Cambodia, renowned for its rich history and culture, has experienced significant economic growth over the past two decades, driven by tourism, manufacturing, and construction. However, the COVID-19 pandemic disrupted this progress, causing the first economic contraction in the country in twenty-five years. Despite a gradual recovery, the pandemic exposed vulnerabilities in Cambodia’s informal sector, which employs 93% of the workforce. This report is Part I of the CNES Cambodia Series, and subsequent parts will delve more deeply into the findings related to vulnerabilities exposed in the informal sector during the pandemic. 

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Cambodia, a Southeast Asian nation renowned for its rich history and cultural heritage, has experienced remarkable economic growth over the past two decades. Emerging from decades of conflict, particularly the devastating Khmer Rouge regime and subsequent civil war that left the country in ruins, Cambodia transformed into one of the world’s fastest-growing economies, boasting an impressive annual growth rate of 7.6 percent between 1995 and 2019. Key drivers of this growth included a thriving tourism industry, robust manufacturing exports, and burgeoning real estate and construction sectors.

However, the unforeseen onslaught of the COVID-19 pandemic caused significant disruptions, resulting in the country’s first economic contraction in twenty-five years. In 2020, Cambodia’s economy contracted by 3.1 percent. Although the post-pandemic era saw a gradual recovery with growth rates of 3.0 and 5.2 per cent in 2021 and 2022, respectively, the scars of the pandemic-induced slowdown remain evident.

The pandemic’s impact reverberated across major sectors, with the garment industry facing severe supply chain disruptions and tourism, a crucial revenue generator, witnessing a drastic decline in international arrivals. While the construction sector exhibited some resilience, the overall economic recovery remains uneven and fragile.

The pandemic also highlighted the vulnerabilities entrenched within Cambodia’s informal sector, a cornerstone of its economy, employing around 93% of the workforce. This sector includes street vendors, small-scale retail ventures, and various forms of unregulated labour. Informal workers, particularly street vendors, grapple with numerous challenges, including scant social protection, susceptibility to economic shocks, and limited access to financial services—all of which were exacerbated by the pandemic.

A UNDP study conducted during the pandemic revealed the socioeconomic toll exacted by COVID-19 in Cambodia. By January 2021, approximately one in five informal workers remained unemployed (18%), marking a 4% increase from October 2020 (14%). Among these workers, women bore the brunt of this unemployment surge compared to their male counterparts.

The pandemic severely impacted the garment sector, one of Cambodia’s major employers of unregistered female workers. One-third of Cambodia’s clothing factories shut down, and 90% of the female workforce in the garment sector lost jobs and were sent home. This widespread job loss among women in the garment industry not only led to economic hardship but also exacerbated issues of domestic violence and abuse towards these women.

Despite a notable 60% surge in the average weekly income among informal workers by January 2021 ($86) compared to October 2020 ($54), it remained below pre-pandemic levels ($112). This income boost was overshadowed by the stark reality that three in five informal workers (63%) struggled to meet daily needs, with four in five workers (80%) having to reduce their food expenditures. The study underscored the worsened financial plight of indebted informal workers, who resorted to borrowing for basic necessities like food, highlighting the lack of support systems to alleviate debt burdens or facilitate repayment.

Initially viewed as a potential solution, microfinance often had the opposite effect on informal workers during the pandemic. Instead of providing the intended financial relief, microfinance loans sometimes increased financial instability for these informal workers, leading to tragic instances of borrower suicides with lasting repercussions on families. This situation highlights the critical need for more effective financial support systems tailored to the unique challenges faced by those working in the informal sector.

To gain deeper insights into the post-pandemic struggles of street vendors, researchers from the Centre for New Economics Studies at O.P. Jindal Global University conducted an ethnographic study with support of field ethnographers based in Cambodia. This research involved interviewing twenty-five street vendors in their native language, Khmer, in the markets of Prey Toteung and near Phnom Penh International Airport Road. It builds upon some of our earlier work with street vendors and street markers across cities in Cambodia. Through extensive semi-structured oral interviews and in-depth questionnaires, the study explored the social, cultural, and economic contexts of the vendors’ lives. These interviews were later translated into English to ensure a comprehensive understanding of the nuanced experiences and challenges faced by the vendors.

Photo1: Street Markets near Phnom Penh International Airport and Prey Toteung

The study highlights street vendors’ economic struggles and ambitions, particularly women, during the pandemic. Many experienced significant drops in their daily income, grappling with exacerbated financial strains. However, despite these challenges, vendors demonstrated remarkable resilience by embracing innovative strategies. For instance, many turned to online platforms to sell beauty products, showcasing their adaptability and resourcefulness.

Photo 2: Street Markets near Phnom Penh International Airport and Prey Toteung

Additionally, the study illuminates the broader economic landscape of Cambodia, which underwent a transformation during this period marked by declining incomes for workers and increasing costs across sectors. It revealed how microfinance, though intended to provide financial support, often worsened the situation for struggling vendors, underscoring the complexities and challenges of economic recovery in the face of adversity.

These findings underscore the critical need for comprehensive and effective support systems to help informal workers navigate economic uncertainties. Strengthening social protection measures, ensuring access to financial services, and providing targeted financial assistance can play a crucial role in alleviating the hardships faced by this vulnerable segment of the workforce. Furthermore, policies aimed at enhancing the resilience of the informal sector can contribute significantly to Cambodia’s broader economic recovery and sustainable growth.

Overall, the next part of this series will delve deeper into the findings of the ethnographic study conducted by the Centre for New Economic Studies (CNES)  at O.P. Jindal Global University. It will explore the specific challenges faced by street vendors in Cambodia during the pandemic, the innovative strategies they employed to cope with these challenges, and the broader implications for Cambodia’s economic policy. Examining these aspects in greater detail will provide a comprehensive understanding of the post-pandemic economic landscape in the country, particularly for the informal sector.

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* Banner photo from author.

*The views expressed in the blog are those of the author alone. They do not reflect the position of the Saw Swee Hock Southeast Asia Centre, nor that of the London School of Economics and Political Science.