Global resource scarcity and regional demand for recyclable materials to feed domestic and foreign industries also drive the formal recycling sector. Policy incentives such as tax holidays for up to 5–10 years for all waste treatment and recycling plants help enhance opportunities from formalization for recycling enterprises. Formalized recycling companies however will still typically buy recyclables from informal traders.
Global resource scarcity and regional demand for recyclable materials to feed domestic and foreign industries also drive the formal recycling sector. Policy incentives such as tax holidays for up to 5–10 years for all waste treatment and recycling plants help enhance opportunities from formalization for recycling enterprises. Formalized recycling companies however will still typically buy recyclables from informal traders.
The distinction between the informal and formal sector is not a
clear-cut one, and the level of formalization in the sector is progressive.
Formalization is the process by which authorities register and authorize individual businesses that comply with rules and regulations. For small scale traders and recyclers formalization means having to comply to norms and requirements of the authorities, such as registration of the business, environmental clearance,
and authorization for the use of the land on which shops and facilities are set up. All these requirements are associated to high costs and long delays, which are clear disincentives for informal traders and recyclers to change their status quo where they are tolerated and do not need to comply with any formal regulations.
Strictly enforcing current regulations on the informal sector is not of great interest to the local authorities as this would reduce the current recycled amounts which then again would additionally burden the waste collection and landfilling process and negatively impact on the living environment.