Research helps bring grey economy into the light

An investigation by the University of Otago's Asia Institute has captured the attention of Latin American countries at a recent Asia Pacific Economic Co-operation (Apec) symposium in Peru.

Drs Andre Everett and Malcolm Cone investigated economic development in China and the former Soviet region of Turkistan.

Their findings attracted strong interest from Latin American nations struggling to rein in their "grey market traders" operating outside the formal economic sector.

The pair studied the contrasting routes China and Turkistan chose to bring grey market enterprises, such as small service providers and retailers who did not pay tax, into their mainstream economies.

In China, social networking had proved highly successful. However, the lack of those networks in Turkistan was a clear factor in the regional economy's relative decline.

Everett said the approach used in China to build its economy could be applied in Peru and Latin America.

"After creating initiatives to encourage the informal and rural enterprises into the mainstream, China is rapidly progressing economically, whereas the same initiatives in Turkistan have been disastrous," he said.

"China's success was largely due to the social network focus of their initiatives. The part that the country's government plays is significant in its success.

"It would be this approach that we would hope to transfer to the Peru situation," he said.

Presenting the study at the Apec symposium last month has opened up negotiations for further research opportunities, Everett said.

The study, Micro and Small Enterprise Financing: A Tool for Mainstreaming the Informal Sector? was presented at the Apec symposium in Lima, Peru, attended by 250 delegates, including government officials and representatives of private think-tanks.

The researchers were approached by representatives of several agencies and think-tanks to research how China's strategies could be applied to bring Peruvian enterprises into the mainstream economy.

"Peru needs some help," Everett said. "Our research has shown that change is possible and we are glad that we will be part of its implementation."

- NZPA