Individual Consultant for a Feasibility study on the role of Employers’ organization in facilitating the transition to formality (Албания - Тендер #46218457)

Cambodias private sector has grown significantly in the last decade, and MSMEs continue to play an important economic role, providing incomes for millions of Cambodians. There were 735,456 nonagricultural establishments according to the 2022 economic census, excluding agricultural businesses involved in production. Approximately 99.8 percent of these are MSMEs, which are collectively responsible for 58 percent of employment and 58 percent of gross domestic product (GDP). However, many enterprises especially smaller ones remain informal. The vast majority of establishments (87.6 percent) are not registered, which is a key trait of informality. All establishments with 100 or more workers and 89 percent of establishments with 5 or more workers were registered. However, only 6.5 percent, or 45,793 micro establishments were registered.

Informality is complex and lacks a single key driver. Some challenges are specific to micro enterprises, others to SMEs, and still others are cross-cutting, affecting workers and enterprises of all sizes. For micro enterprises, the primary reason that many are informal is because the legal and regulatory framework does not require them to fulfill some of the steps associated with formality. Practically, micro enterprises are not required to register with the MoC, nor pay commercial income tax (CIT) or charge and collect VAT from customers, although they can register with the NSSF if they have a permit or license from the OWS. The CamDX registration portal, a primary avenue through which enterprises formalize, is not yet compatible with the registration needs of micro enterprises.

For small and medium enterprises (SMEs), the drivers of informality are more complex. There are numerous types of financial and time costs associated not just with formalizing, but with remaining formal, and these shape enterprise decisions about formality. The time and financial costs of taxes are one example. However, it is not only the cost of paying taxes that must be taken into account, but also the tax-related risks and uncertainty. The financial costs of formalizing are also comparatively high. Other drivers of informality are the lack of enforcement, the perceived value for money of the public services in place, and issues in the legal and regulatory framework.

Against this background, the ILO Office of Cambodia is seeking proposals from a qualified and experienced consultant to conduct a comprehensive feasibility study on the role of EOs (Employers Organizations) in facilitating the transition to formality. This study aims to explore the challenges, opportunities, and best practices associated with encouraging businesses to operate within a formal framework.

Please refer to the attached ToR file for details and deliverables, and strictly follow the application guidelines.