2025 APEC Economic Policy Report

The 2025 APEC Economic Policy Report (AEPR) discusses the important topic of Structural Reform to Increase Participation in the Formal Economy, addressing the challenges and opportunities faced by a sector that is often out of sight and out of mind in economic monitoring and policymaking.

The report discusses the root causes of having an informal sector-from weak governance and inadequate human capital to overregulation and constrained market opportunities-and the various reasons people and firms find themselves in informality. It then outlines the various policies APEC economies have implemented to transition informal workers and firms into the formal economy, such as providing skills training and social protection, facilitating business registration and entry, promoting financial inclusion, and digitalising government services. To promote participation in the formal economy, the AEPR recommends economies to strengthen governance and institutional quality, invest in human capital development, and ensure that the benefits of formalisation outweigh its costs.