The APEC Economic Policy Report 2025 identifies structural reform as the primary mechanism for transitioning workers and firms from the informal to the formal economy across APEC member economies. Informality—defined by activities outside government oversight, taxation, and social protection—fundamentally hinders long-term productivity and Total Factor Productivity (TFP). To address this, APEC has introduced the Lima Roadmap (2025–2040), prioritizing the digitalization of government services and the expansion of social protections to gig workers.
Key Pillars of the APEC Formalization Framework
Digitalization of Governance: Promoting digital government services to simplify formalization and using technology for automated compliance monitoring.
Social Protection Extension: Incentivizing formalization by extending healthcare and income security to informal and gig workers.
Fintech and Financial Inclusion: Expanding market access via non-collateralized loans and credit guarantees tailored for small businesses.
Human Capital Development: Developing certified training programs and promoting entrepreneurial skills to help jobseekers transition into formal roles.
Regulatory and Tax Reform: Updating laws to reduce the "regulatory-barrier" burden and ensuring benefits outweigh costs.
Inclusive Market Access: Promoting public procurement opportunities for formalized SMEs.
What is the "Lima Roadmap (2025–2040)"? The Lima Roadmap is a long-term APEC strategic framework that prioritizes formalization as a prerequisite for economic growth and resilience. It provides the mechanical timeline for member economies to implement digital transformation, skills development, and financial inclusion programs, ensuring that informal sector firms can integrate into the broader formal trade architecture.
Policy Relevance: Productivity and India's Role
Global South Synergy: India ranks third among Global South economies in trade partnership diversity, providing the robust ecosystem needed to support the APEC goal of formal sector expansion.
Operationalizing Domestic Formalization: India’s programs like FoSTaC (FSSAI) for street food vendors and PM SVANidhi for digital credit serve as mechanical benchmarks for APEC’s "survival-driven" and "fintech-led" formalization strategies.
Bypassing the Digital Divide: India’s mandatory Enabling Telecommunication Infrastructure (ETI) building ratings align with APEC recommendations to use digital connectivity as a tool for increasing formal economy participation.
Follow the full report here: APEC Economic Policy Report 2025: Formal Economy Participation
