Informal sector suffering

Photo by: Tracey Shelton
Informal businesses such as street vendors and tuk-tuk drivers have suffered from the crisis.

The Phnom Penh Post
http://www.phnompenhpost.com

Written by Hor Hab and May Kunmakara
Friday, 29 May 2009

Cambodia's largest sector by employment says it's feeling the downturn.

THE main source of Cambodian employment and economic output - its informal economy - is struggling to sustain growth during the global financial crisis, the industry told the Post this week.

Cambodia's informal economy is defined as businesses that do not register with the government, do not pay taxes and hire few employees.

These accounted for 80 percent of GDP and close to 90 percent of employment in the latest International Labour Organisation (ILO) report in 2006, when a mere 7,000 businesses were registered.

By 2008 this number had swelled to 63,500 registered enterprises, according to a report released Monday by the World Bank and the International Finance Corporation.

Of those, 67 percent employ only the owner, 22 have between one and four employees, and 1.5 percent have more than 20 employees, the Second Investment Climate Assessment said.

Luos Seyha, president of the Cambodia Association for Informal Economic Development (CAID), said the economic downturn is strongly affecting the informal sector.

"The average income of tuk-tuk drivers has declined to around US$4 a day in the first quarter of 2009 from about $10 a day during the same period last year," he said.

Similarly, the incomes of those working in anything from farming to tourism declined by half in 2008 from about $10 a day in 2007, said Luos Seyha.

"I think the government should have reserved a special fund to help people working in the informal economy keep their businesses alive during this slowdown," he added.

Tun Sophorn, national project coordinator for the ILO in Cambodia, said that "The situation is improving, as people understand more about the informal economy and form associations to share experiences and expand business, because they have more support".

Luos Seyha agrees that "in the next five years, people will better understand its importance, as awareness is ... growing".

Keat Chhon, minister of economy and finance, however, wants the informal sector to formalise.

"We have a strategy to finance micro, small and medium enterprises," he said, "but they have to register their business".

Last month, the government pledged to spend over 31 billion riels [about $7.6 million] on training the jobless, hoping to improve workers' productivity and resilience to the crisis.

But, despite this, the director of the Cambodian Centre for Study and Development in Agriculture (CEDAC), Yang Saing Koma, maintains: "The government does not focus much on the sector, or offer more credit for them to expand their businesses and improve their capacities."

Tun Sophorn said the downturn affects both the formal and informal sectors, which are somewhat codependent. So far, about 70,000 formal workers have been rendered unemployed during the crisis, he said.