A Study on the Informal Economy Size of Emerging Southeast Asian Nations

  • Quang Trung Ngo

Abstract

In many countries, the size of the informal business sector including small-scaled stores, street
vendors, private tailor shops, self-employed craftsmen, or scrap collectors, etc. even dominates the
economy compared to the formal one. However, informal businesses are usually not easy to be
managed and fairly assessed by the government. This could lead to an issue for the government in
terms of developing, exploiting, and regulating the informal sector. Recognizing the significance of
the informal economy, this paper aims to examine the size of the informal economies of some
emerging countries in the Southeast Asian region, namely Indonesia, Malaysia, Philippines, Thailand,
and Vietnam. By the quantitative method using the FEM analysis, this paper finds that the existence of
informal economies in these countries is not small and there are large disparities between countries.
In which, Thailand exists the largest informal economy size, while Vietnam is the smallest one.
Additionally, the study identifies that the tax burden is the main factor leading to the informal
economy among other variables, namely money supply, tax, saving interest rate, personal
consumption, and GDP per capita. In general, the study aid policy-makers in Southeast Asian
countries to have a better understanding of the factors leading to the informal economy, thereby they
can effectively manage the economy. In many countries, the size of the informal business sector including small-scaled stores, street
vendors, private tailor shops, self-employed craftsmen, or scrap collectors, etc. even dominates the
economy compared to the formal one. However, informal businesses are usually not easy to be
managed and fairly assessed by the government. This could lead to an issue for the government in
terms of developing, exploiting, and regulating the informal sector. Recognizing the significance of
the informal economy, this paper aims to examine the size of the informal economies of some
emerging countries in the Southeast Asian region, namely Indonesia, Malaysia, Philippines, Thailand,
and Vietnam. By the quantitative method using the FEM analysis, this paper finds that the existence of
informal economies in these countries is not small and there are large disparities between countries.
In which, Thailand exists the largest informal economy size, while Vietnam is the smallest one.
Additionally, the study identifies that the tax burden is the main factor leading to the informal
economy among other variables, namely money supply, tax, saving interest rate, personal
consumption, and GDP per capita. In general, the study aid policy-makers in Southeast Asian
countries to have a better understanding of the factors leading to the informal economy, thereby they
can effectively manage the economy.

Published
2020-05-20
How to Cite
Quang Trung Ngo. (2020). A Study on the Informal Economy Size of Emerging Southeast Asian Nations. International Journal of Advanced Science and Technology, 29(9s), 5949-5959. Retrieved from https://sersc.org/journals/index.php/IJAST/article/view/18786