Phnom Penh, 14 December 2023 – The General Secretariat for the National Social Protection Council (GS-NSPC) in partnership with the United Nations Development Programme (UNDP) and the International Labour Organization (ILO), and have launched a joint publication titled, “Understanding the Paths to Formalization in Cambodia: An Integrated Vision” during the 2-day workshop on the integrated formalization for the social protection held on December 13-14, 2023 at Hotel Sofitel Phnom Penh Phokeethra.

The report puts forth a set of key recommendations that form an integrated strategy to address informality comprehensively. To effectively tackle the challenges of informality, it is essential to enhance coordination among various stakeholders, including the government, private sector, civil society organizations, and international organizations. To facilitate the formalization for enterprises and workers, it is crucial to identify and eliminate barriers. This can be achieved by reducing fees, streamlining registration procedures, eliminating minimum capital requirements, and implementing automatic licensing or registration processes. Additionally, a comprehensive review the taxation system is recommended to create an environment more conducive to formalization. Consideration should be given to the implementation of tax incentives aimed at incentivizing enterprises to formalize their operations.

“Formalization is an integral part of fostering a resilient economy that creates more and better jobs, reducing poverty and alleviating some of the most serious decent work deficits, such as legal and social protection for example. However, the business case for formalization is not straightforward; it comes with costs, benefits, and risks for the government, enterprises, and workers,” said Ms. Alissar Chaker, Resident Representative of UNDP Cambodia. “Through strong partnerships and collaborative efforts, we can accelerate the transition to formal economy, promote decent work, and expand social protection coverage.”

“It is important to strengthen the social protection measures to provide support and security for workers. This would involve improving access to healthcare, social security, and other related benefits,” said Ms. Than Kennaroit, Deputy Secretary General of the General Secretariat for the National Social Protection Council. “By implementing the recommendations in the report, Cambodia can make significant progress in addressing informality in the country, in line with the National Social Protection Policy Framework 2016-2025 and the National Strategy for Informal Economic Development 2023-2028”.

Mr. Oktavianto Pasaribu, Officer-in-Charge/Deputy Director of the ILO Country Office for Thailand, Cambodia and Lao People’s Democratic Republic said, “Formalization in the Cambodian labour market offers many benefits and will help drive progress towards our goal of universal social protection.  An integrated strategy on formalization is a necessary foundation for such a transformation as is the full collaboration and engagement of employers’ and workers’ organizations alongside the government to ensure an effective roll out.”

Australian Ambassador Justin Whyatt said, “Social protection is both a tool for reducing poverty and inequality as well as an investment which supports resilient economic growth.  Australia values its partnership with Cambodia to establish, expand and improve its social protection system.”

Mr. Koen Everaert, Deputy Head of Cooperation of the Delegation of the European Union said, “The EU supports the Government efforts to expand social protection coverage. This requires implementing policies to ensure workers have legal protections and social security. The goal is to decrease vulnerability and inequality, promote decent employment, and support inclusive green growth—a key EU priority in Cambodia. Effective coordination with stakeholders and across policy sectors, including public finance management, is crucial for achieving these objectives.”

The informal Micro Small and Medium Enterprises (MSMEs) in Cambodia remains high with a significant percentage of workers engaged in the informal employment, the majority of those are women. Informality poses various challenges for workers, businesses, governments, and society. Informal workers have lower income, limited access to labor rights and social security and are highly vulnerable to socioeconomic shocks, while informal enterprises face lower productivity and difficulties in accessing finance and markets. This has underscored the needs of exploring feasible options to facilitate their transition to the formal economy.

Global experience shows that greater uptake in formal economy will bring about numerous benefits for workers and businesses in terms of increased productivity, decent work, and social protection. For the state, it is a crucial step towards mobilizing domestic resources and expanding fiscal space for funding comprehensive social protection policies. The UN Secretary General’s “Our Common Agenda” initiative calls for roadmaps to integrate informal workers into formal economies and to benefit from women’s full participation in the workforce.

In October 2023, the Government of the Kingdom of Cambodia launched the National Strategy for Informal Economic Development 2023-2028. This strategy aims to promote the protection, capacity building, efficiency, and resilience of the informal economy, facilitating its gradual transition to the formal economy, and providing more comprehensive incentives to the formal enterprises. It also recognizes the importance of extending social protection coverage to the workers in the informal economy and alleviating the burden on vulnerable workers and their families.

This study is funded by the Government of Australia, the European Union, and UNDP core donors.

For media inquiries:
-    Ms. Ath Chhunmuoy, UNDP Cambodia’s Communications Analyst, at Chhunmuoy.ath@undp.org   
-    Mr. Finn Koh, ILO Cambodia’s Social Protection Program Manager, at koh@ilo.org  
-    Ms. Heang Kanhary, GS-NSPC’s Communication Specialist at kanharyh@gmail.com 
-    Ms. Mao Chandaly (EEAS-PHNOM PENH) Chandaly.MAO@eeas.europa.eu, Press and Information Officer 
-    Australian Embassy, Media.Cambodia@dfat.gov.au

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UNDP is the leading United Nations organization fighting to end the injustice of poverty, inequality, and climate change. Working with our broad network of experts and partners in 170 countries, we help nations to build integrated, lasting solutions for people and planet. Learn more at https://www.kh.undp.org/or follow us at @UNDPCambodia.

ILO
The International Labour Organization (ILO) is a specialized agency of the United Nations that aims to promote social justice and promote decent working conditions worldwide. The ILO formulates international policies and programs to promote basic human rights, improve working and living conditions, and enhance employment opportunities.

NSPC
The National Social Protection Council is a key actor responsible for policy coordination and strategy formulation for the development of Social Protection in Cambodia. The NSPC has a General Secretariat (GS-NSPC) based in the Ministry of Economy and Finance performing technical functions.