Cambodia business

Informal Businesses Take the Toll of Covid-19

Cambodian micro, small and medium enterprises report huge financial blows, with massive decreases in demand and profits due to the pandemic.
Vendors sell vegetables along a street in Phnom Penh on December 7, 2021. Picture: Sam
Vendors sell vegetables along a street in Phnom Penh on December 7, 2021. Picture: Sam

The vast majority of Cambodia’s micro, small and medium enterprises (MSMEs) have been severely hit by Covid-19, a survey revealed on Wednesday.

According to the Tracking Surveys on the Impacts of Covid-19 on Formal and Informal MSMEs in Cambodia, 91 percent of businesses reported a decrease in demand for products or services.

Additionally, 93 percent of businesses reported a monthly decline in profits, and 43 percent said this decline was more than 50 percent.

The surveys, presented by the United Nations Development Programme (UNDP) at the 8th annual conference on microeconomy, said vehicle drivers were hit the hardest. Average weekly earnings declined by 59 percent to $43.

This was followed by agricultural laborers, who have endured a 51 percent decrease in profits to $30 since the pandemic hit.

Workers without contracts saw their average weekly earnings decline by 48 percent to $56. This was followed by street vendors/ grocery sellers at 45 percent to $88. Heavy work laborers also saw a 45 percent dent in income, dropping to $36.

“Unfortunately, the Covid-19 pandemic subjected small and medium enterprises to many challenges, border closures, movement restrictions. These had a dramatic impact on the tourism, travel and hospitality industry in particular,” said Alissar Chaker, Resident Representative of UNDP in Cambodia.

“Many had to permanently shut down because of financial losses,” Chaker said. She added despite government support to formal enterprises, such as salary subsidies, tax cuts and utility and rental subsidies, many informal businesses have not received support during the pandemic.

“While formalized enterprises received support from the government or reported receiving support from the government, none of the informal enterprises did over the same period of time,” she said. Chaker added that those receiving support were found to be in a better position than informal businesses.

MSMEs account for 99.8 percent of Cambodian firms, according to National Bank of Cambodia (NBC) and they face many challenges. Chea Serey, NBC's Director General, said challenges include lack of skilled labor, capital and access to finances, market information about local customers and export markets.

Those challenges “are obstacles to sustainable growth,” Chea Serey said at the conference.

While Covid-19 severely hit MSMEs, the pandemic has also changed how businesses operate digitally in response, Chea Serey said.

She added since the majority of MSMEs are in the informal sector, it is difficult for the government to deploy policies to support them.

Sor Sontheary, Co-Founder and Chairman of Khmer Vision Company and university lecturer in Economics and Finance, said Cambodia can no longer rely on the traditional economy as before.

“It is necessary to develop the economy in a new context, the digital economy and digital society,” he said at the conference.

“The main challenges for continued SME development are access to finance, development of human capital and skills, market access, and adoption of digital technology,” he said, adding that Cambodian SMEs play an important role in the digital economy and provide 70% of employment.