Informal economy is often stated as a temporary phenomenon which diminishes along economic growth. The sector is regularly taken as granted and its role for development is not properly seen. Around 80 percent of the GDP in Cambodia is produced by the informal sector. Informal economy is also important for the country’s urban areas and particularly for the country’s capital city. The economic development of Phnom Penh, the capital, is combined with a growth in its non-agricultural informal sector.
At the same time the city’s slum settlements are mushrooming, creating more pressures on the informal sector. As a result, many of the city’s informal workers have become working poors. Without proper protection and legalization of the informal sector, these poor citizens cannot be lifted up from the poverty trap and the sustainable development of the city cannot be achieved. In the 1970s informal sector became a common topic in international development discussions. Informality was identifi ed as a continued existence of traditional activities and production methods that would disappear along with industrialization and modernization (Straub, 2005).
The sector was seen marginal for growth and separate from the formal sector. However, later on the informal economy has increased, particularly in the Corresponding author: Ulla Heinonen Water Resources Laboratory Helsinki University of Technology - TKK P.O. Box 5200, FIN-02015 TKK, Finland Email: ulla.heinonen@tkk.fi countries where income is not equally distributed, and has become an integrated part of the economy in many countries (Becker, 2004). Thus, the informal economy - the refined definition of the International Labour Organisation (ILO) - could no longer be seen as a temporary phenomenon, or as a phenomenon that straightforwardly decreases with economic growth. In the recent decades the sector has grown around the world and it is currently the largest “economy” in many countries (ILO, 2002).
It seems to be that if economic growth is not accompanied by improvements in employment and income distribution, the informal economy does not shrink. Instead, it seems to expand, both in urban and in
Informal economy is often stated as a temporary phenomenon which diminishes along economic growth. The sector is regularly taken as granted and its role for development is not properly seen. Around 80 percent of the GDP in Cambodia is produced by the informal sector. Informal economy is also important for the country’s urban areas and particularly for the country’s capital city. The economic development of Phnom Penh, the capital, is combined with a growth in its non-agricultural informal sector.
At the same time the city’s slum settlements are mushrooming, creating more pressures on the informal sector. As a result, many of the city’s informal workers have become working poors. Without proper protection and legalization of the informal sector, these poor citizens cannot be lifted up from the poverty trap and the sustainable development of the city cannot be achieved. In the 1970s informal sector became a common topic in international development discussions. Informality was identifi ed as a continued existence of traditional activities and production methods that would disappear along with industrialization and modernization (Straub, 2005).
The sector was seen marginal for growth and separate from the formal sector. However, later on the informal economy has increased, particularly in the Corresponding author: Ulla Heinonen Water Resources Laboratory Helsinki University of Technology - TKK P.O. Box 5200, FIN-02015 TKK, Finland Email: ulla.heinonen@tkk.fi countries where income is not equally distributed, and has become an integrated part of the economy in many countries (Becker, 2004). Thus, the informal economy - the refined definition of the International Labour Organisation (ILO) - could no longer be seen as a temporary phenomenon, or as a phenomenon that straightforwardly decreases with economic growth. In the recent decades the sector has grown around the world and it is currently the largest “economy” in many countries (ILO, 2002).
It seems to be that if economic growth is not accompanied by improvements in employment and income distribution, the informal economy does not shrink. Instead, it seems to expand, both in urban and in
