Development Strategy on Business of Informal Sector and Its Role in Reducing Poverty in South Sulawesi, Indonesia

Abstract

The study is aimed to identify the problems of informal sector business, to design the models and strategy in developing informal sector business, and to analyze the role of informal sector in reducing poverty in South Sulawesi. The population of the study is the informal sector in Makassar, and Pare-Pare, South Sulawesi Province. The number of samples is 200 people. Purposive sampling is used as the sampling technique. Data is analyzed by descriptive statistics, and Analytical Hierarchy Processes (AHP). Then, data is processed by IBM SPSS 22 and Expert Choice. The results show that the main problems faced by the informal sector consist of: (1) the lack of government support, (2) access to capital is relatively difficult, (3) business management unprofessional, (4) lack of labor skills, (5) Lack of marketing network, (6) retribution, (7) the urban planning policy, (8) generally do not have a business license, (9) competition, and (10) the existence of illegal fees. There are three alternative strategies that can be used to develop the informal sector, namely: (1) empowerment, (2) formalization (legal / business licensing), and (3) the localization, which provides the location for the informal sector. Development of the informal sector requires the support and commitment from the stakeholders, especially local government. In addition, the support from the institutions such as universities, NGOs, and the private sector. The study also shows that the informal sector has a greater role as a source of people income. Furthermore, the informal sector also contributed as a provider of jobs, reduce poverty, and as a source of local revenue and economic growth.

DOI: 10.5901/mjss.2016.v7n6p97