The Ministry of Industry, Science, Technology and Innovation is enhancing efforts to promote formal economic participation, aiming to attract enterprises, workers and self-employed individuals from the informal economy into the formal system.

Ministry spokesman Heng Sokkung acknowledges that disseminating these benefits is crucial yet challenging for fostering informal economic development. 

He mentions that the ministry plans to enhance and strengthen the effectiveness of dissemination, raise awareness of government policies and strategies, and encourage participation from the private sector, development partners (DPs), associations and other organisations directly involved with those in the informal economy.

“We may establish an informal economic alliance to promote dialogue and involvement in policy-making, to advance awareness of the informal economy and encourage participation in our system,” he says.

Prime Minister Hun Manet urged the ministry to broadly promote the government’s objectives at the closing ceremony of the ministry’s annual review and planning meeting in February. 

These aims include building the capacity of those in the informal economy, making them more productive and accelerating their transition into the formal economy.

Manet highlighted that local-level growth depends on the government’s ability to mobilise those in the informal economy into the system with supportive policies. 

“To assist the informal economy, we need to identify where they are to offer help. Thus, we need comprehensive data on our micro, small and medium enterprises [MSMEs] to attract them to our system, not by force, but by conveying the benefits provided by the government,” he stated.

Sokkung says that in the past, various mechanisms had been set up to support MSMEs, equipping workers with skills and knowledge, such as enhancing the production chain to meet both domestic and international market demands.

He adds that these processes include establishing the new Techo Startup Centre, the Skills Development Fund (SDF) and promoting entrepreneurship among Cambodians.

“In addition, we have the Small and Medium Enterprise Bank of Cambodia [SME Bank], which plays a crucial role in providing financial support so all SMEs can afford to expand and enhance their abilities and production chains even further,” he says.

At the same time, the industry ministry is crafting a policy to encourage more SMEs, focusing on establishing a clear mechanism for their promotion. The ministry is also preparing a sub-decree on the organisation of SME cluster zones, according to Sokkung. 

However, he notes that promoting informal economies to transition into the system is not a solitary or short-term endeavour. He says it requires the involvement of all stakeholders and more time to promote and integrate awareness.

National economic development strategy

Sokkung says the National Strategy for Informal Economic Development 2023-28 aims to facilitate access to informal economic development areas, or in other words, to guide them towards a transitional development system before full participation in the formal economy.

He says this strategy emphasises the benefits of entering the system to prevent a fallback into the informal economy, even if complete participation is not yet possible. 

He adds that the government aims to nurture those within the system to reach their full potential and wholly engage in the formal economy.

Hong Vanak, director of International Economics at the Royal Academy of Cambodia, opines that caring for those in the informal economy is crucial, as their participation in socio-economic development is vital in both developed and developing countries. 

He says preparing people for employment and high-paying jobs enables them to contribute to the economic flow.

Vanak stresses that if these aspects are overlooked, it results in working individuals or citizens with insufficient income not contributing to the national economy. He says these people work and do business merely for subsistence and also utilise public services like those who pay taxes to the state.

“If we don’t have specific policies to promote informal entrepreneurs or those with a limited income, the state incurs a loss because they use the state’s public services without contributing to the national economy,” he explains.

Vanak suggests that the state or responsible institutions clearly identify who is in the informal economy, their location and the types of occupations they engage in, and provide some level of support to enable them to grow and transition into the formal economy.

“Even if the state doesn’t receive tax income, when someone has a high income, such as $350 or $400 monthly in the informal economy, they can afford to spend more, boosting socio-economic life,” he explains.

Bringing workers into the fold

Vorn Pov, president of the Independent Democracy of Informal Economy Association (IDEA), mentions that his association currently represents 20,000 members, a fraction of the estimated total of over 70,000 people working in Cambodia’s informal economy.

To help members understand the government’s intent to support those in the informal economy, he says the association imparts knowledge about new government policies, including the National Social Protection Framework, the law on social security, how to understand the social assistance system, registration for the National Social Security Fund (NSSF) card and various other state policies.

Pov adds that the association collaborates with the Ministry of Labour and Vocational Training, the National Social Protection Council (NSPC) and the Ministry of Women’s Affairs to address the needs of informal economy members, particularly women. 

He says the association is also open to assisting all ministries and state institutions by providing data or identities for additional support to those in the informal economy.

“We welcome cooperation with ministries and relevant state institutions. In case they need identities, they can collaborate with us. We are always open, as this helps the government, our nation and especially those in the informal economy who are the most vulnerable,” he says.

Nil Socheat, a 50-year-old cyclo rider in Phnom Penh, expressed uncertainty about how to engage in the formal economy system. However, he says he would support initiatives that pay attention to growing the informal economy and increasing income to support families. 

“I’m unaware of the benefits of entering the formal economy and don’t know how to get involved. But increased support for professionals like us would be very beneficial. I hope the relevant officials work effectively and follow guidelines from their supervisors or leaders,” he adds.