Livelihood Vulnerability Index of the Informal Food Sec-tor to Climate Extremes in Camarines Sur

The study was anchored on the framework approach of Hahn, M.B., et al (2009) which uses the Livelihood Vulnerability Index (LVI) incorporating seven livelihood components – socio-demog[r]

Livelihood Vulnerability Index of the Informal Food

Sec-tor to Climate Extremes in Camarines Sur

Hanilyn A Hidalgo#

#

Department of Agribusiness and Entrepreneurship,

Central Bicol State University of Agriculture, Pili, Camarines Sur , Philippines

E-mail: hanilyn77@gmail.com

Abstract— The informal food sector is regarded as a huge contributor in local economic development However, since they directly get their supplies and raw materials from agricultural produce in the local markets, they become vulnerable to the uncertainties of nature The study aimed to: describe the level of livelihood vulnerability of the informal food sector; identify the issues and opportunities of the informal food sector; and draw out policy implications that could enhance the livelihood resiliency of the informal food sector in Camarines Sur The study used and modified the Livelihood Vulnerability framework of Hahn (2009) where seven indicators were used in determining the vulnerability: socio-demographic pro-file, livelihood strategies, social network, health security, food security, access to utilities, and disaster experience A random sampling of 200 informal food enterprises was employed to three market areas in Camarines Sur The livelihood vulnerability index was used to describe the vulnerability level The study revealed a low to moderate vulnerability level of the informal food enterprises The result is at-tributable to their ability to withstand disaster experience and high adaptive capacity to areas such as livelihood diversification, years in business experience and income factor Findings suggest the need to highlight technical and social areas for intervention to further enhance their business resiliency to climate extremes

Keywords— livelihood vulnerability, informal food sector, livelihood vulnerability index, business resiliency

I. INTRODUCTION

A. Rationale

Businesses are operated formally and informally Informal sector operators do not follow the formalities established by the legal frameworks for enterprises Usual activities within this sector include the unregistered businesses, self-employed manufacturers, temporary street vendors and casual retailers Workers under this sector are not covered by the state's laws and policies on labor Workers without formal work arrangements have no or limited access

to social protection and are more vulnerable during a crisis or shock Employment from the informal sector could barely suffice the basic needs of a family Without the formal structure and system, they are not protected by the labor policies and programs of the country

While entrepreneurship is considered an economic tool in small and medium enterprise de-velopment through job creation, investment, and innovation, in the informal sector, it is gen-erally necessity-driven The proliferation of informal entrepreneurs in many developing countries is caused by the high unemployment rate, limited access to financial support and the increasing poverty incidence

With the huge contribution of the informal sector in economic development, local authorities regard the sector as partners in local development initiatives Informal sector comes in vari-ous forms Among the industries under this sector, the food sector demonstrates a huge im-pact to food production and distribution in the urban, peri-urban and rural areas The informal food sector covers the activities in the entire food value chain, thus, it becomes a source of income and food security Since they directly get their supplies and raw materials from the local markets, they become vulnerable to the uncertainties of nature including the global cli-mate change that severely affects agriculture

However, while it continues to thrive in many parts of the country and in all parts of the world and has supported a wide diverse group of people to contribute to poverty reduction, it

is often neglected and left out of policymaking In the Philippines, the government shows a strong inclination of cooperation and positive attitude towards the informal sector, Realizing its role as a contributor in the gross domestic product and food security for poor consumers, capacitating them by reducing their vulnerabilities may be a strategic move for a transforma-tional shift in the context of climate change

B. Review of Related Literature

Informal Sector

Over the last two decades from 1995 to 2014, the size of the shadow economy in ASEAN countries have increased The existing policies on the tax rate, labor and businesses have provided a significant effect on the growth of the shadow economy (Vo and Ly, 2014) The informal sector is prevalent in developing countries where formal employment is insufficient

Hence, most of the entrepreneurs in the informal sector are necessity-driven (Meye, 2016) Necessity is a primary motive of the informal business sector But not all who engaged in off-the-books transactions are driven by necessity (Williams, 2007) In economically de-pressed communities, informal entrepreneurship is motivated out of necessity However, in prosperous areas, the informal sector is motivated by opportunity (Williams, 2011)

Informal economic activities exist due to poor implementation of state policies and regula-tions They are not accounted for in the Gross Domestic Product but they are, nevertheless, recognized by the government as the hidden contributor in economic development (Boels, 2014) In developing countries, the presence of the informal sector is normal The role of micro and small enterprises where informality is common has been recognized to foster

growth (Li and Rama, 2015)

Informal entrepreneurs comprise a large portion of the economy than the formal entrepre-neurs But in actual practice, entrepreneurship does not adhere to the rules all the time

Many informal economic activities were seen as more enterprising and entrepreneurial than the formal ones (William and Nadin, 2011) In Ukraine, the informal sector serves as the breeding ground for enterprise development Hence, the hidden enterprise culture in this sec-tor should be given recognition in public policy and be treated separately with the formal en-terprise (Williams and Round, 2007)

Studies on growth barriers in the informal sector have been noted in various studies People who engage in microenterprises are those with poor educational background and low demand

in the labor market (Chandrakumara, 2012) In Bangladesh, education is an important facet

of livelihood security Hence, supplemental training in business skills and management are considered an important aspect of intervention programs to strengthen the economic security

of the household (Akter and Rahman, 2016) Further, the intensification of urbanization has forced people to adopt diversification of both farm and non-farm livelihood strategies As a survival strategy, members of the households keep different occupations (Abass, et.al., 2013)

The prevalence of informal sector has brought some policy implications to facilitate formali-zation of the hidden enterprise sector Policy measures such as simplification of regulatory compliance, the introduction of incentives and amnesties and campaigns for tax morality were suggested measures in response to the growing population of informal entrepreneurship (Williams and Nadin, 2012)

Livelihood Vulnerability

Looking through the lens of a sustainable livelihood approach, a Livelihood Vulnerability Index (LVI) was developed by Hahn et al (2009) to determine a detailed analysis of forces affecting household livelihood vulnerability in a particular community The LVI is a combi-nation of Sustainable Livelihood Analysis (Chambers) and IPCC‘s three major contributing factors to vulnerability – exposure, sensitivity and adaptive capacity The LVI with seven ma-jor indicators aggregated into IPCC‘s vulnerability factors was piloted in Mozambique The utility of LVI has been tested and applied in different socio-ecological settings such as the case of two wetland communities in Trinidad and Tobago Results of the application

provid-ed new variables in minimizing vulnerability to environmental change (K.U Shah et al., 2013)

In another LVI application in the Mekong Delta of Vietnam, the livelihood vulnerability was analyzed in the context of gender Other confounding variables were seen as an important point in data interpretation (Can et al., 2013) Simone, et al (2014) further proved the ap-plicability of LVI at agro-ecological system scale at the communities of Choke Mountain in Blue Nile Highlands of Ethiopia In the agricultural context, LVI was tested in Nepal which

is considered the world's fourth most vulnerable country to climate change The findings pro-vided site-specific development entry points to minimize the vulnerability of small farmers to climate change In the Philippines, LVI has not been used in assessing the household liveli-hood vulnerability, particularly in the sub-community and community levels A coastal

com-munity vulnerability index used by Orencio and Fuji (2012) was tested in Baler, Aurora However, some variables were not accounted for which could further substantiate the vulner-ability factors of the households Climate change vulnervulner-ability was also assessed in disaster-prone provinces like Infanta, Quezon but Acosta et al (2014) used only three factors of vul-nerability – sources of livelihood, loss, and damage, and knowledge and perceptions of peo-ple

In order to fully understand the socioeconomic conditions that contribute to the vulnerability

of the poor communities, a detailed vulnerability and adaptive studies at the local level must

be conducted (Cuesta and Rañola, 2008) While studies in the Philippines which are related

to climate change focused on vulnerability and adaptive measures, no study has concentrated

on livelihood vulnerability that would quantify the strength of livelihood systems that would include socio-economic conditions and adaptive capacities

Assessing the livelihood vulnerability is a primary step in building sustainable and resilient enterprises Currently, Naga City does not have a baseline data on the status of livelihood vulnerabilities in the informal food sector where assessment for developmental programs could start

The informal food sector lacks the safety nets that will protect their livelihood from climate change extreme events Working under a shadow economy, they are more susceptible to business risks associated with the primary source of their enterprise – agriculture These are some potential threats to developmental programs that seek to increase the business formali-zation program of the government

Understanding the factors that hinder informal food sectors' livelihood growth will provide a signal to the local government the specific type of development programs the sector needs Furthermore, the quantified indicators of vulnerability will somehow send a picture of where should the enterprise strengthen their capacities to lessen the vulnerability The multiple indi-cators used in the LVI may provide a holistic view in determining appropriate development

entry points The LVI may also serve as a monitoring tool in determining the status of vul-nerability in the area

II. O BJECTIVES OF THE S TUDY

General

The general objective of the study is to assess the livelihood system of the informal food

sec-tor in key areas in Camarines Sur Specifically, it aims to:

 Describe the level of livelihood vulnerability of the informal food sector

 Identify the issues and opportunities of the informal food sector

 Draw out policy implications that could enhance the livelihood resiliency of the in-formal food sector

III.M ETHODOLOGY

A Research Design

The study is a descriptive type of research The methodology was anchored from the LVI components (Socio-Demographic Profile, Livelihood Strategies, Social Networks, Health, Food, Water, and Natural Disasters and Climate Variability) used by Hahn (2009)

Howev-er, modifications was made in the indicators using entrepreneurial indicators suited to a food microenterprise The applicability of the LVI indicators was further tested and refined after field surveys and consultations

B Sampling

The informal food sector in Camarines Sur served as the study site Camarines Sur is among the top ten provinces at risk to typhoons and among the top twenty provinces at risk to combined climate-and-weather-related risks such as typhoon, rainfall change, El Nino and temperature increase Located in the central part of the Philippines, the province is bounded

by several bodies of water: Pacific Ocean and San Miguel Bay on the north, Lagonoy Gulf on

the east and Ragay Gulf on the west It is mostly agriculture-based type of economy with rice, corn, coconut and fish as main agricultural commodities

Using the standard set by the World Health Organization, a total sample size of 200

households was randomly selected from these communities at the 95% confidence interval, 10% precision, 50% prevalence

The public market areas of two municipalities (Calabanga and Pili) and one city (Naga City) in Camarines Sur were purposely selected to represent rural, peri-urban and urban types

of communities Sixty respondents were randomly chosen from the two municipalities while eighty respondents were taken from Naga City having the biggest population among the three areas

C Data Collection and Analysis

The study was anchored on the framework approach of Hahn, M.B., et al (2009) which uses the Livelihood Vulnerability Index (LVI) incorporating seven livelihood components – socio-demographic profile, livelihood strategies, social networks, health, food, water, and natural disasters and climate variability The study uses the mathematical expression below

to quantitatively describe the livelihood vulnerability index of the informal food sector: LVI = Σi=1 wMiMi

Σi=1 wMi

where LVI, the Livelihood Vulnerability Index for a certain area or district d, equals the weighted average of the seven major components The weights of each major component,

wmi, are determined by the number of sub-components that make up each major component and are included to ensure that all subcomponents contribute equally to the overall LVI (Sul-livan et.al., 2002)

Further, as used in the study of Hahn et.al (2009), the Intergovernmental Panel on Cli-mate Change (IPCC) vulnerability framework approach will be integrated into the LVI

com-putation placing the context of climate change in the livelihood assessment The IPCC con-tributing factors to vulnerability are exposure, adaptive capacity, and sensitivity The seven livelihood major components were categorized following the vulnerability factors Exposure

is measured by the natural disasters and climate variability Adaptive capacity is measured by socio-demographic profile, social networks, and livelihood strategies while sensitivity is measured by health, food, and water

With three factors combined, the study will use the formula LVI-IPCC= (ed –ad) *sd where LVI-IPCC is the LVI for district expressed using the IPCC vulnerability framework, e

is the calculated exposure score, a is the calculated adaptive capacity score and s is the calcu-lated sensitivity score

The data for LVI computation will use the three models used by Shah, et.al (2013): calcula-tion of a balanced weighted average LVI, calculacalcula-tion of LVI based on the IPCC framework utilizing the first two models An equal weighting scheme was used for all indicators The table below shows the level of vulnerability for the LVI value

Table 1 Values and Level of Livelihood Vulnerability

LVI Value Level of Vulnerability

IV.RESULTS AND DISCUSSION

Adaptive Capacity

The dependency rate is highest in Calabanga and lowest in Pili But, generally, they all reflect

a large ratio of the economically dependent people to working population The informal

businesses in Calabanga, Naga, and Pili are headed by women at 87%, 88%, and 77%,

re-spectively While the women work in the informal business sector, the husbands work mostly

in the agriculture and construction sectors This is a typical gender assignment in a

house-hold In Calabanga, almost half of the respondents were earning below the food threshold of PhP1,288 per capita per month The lowest percentage was observed from Pili where only about two out of ten respondents were reported to earn below the subsistence level The av-erage monthly income of the business owners in Calabanga is PhP10,375 while PhP16,675 and PhP19,381 in Naga and Pili, respectively Majority of the respondents have not even at-tended college The high vulnerability result of the socio-demographic profile is explained

by the sector‘s high dependency ratio, female-headed enterprise and poor educational back-ground

Table 2 Values of sub-component vulnerability indicators in the three sites

Vulnerability

factor Component Indicators

Calabanga Naga Pili

Adaptive

Ca-pacity

Socio-demographic profile

Percentage of dependent people (15-65 years and without disability)

Percent of female-headed food businesses 0.883 0.875 0.783

Percentage of owners earning below the sub-sistence level

Percent of owners who have not attended college

0.933333 0.9375 0.833333

Livelihood strategies

Average commodity diversification index 0.93055556 0.8823529 0.882353 Average livelihood diversification index 0.555 0.5753382 0.211765 Average skills diversification index 0.588 0.6410256 0.59 Percent of owners with less than 3 years in

same business

0.267 0.3125 0.3167 Percent of owners with insufficient savings 0.266667 0.0875 0.45

Percentage of owners with single input sup-pliers

0.116667 0.0875 0.15

Social Network Percentage of owners with no access to credit 0.466667 0.4 0.566667

Percentage of owners who are not confident they can borrow after a calamity

0.083333 0.175 0.083333

Percent of owners who have availed of any livelihood assistance (past 12 months)

Percent of owners who are not members of industry-related organization

Average percentage of sales comes from non regular market or non ‗suki‘

0.255 0.70625 0.4025

Sensitivity Health Security Percent of owners with chronic illness 0 0.0125 0.083333

Percent of food businesses where the owner had to stop food business operation due to illness

0.066667 0.075 0.083333

Percentage of business owners without health insurance

0.433333 0.575 0.416667 Food Security Percentage of owners who are food insecure 0.133333 0.4125 0.333333

Access to Utili-ties

Percent of business owners without access to pipe line water supply

0.333333 0.8625 0.766667 Percentage of owners without own electricity 0.083333 0.1 0.066667

Percentage of owners without modern fuels or stove

0.766667 0.75 0.5

Percentage of owners without mobile phones (active numbers)

0.566667 0.525 0.416667

Exposure Disaster

Expe-rience

Average number of days of electricity disrup-tion during typhoon

0.24022346 0.180791 0.213873

Percentage of owners that did not receive early warning

Average number of casualty (sickness/injury) due to typhoon Nina

Average number of days of irregular supply inputs due to typhoon Nina

0.17777778 0.0684932 0.071233

Average percentage of loss on productive assets

0.05405405 0.0719424 0.115108

Average percentage of loss on household assets

0.05769231 0.045977 0.046512 Average percentage of loss on income 0.08403361 0.0449704 0.12

The informal food sellers have usually one or two types of products sold Hence, the levels

of commodity diversification indices in the three areas are very high Among the three sites,