on public interest is high opportun ities. No impact No Impact No Impact which offsets lower number of jobs No impact No policy change is needed, however opportunity cost is high. According to a study conducted by UNDP and Ministry of Planning and International Cooperation in 2013 under title "The Informal Sector in Jordanian Economy", estimated that informal employment constituted 44% of total employment in Jordan. Keeping current status means a growth in this percentage, and deprives economy from advantages that working under radar screen would generate. 12

13 5 Recommended Option Based on analysis matrix above, it is clear that options 3 and 4 (Allowing knowledgebased only to operate from home and Allowing knowledgebased for women and youth respectively) are most plausible ones given government willingness to adopt m and ir affordable costs and still high benefits. However, option of restricting knowledgebased to women and youth might lead to abusing policy by those who don't fall under se categories. Moreover, defining an age for "youth" category might be a daunting issue because of presence of different definitions for this age bracket. Finally, policy would be difficult to be implemented when entrepreneurs who fall under "youth" definition depart from this age bracket. Therefore, recommendation is to purse development and implementation of a policy that allows entrepreneurs who work in knowledgebased sectors to work from home under specific conditions, se conditions which should be specified in discussion with different stakeholders should include following elements: a. Zoning b. Area utilized c. Recruitment of labor d. Inspection e. Signage and marketing f. Inventory g. Visitors The policy should also specify procedures that should be followed in licensing homebased outside Amman. 13

14 6 Action Plan Activity Responsibility Timeframe Needed resources/ Budget (Estimate 1 Conduct secondary research on regional and international models for homebased 2 Conduct focus group meetings (with home owners in Zarqa and Irbid and with municipalities) Objectives of focus group meetings are to: a. Collect Data b. Verify Information c. Discuss required policy changes Policy Advisor July 1 31 Number of meetings/worksho ps/focus groups (If applicable) LENS August 131 US$ 1,200 3 (One with women working from home) 3 Conduct interviews with key stakeholders including MoMA, GAM, Zarqa and Irbid Municipalities to introduce and discuss idea 4 Prepare a concept paper about home based LENS + Policy Advisor August 131 Policy Advisor September 115 5Present concept paper to MoMA LENS September Conduct Policy Analysis to identify cost, Policy Advisor September 15 impact and options October 30 7 Conduct workshop to present findings and LENS November 2015 US$ 2,

15 discuss options 8 Draft legal tool Legal Advisor* November December Approve legal tool Government under MoMA's leadership January March Launch an awareness campaign for citizens to inform m about possibility to work from home Municipalities with support from LENS April 2016 Deliverable: Minutes of focus group meetings with stakeholders Concept note on subject of home based to be presented and discussed with key stakeholders Policy analysis report to identify cost, impact and options to formalize home based outside Amman Workshop to discuss options A draft legal tool 1 to formalize home based outside Amman An awareness campaign for citizens The legal advisor will draft legal tool (law, bylaw, instructions) that formalize policy 1 15