metadata: authors: 0: author: Seror,Marlon Armand Remy
1: author: Record,Richard James Lowden
2: author: Clarke,Julian Latimer
count: Cambodia,Lao People's Democratic Republic
docna: 0: docna: Glass barriers : constraints to women's
            small-scale cross-border trade in Cambodia and Lao PDR
docty: Policy Research Working Paper
subtopic: Macro-Fiscal Policy,Taxation & Subsidies,Economic Adjustment and Lending,Human Rights,Public Sector Economics,Gender and Development,International Trade and Trade Rules,Public Finance Decentralization and
            Poverty Reduction,Transport Services
teratopic: Gender,Macroeconomics and Economic Growth,International Economics and Trade
abstracts: cdata!: Trade facilitation projects often assume
            indirect benefits for small-scale, cross-border traders.
            Recent studies have shown the challenges faced in Africa by
            this population, especially women, but it remains unknown in
            Cambodia and the Lao People's Democratic Republic,
            despite large trade facilitation investments. This paper
            fills this gap, thanks to an innovative mix of original
            qualitative and quantitative data from various checkpoints
            on the borders with Thailand and Vietnam. The quantitative
            data, collected in 2014, consist of an exhaustive list of
            trade-related border crossings during two to three days and
            a survey of 158 randomly selected small-scale, cross-border
            traders and brokers. The paper combines qualitative data and
            statistical techniques to shed light on the structure of the
            small-scale, cross-border trade economy, traders' and
            brokers' profiles, the challenges they face, and
            potential solutions, with a particular emphasis on gender.
            Key challenges pertain to taxation and poor infrastructures.
            Narrow roads, insufficient parking space, and restrictive
            border regulations on transportation means cause traffic
            jams and delays. These disproportionately affect women, who
            are more time constrained. Despite a rather moderate tax
            pressure, widespread informal payments erode traders'
            and brokers' willingness to comply with taxes. Women
            suffer from a higher tax rate and a tax schedule that deters
            them from upgrading to more profitable cross-border trade
            activities. Along with capital constraints, this finding may
            explain the lower share of women in small-scale,
            cross-border trade than among own-account workers and the
            self-employed, as evidenced by nationally representative
            data. The paper delineates policy implications and puts
            forward concrete steps.
geo_reg_key: 517198,517191
repnme: repnme: Glass barriers : constraints to
            women's small-scale cross-border trade in Cambodia and
            Lao PDR
display_title: Glass barriers : constraints to
            women's small-scale cross-border trade in Cambodia and
            Lao PDR
listing_relative_url: /research/2017/11/28204951/glass-barriers-constraints-womens-small-scale-cross-border-trade-cambodia-lao-pdr
topicv3: Transport m1326661 135,Trade m1326924 698,Taxation m1327615 1121,Gender m1327621 615,Discrimination m1505707 3379
publishtoextweb_dt: 2017-11-21T00:00:00Z
historic_topic: Gender,Macroeconomics and Economic Growth,International Economics and Trade
no_of_pages: 28
author_keys: 0: author_key: 1239117
1: author_key: 1012328
2: author_key: 889176
model_extractions: WPS8249 Policy Research Working Paper 8249

# Glass Barriers

Constraints to Women’s Small-Scale Cross-Border Trade in Cambodia and Lao PDR _Marlon Seror Richard Record Julian Clarke_ Macro Trade and Investment Global Practice Group November 2017
Policy Research Working Paper 8249

# **Abstract**

Trade facilitation projects often assume indirect benefits for small-scale, cross-border traders. Recent studies have shown the challenges faced in Africa by this population, especially women, but it remains unknown in Cambodia and the Lao People’s Democratic Republic, despite large trade facilitation investments. This paper fills this gap, thanks to an innovative mix of original qualitative and quantitative data from various checkpoints on the borders with Thailand and Vietnam. The quantitative data, collected in 2014, consist of an exhaustive list of trade-related border crossings during two to three days and a survey of 158 randomly selected small-scale, cross-border traders and brokers. The paper combines qualitative data and statistical techniques to shed light on the structure of the small-scale, cross-border trade economy, traders’ and brokers’ profiles, the challenges they face, and potential solutions, with a particular emphasis on gender. Key challenges pertain to taxation and poor infrastructures. Narrow roads, insufficient parking space, and restrictive border regulations on transportation means cause traffic jams and delays. These disproportionately affect women, who are more time constrained. Despite a rather moderate tax pressure, widespread informal payments erode traders’ and brokers’ willingness to comply with taxes. Women suffer from a higher tax rate and a tax schedule that deters them from upgrading to more profitable cross-border trade activities. Along with capital constraints, this finding may explain the lower share of women in small-scale, cross-border trade than among own-account workers and the self-employed, as evidenced by nationally representative data. The paper delineates policy implications and puts forward concrete steps.

This paper is a product of the Macro Trade and Investment Global Practice Group. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://econ.worldbank.org. The authors may be contacted atmarlonseror@gmail.com, rrecord@worldbank.org and jclarke1@worldbank.org.

_The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent._ Produced by the Research Support Team
# **Glass Barriers: Constraints to Women’s Small-Scale Cross-Border Trade in Cambodia and Lao PDR**<sup>**1**</sup>

# **Marlon Seror, Richard Record, Julian Clarke**

_Keywords:_ Economics of Gender, Informal Sector, Corruption, Tax Evasion, Trade _JEL codes:_ J1, O17, D73, H26, L81

> 1 The research undertaken through this was supported by the Trade Development Support Program in Cambodia, the Second Trade Development Facility Multi Donor Trust Fund in Lao PDR, and the Umbrella Facility for Gender Equality.

Cambodia and Lao PDR
Glass Barriers

# 1. Introduction

Border checkpoints in developing countries often teem with traders transporting small quantities on foot or pushing carts alongside trucks that sport the insignia of formal companies. Those smallscale cross-border traders may eventually be superseded by large import-export firms. But during the process of development, their trade may be a valuable avenue for poverty alleviation and women’s empowerment. This paper focuses on the latter in the context of small-scale crossborder trade in Cambodia and Lao People’s Democratic Republic (Lao PDR). It draws on recent survey research undertaken by the World Bank, and draws conclusions about the key policy implications for facilitating the poverty-reducing impact of women’s participation in small-scale cross-border trade.

Small-scale cross-border trade is thought to provide a number of benefits to developing countries. First, the literature emphasizes its importance as a means of employment and financial resources for poor smallholders and landless households, in particular in a country’s geographical (and often socioeconomic) fringes. Second, cross-border trade plays an important role in reducing price differences and volatility, thus having a positive welfare impact on poor households beyond those directly involved in this activity (World Bank 2011). Third, trade offers a way for women to earn money outside the household, which may foster empowerment.

In this context, trade facilitation projects are traditionally built on the expectation that the automation, streamlining and simplification of procedures<sup>2</sup> will foster economic activity and eventually reduce poverty. Small-scale cross-border traders, including informal, female and other categories of potentially vulnerable traders, may benefit at the margins of such projects, e.g., from improvements in transparency. They carry small quantities and may fall under customs declaration thresholds. They are poorly educated and thus cannot cope with the administrative tasks demanded of formal firms, and their profit margins may be so thin that full compliance with customs duties and other border procedures would prevent them from trading at all (Lesser and Moisé-Leeman 2009). Trade policy in developing countries thus tends to focus on large, formal firms and firms that might consider going formal despite the fact that many traders are unlikely to formalize in the medium run.

In Cambodia and Lao PDR, the two countries on which this study shall focus, women tend to be overrepresented in unpaid family labor, while wage-earning jobs are mostly taken up by men (UNIFEM, WB, ADB, UNDP and DFID/UK 2004, World Bank 2012b). Since women’s employment opportunities are often limited by cultural norms, restrictions on mobility for safety reasons and household responsibilities, the fact that trade is considered an acceptable occupation for women in the Mekong sub-region (ibid.) makes cross-border trade a valuable avenue for women’s empowerment. Lao female traders, for instance, were found in an early study to often earn more than their husbands (Walker 1999), which may allow them to gain financial independence. It therefore does not come as a surprise that small-scale cross-border trade is largely carried out by women (World Bank 2011). Prior to this study, women were known to be dominate some subcategories of traders in the Mekong sub-region, e.g., fish traders across the Cambodian-Thai

> 2 See World Bank (2012a) for Cambodia, and EMC (2012) and World Bank (2014a) for Lao PDR.

Cambodia and Lao PDR 2
Glass Barriers border (Kusakabe, et al. 2008) and long-distance traders between Lao PDR and Thailand (Walker 1999).

Yet women face particular challenges in small-scale cross-border trade. Besides the “crushing weight of family responsibilities” (UN Women, 2012), women are more likely to face capital constraints, market smaller quantities and have difficulties accessing information on market opportunities (World Bank 2012c). Women are also more likely to be illiterate, which restricts their access to, and knowledge of, trade policies and procedures (USAID 2012) and thus further limits business development. Women often have to hire brokers, which eats into their profit margins, or seek assistance from officials, who are predominantly male and not trained to work in gender-sensitive environments (World Bank 2012b). This may fuel extortion and even harassment, as shown in East Africa (World Bank 2011, UN Women 2012).

Whereas this study does not find women reporting the dramatic level of abuse highlighted in the East African context, women may face binding constraints in their activity as small-scale crossborder traders. These challenges may be “visible” and acknowledged by (at least some of) the actors in the border economy, e.g., discriminatory tariffs or gender-based violence. The barriers to small-scale cross-border trade that women face may also be “invisible,” i.e., not recognized by those actors as related to gender, or indirectly—through regulations, norms, infrastructure, etc., that adversely affect women—constraining women’s participation in cross-border trade.

The contribution of this study is thus to shed light on the obstacles, both visible and invisible (“glass barriers” to trade), that prevent women from making the most of small-scale cross-border trade for income generation and empowerment. To this end, we rely on an innovative mix of original qualitative and quantitative data to both voice the concerns of the actors in the border economy and econometrically detect constraints that they fail to perceive or would not express. Our combination of qualitative and quantitative data further allows us to infer the constraints faced by women who _selected out_ of small-scale cross-border trade. Following the metaphor of Hausmann, Klinger and Wagner (2008), we shall strive to voice the concerns of both “camels” (women actually participating in cross-border trade—or the “Sahara desert”) and “hippopotami” (who would, but cannot, engage in this activity—are absent from the “Sahara”—and thus do not appear in our data).

Our study first documents that, in contrast to other parts of the world, female traders in the Mekong sub-region seldom report abuse and gender-based violence or discrimination; yet women are underrepresented in small-scale cross-border trade despite a potential for expansion and their dominance in trade and services away from border checkpoints. We next establish that poor infrastructure is a key challenge for traders, and acts as an “invisible” source of discrimination, women being more time constrained and thus disproportionately affected. Our findings further highlight that although they do not interpret it as gender-based discrimination, women are found to suffer from a higher tax rate and a tax schedule that deters them from upgrading to more profitable cross-border trade activities. This may explain along with capital constraints the lower share of women in small-scale cross-border trade than among own-account workers and the self-employed.

The structure of this paper is as follows. In the next section, we present the study design and methodology for data collection. In Section 3, we provide an overview of the border economy in Cambodia and Lao PDR 3
Glass Barriers Cambodia and Lao PDR. Section 4 then investigates gender-related constraints to women’s smallscale cross-border trade. Section 5 discusses the results and delineates policy implications.

# 2. Study design and methodology

The profiles of and challenges faced by the women and men who deal with border authorities for a living cannot be easily described, given the dearth of data on the topic in Cambodia and Lao PDR. Neither country holds a register of small-scale cross-border traders, as they usually operate only with the documents necessary to enter the neighboring country. Besides, informality often carries stigma, which means that they may be reluctant to acknowledge their line of business.

Given the lack of a list of small-scale cross-border traders and brokers, an innovative mix of survey strategies was implemented. The challenge to collect data on the population of interest was triple: (i) making sure that interviewees are indeed involved in small-scale cross-border trade; (ii) establishing a list of crossers to get an accurate picture of trade patterns and the population; and (iii) drawing a sample of crossers from that list to gather representative data.

The following approaches were implemented for data collection:

1. Preliminary observations were made in various checkpoints in Cambodia and Lao PDR, on the borders with Thailand and Vietnam—see Table 1. Preliminary observations were meant to: (i) select economically important, diverse and typical border checkpoints to include in the study; (ii) identify research questions for further investigation; and (iii) define the survey methodology and inform survey instruments.

2. In all checkpoints visited for preliminary observations, stakeholder interviews were carried out with border agency (customs, immigration, Camcontrol, etc.) staff and management, both small- and large-scale, formal and informal traders and brokers, transporters who do not act as brokers and various border users and local dwellers. Based on the preliminary observations and stakeholder interviews, three checkpoints were selected for further study: Bavet (Svay Rieng province, Cambodia), Poipet (Banteay Meanchey province, Cambodia) and Vangtao (Champasak province, Lao PDR), on the Cambodian-Vietnamese, Cambodian-Thai and Lao-Thai borders, respectively (Map 1).

3. In each of the selected checkpoints—Bavet, Poipet and Vangtao—more detailed qualitative data were gathered through focus group discussions (FGDs). They consisted of open questions about small-scale cross-border trade patterns and the people involved in them. FGDs are helpful to understand the overall picture of small-scale cross-border trade through traders’ and brokers’ experiences. Focus groups separated women and men to build trust and elicit truthful information about gender-specific issues. Representativeness was also aimed at when forming the groups. The information obtained was used to determine the data collection strategy and refine the questionnaire for the quantitative part of the study.

Cambodia and Lao PDR 4
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Glass Barriers sampling frame is an exhaustive list of shipment crossings, the sample was meant to be representative of small-scale cross-border trade crossings rather than crossers.<sup>6</sup> The IDIs contain detailed information on both crossers (demographics, education, past experiences as a trader/broker, perception of challenges, etc.) and crossings (goods transported, purchase value, selling price, etc.).

# 3. Overview of the Border Economy

## Definition of the population of interest

Small-scale cross-border trade (SSCBT) is an elusive concept. Different definitions have been used in the literature,<sup>7</sup> different rules apply depending on the country,<sup>8</sup> the value and quantity of goods traded per crossing may vary from one checkpoint to the next and SSCBT hides a variety of actors. Subsequently, we need develop an alternative, unified definition of SSCBT.

Based on field observations and stakeholder interviews, the population of interest shall be defined along the following criteria in this study:

- **People who deal with authorities** . These comprise: (i) traders who do not hire brokers and thus pay taxes and fees and interact with border authorities in general themselves; and (ii) brokers who do that on behalf of traders.<sup>9</sup> Transporters who do not act as brokers and traders who do not interact with authorities are not included in the population of interest. This criterion is meant to capture those who are the most knowledgeable about border-crossing processes and most directly affected by border conditions. In what follows, the population of interest shall be referred to as “traders and brokers” or “SSCBTers.”

- **People involved in “small-scale” trade** —as traders or brokers—i.e., in the trade of goods<sup>10</sup> that cross the border in man-powered vehicles or vehicles with fewer than four wheels. All the checkpoints selected for this study indeed have clear (informal) rules to

> 6 For instance, the “share of crossers who have ever experienced a confiscation” should strictly speaking be stated as the “share of crossings carried out by a crosser who has ever experienced a confiscation.” The sampling design thus allows a direct interpretation of a phenomenon in terms of economic importance in small-scale cross-border trade. 7 UN Women (2012) considers that “all revenue-generating cross-border commercial activities with a daily transaction value of less than 100 U.S. dollars (USD) per trader” qualifies as “small-scale” and that traders are “informal” if they are not registered and pay no income taxes, although they might pay export or import taxes, and pass through official border crossings with appropriate travel documentation. World Bank (2011) defines informal trade as “unorganized small-scale trade which does not appear in the customs record.” It may however be “official” in the sense that “traders go through official border posts, pay a crossing fee to the immigration office, and if processed appropriately pay a duty on imports” (ibid.).

> 8 In the Mekong sub-region, if traders are not registered, their informal status disqualifies them from a full customs declaration using the ASEAN Customs Declaration Document (ACDD). Typically, these unregistered traders will instead use a modified form, called “Customs Declaration Form for Retailed Declarants” (or “Customs Regime Form 44”) in Lao PDR. In Cambodia, small import transactions with a value equal to or greater than USD 100 are required to pay excise tax and duty, make a verbal customs declaration and fill out a simplified customs form.

9 Brokers and traders who are exempted from taxes and fees but would interact with authorities if controlled are part of our study population.

10 Preliminary observations and stakeholder interviews revealed that the trade of services (hairdressers, housekeeping, etc.) constitutes a very marginal activity at the studied checkpoints. We therefore exclude such traders from the population of interest.

Cambodia and Lao PDR 6
Glass Barriers distinguish between “small” and “large” trade based on the type of vehicle used. Trucks are always considered as large, carts or motorbikes as small.<sup>11</sup> This criterion also implicitly captures informality, as most small trade is informal.

# Structure of the Small-Scale Cross-Border Trade population

This definition reflects a striking feature of border economies in the Mekong sub-region: the structural divide between “absentee” traders, own-account traders and transporters-brokers, and the differences in this structure across checkpoints. An arrangement between a trader and broker can also assume one of several contractual forms.<sup>12</sup> Qualitative evidence highlights a watershed in the SSCBT population between traders and transporters-brokers on the one hand and “absentee” traders on the other. The latter may trade small quantities but do not interact with authorities (and are therefore not considered small-scale _cross-border_ traders).<sup>13</sup> Traders rarely engage in brokering, i.e., dealing with authorities on behalf of other traders, and never work only as transporters, while brokers rarely trade on their own accounts but are often hired as transporters, i.e., carrying goods across the border but not dealing with authorities. There is no overlap between “absentee” traders and either cross-border traders or brokers. Figure 1 illustrates this with a simple Venn diagram. In 6% of cases brokers also trade on their own accounts. No trader who deals with authorities and was thus eligible for sampling was found to ever hire brokers. This implies that the traders who hire own-account traders as occasional brokers are “absentee” traders who never cross the border.

> 11 Private cars, tractors, pick-up trucks or minivans are in a “grey zone”: They cannot transport goods across the border without going through the formal channel or with a fee that SSCBTers would seldom accept to pay, preferring other (smaller) means of transportation.

> 12 Transporters-brokers are mostly (93% of crossings) remunerated on the basis of how much they have to transport, which is determined either in kilograms or by the number of items; the rest are paid a lump sum. Different contractual arrangements are available and were observed in the field: Brokers may keep whatever they can save on taxes and fees (brokers are remunerated in this manner for 91% of crossings) or give back all savings to the trader (8%); they may be responsible for the goods in case of confiscation (76%) or not (15%), or share the responsibility (10%) according to idiosyncratic agreements, e.g., depending on whether forbidden goods are concealed in the shipment.

> 13 Whereas eliciting information from “absentee” traders would yield interesting information about trade patterns, the determinants of informality and the choice of hiring a broker, qualitative information and pilot experience made it clear that they could not be contacted through their brokers. Brokers themselves often deal with intermediaries, typically cart owners in Poipet, who do not deal with authorities and do not handle the goods at any time but rent carts to several brokers and are contacted by traders.

Cambodia and Lao PDR 7
Glass Barriers _Figure 1: SSCBT Is Divided in Three Distinct Activities despite Some Overlap between Brokers and Traders_ <!-- Start of picture text --> 6% (5%) of<br>brokers<br>(traders) Own-account<br>also act as<br>traders<br>traders<br>(brokers)<br>Brokers<br><!-- End of picture text --> <!-- Start of picture text --> "Absentee"<br>traders<br><!-- End of picture text --> Qualitative evidence hints at the importance of overall traffic as an explanatory factor for a predominance of brokers at a checkpoint. Busier checkpoints can indeed lead to delays and traders incur significant losses as a consequence, which fuels demand for specialized transportersbrokers who know how to get heavy carts across the border faster, where to stop for dealing with authorities and how to minimize taxes and fees. The volume of trade, both by large and small, formal and informal firms, is much larger in Poipet than in the other two checkpoints. Therefore, middlemen specialized in getting large quantities of goods through a congested checkpoint are much needed in Poipet and most SSCBTers there are brokers—see Figure 2. Conversely, brokers are almost absent in Bavet and preliminary observations, FGDs and stakeholder interviews brought evidence of no such activity in Vangtao.

Being a broker is a second best relative to the trader option: Besides being more physically demanding, brokering implies interacting with border authorities, negotiating taxes and sometimes smuggling illegal or high-tax goods. Depending on the contractual arrangement, brokers may be responsible for confiscated goods. As shown by our qualitative data, brokers would become traders, had they a better access to capital and knowledge of local demand and supply.<sup>14</sup> Their lack of knowledge of the local market is partly explained by their higher probability of being migrant workers from other provinces, which also means that they are more vulnerable to changes in the local legal environment.<sup>15</sup> In the checkpoints visited, SSCBTers were always Cambodian and Lao on the border with Thailand whereas at least a significant minority of SSCBTers was Vietnamese at checkpoints on the border with Vietnam, but still mostly coming

> 14 They explain that they do not trade for lack of capital (92%), are afraid they might get cheated or their goods might be confiscated (5%), or they “don’t know how to” (9%).

> 15 In Poipet, fees for the necessary “immigration card” increased dramatically for non-local residents of Banteay Meanchey province six months prior to the study. The process had also become stricter as birth and registration certificates were required. The regulatory change was too recent to assess whether it was generating informal arrangements or whether transporters-brokers just accepted the hike. We expect little room for negotiation as the card is issued by the Thai police and the relationship between Cambodian border users and Thai officials is notoriously poor. Moreover, the interviewees never mentioned this as an issue unless we specifically asked about travel documents.

Cambodia and Lao PDR 8
<!-- Start of picture text --> 100%<br>90%<br>80%<br>& 70%<br>3B 60%<br>S5SSO%<br>& 40%<br>E° 30%<br>20%<br>10%<br>0%<br>Bavet Poipet Vangtao Men Women<br>mOwn-accounttraders @ Brokers<br><!-- End of picture text --> <!-- Start of picture text --> eo%<br>ee<br>60%<br>i<br>&= 50%<br>=a 40%<br>som<br>é 20%<br>iO%<br>O%<br>Bavet Poipet Vangtac<br>we Male SSOBTers mFernale SSCBTers<br><!-- End of picture text -->
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<!-- Start of picture text --> 100%<br>90%<br>80%<br>2¥ 70%<br>6 50%<br>S<br>‘5 50%<br>§2 40%30%<br>2<br>on<br>10%0% —[8 a — =m<br>Own savings Loan from Bank Relatives’ Goods supplier<br>relatives savings credit<br>@ Female SSCBTers += Male SSCBTers<br><!-- End of picture text -->
<!-- Start of picture text --> Total distance traveled Ba.<br>Female * Total distance traveled —<br>-20% -10% 0% 10% 20% 30% 40%<br>Marginal effect on probabilityto be a trader<br><!-- End of picture text -->
<!-- Start of picture text --> 0m<br>3 70% |<br>benz<br>=<br>¥ sox :<br>fs<br>5<br>= 10%<br>on<br>Male traders Female traders<br><!-- End of picture text -->

<!-- Start of picture text --> 100%<br>90%<br>3 -70%<br>8 cox<br>S 50%<br>A 40%<br>Ge<br>10%<br>O%<br>Men Women Pooled Men Women Pooled Men Women Pooled<br>Bavet Poipet Vangtao<br>8 Tax paid per unit or visual assessment of value @ Tax paid by per cart or time period<br><!-- End of picture text --> <!-- Start of picture text --> Une _7_—y—y—y—~—E———a<br>Reduce thenumberofauthitis =<br>Signsshowingtxanes —<br>A parkinglot mmmeens<br>Weighing scales =<br>Receipts fortaxesandfees im,<br>AnATMat the border =<br>rCr3ad ——_—<br>Onestop vino ——<br>Use of scanners 5<br>0% 10% 20% 30% 40% 50% 60% 70% 80%<br>Share of SSCBTers making the recommendation<br>BPoipet @Bavet mVangtao<br><!-- End of picture text --> <!-- Start of picture text --> 45<br>ict<br>g a<br>235<br>g 3<br>S<br>225<br>H 2<br>Svs<br>g<br>=&3 as1<br>0<br>Male traders Female traders<br><!-- End of picture text -->
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<!-- Start of picture text --> 60%<br>50%<br>406<br>306<br>20%<br>oo mam BL | a<br>Bavet Poipet Vangtao Bavet Poipet Vangtao<br>Tax payments as share of total purchase Tax payments as share of total gross profit<br>value<br>eMean & Median<br><!-- End of picture text -->
<!-- Start of picture text --> 30%<br>25%<br>20%.<br>15%<br>10%<br>5% z<br>ox | =a —<br>Men Women Men Women<br>Tax payments as share of total purchase Tax payments as share of total gross profit<br>value<br>= Mean @ Median<br>Female * Perishable food ===> i.<br>Perishable food f.<br>Female 1 £e<br>-5% 0% 5% 10% 15% 20%<br>Marginal effect on probability to interact with quarantine<br><!-- End of picture text -->

<!-- Start of picture text --> TAY<br>\<br>\<br>\\<br>i}1<br>\<br>\<br>1<br>\<br>\\<br>\<br>\<br>\<br>Nett pets N e e ae<br><!-- End of picture text -->
Glass Barriers _Note:_ The figure displays coefficients from an OLS regression. Country and checkpoints are controlled for. Whiskers represent 95% confidence intervals.

Higher taxes for female SSCBTers and a higher probability of being controlled would be justified if, for some reason (including a low-trust equilibrium between border authorities and female crossers), women were more likely to bend the rules. SSCBTers indeed report being sometimes involved in illegal practices. These practices include hiding high-value goods under low-value ones, taking a small by-road to avoid officers and transporting brand clothes and shoes, exports that are carefully monitored in Cambodia to protect the garment industry.

The IDI data contain information on whether in the 12 months preceding the survey the respondent had ever “omitted to declare goods or underreported their quantity or value on purpose in order to avoid taxes.”<sup>31</sup> We find that about one-tenth of SSCBTers admit to deliberate tax evasion in the past year but stakeholder interviews revealed that SSCBTers are reluctant to confess tax evasion. Their answers on this topic are therefore likely to be biased downwards. We decided to include in the IDI survey additional questions to take into account SSCBTers’ reticence and adjust estimates of the incidence of tax evasion accordingly. The methodology implemented relies on Kraay & Murrell (2013). SSCBTers’ direct answers to the binary question about tax evasion in the past 12 months are contrasted with the reticence-adjusted estimates. We leave the presentation of the methodology and results to Appendix B. The main finding is that although rates of tax evasion are sensibly higher when taking reticence into account, they are neither significantly nor qualitatively different between men and women. This suggests that female SSCBTers’ higher tax burden is not clearly due to female traders and brokers indulging more than men in illegal practices.

Third, women suffer from a wedge in the tax schedule applied to them at the border. Tax exemption or preferential treatment is granted by the law for local cross-border trade. For instance, in Cambodia “consumption within the border area” and “personal consumption” by travelers are both subsumed under the “imported non-commercial goods” category (Ministry of Economy and Finance of the Kingdom of Cambodia 2005). Such rules are enforced by secondary customs checkpoints or patrols along major roads. In Lao PDR, a physical checkpoint is visible 15 km off Vangtao on the road to Pakse; a similar structure stands 8 km before Dansavanh. Subsequently, a large share of crossings is reported to imply no interaction with or taxation from border authorities, and women and men appear equally likely not to pay any taxes.

Gender differences nevertheless arise when one takes activity (trader vs. broker) into account. As can be seen from the regression coefficients displayed in Figure 19, female _brokers_ enjoy a preferential treatment relative to their male counterparts, whereas the effect of being a woman is statistically indistinguishable from 0 for traders. This may be evidence of positive discrimination in favor of female brokers and negative discrimination against women when they trade on their own accounts. Although such a nonlinear tax schedule seems to protect more vulnerable female SSCBTers, it may create a tax wedge that deters female brokers from engaging in trading and women in general from entering SSCBT.<sup>32</sup>

> 31 Some goods, e.g., alcohol, are subject to declaration in some checkpoints and simply forbidden to cross the border in others. A common practice for traders who want to minimize taxes is to hide high-duty goods under low-duty ones. This is particularly effective under the “visual assessment” method, which remains usually superficial.

> 32 The gender gap in tax exemption is not due to differences in shipment values, since Figure 19 controls for that.

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<!-- Start of picture text --> Trader r t 4<br>Total purchase value (standardized) '<br>Female (standardized)* Total purchase value |<br>Female * Trader — |<br>“150% -100% -50% 0% 50% 100% 150%<br>Marginal effect on probability of tax exemption<br><!-- End of picture text -->
Glass Barriers up to date.<sup>33</sup> The display of tariffs could be complemented by the equipment of checkpoints with weighing scales, a recommendation some SSCBTers put forward. They would indeed avoid timeconsuming negotiations and help reinforce SSCBTers’ bargaining power. Finally, one-stop windows should help reduce border clearance time.

Women’s time constraints also resonate with another major hurdle in trading goods across the border: transportation. SSCBTers’ top concerns include narrow roads that cause traffic jams and delays, the lack of public transportation and parking lots, and restrictions on the types of vehicles allowed across the border with goods. The first way to tackle the issue of transportation consists of investing in transportation infrastructure. Checkpoint roads tend to be narrow and different categories of border users and vehicles have to shoulder their way across the border. The most crowded of the checkpoints visited is undoubtedly Poipet, where large trucks, private cars, SSCBTers’ carts and tourists on foot all go through the same gate. Infrastructures could also include parking lots that would enable better-off SSCBTers to invest in larger vehicles, or a bus service to the border proper. Women’s time constraints and high transportation costs may also be effectively tackled by relieving them of some of their household duties, for instance through a better provision of child care—the cost of which could be shared through a female traders’ association.<sup>34</sup> Border-crossing rules need to be altered to facilitate SSCBT. In Vangtao, SSCBTers refrain from using pick-up trucks because of the fees attached to crossing the border with goods in fourwheeled vehicles. Reducing those fees might be an alternative to enlarging the existing parking lot. On the border with Thailand, motorbikes are not allowed to cross with goods, which bereaves SSCBTers of a cost-effective transportation option and means that only man-powered carts are available. On the border with Vietnam riding a motorbike with goods is forbidden in the checkpoint zone, which forces them to push the heavy shipment for long distances.

Our findings that women are subject to higher tax rates, more often controlled by quarantine and incur much larger transportation costs are evidence of “glass barriers” to female cross-border trade—either hidden yet real discrimination or challenges that affect women disproportionately. This is part of the explanation for the relatively low share of women in SSCBT compared with similar jobs in Cambodia and Lao PDR. Such practices are not justified by a higher propensity to evade taxes since women appear no different from men in that respect, even after adjusting reports for differential reticence. Equal taxation should thus be aimed at. A potential solution would be to introduce an exogenous control probability so as to minimize the correlation between controls for a type of product and women’s share of crossings in that line of business. Exogenous controls would moreover be more transparent while still allowing customs to flexibly target high-

> 33 Whereas SSCBTers in FGDs complained about the level of taxes, they were seldom inclined to reject negotiability, probably out of fear that the application of tariffs set in stone would be detrimental to them. But if the average tax rate were to remain unchanged, predictable tariffs would improve SSCBTers’ welfare, especially for brokers, who are found in the data to be more risk-averse. Moreover, we saw that women are less attached to negotiations since they do not have time for them.

34 No small-scale traders’ associations exist in Cambodian and Lao checkpoints, but in open discussions about ways to foster small-scale cross-border trade during FGDs, SSCBTers agreed associations might have a positive impact on their activities. They would however not list them among their recommendations as they were reluctant to suggest solutions they had never tried out. Associations have been proven effective in defending female traders’ rights, improving information about prices, providing training and ensuring smooth relationships with border officials in East Africa.

Cambodia and Lao PDR 21
Glass Barriers duty goods. They would put an end to what seems to be statistical discrimination: targeting women because women tend to trade specific types of goods.<sup>35</sup> Training border officials to identify gender-biased challenges and sources of discrimination could also go a long way towards improving women’s access to cross-border trade. Women are strikingly underrepresented among officials, in particular in Cambodia, and do not have representatives to voice their concerns. Regular trade facilitation audits, with a specific focus on small-scale trade and gender issues, could be readily implemented and help improve female traders’ lot before female officials are recruited and trained.

A Charter for Cross-Border Traders and Brokers reminding all parties in small-scale cross-border trade—authorities on both sides of the border, small-scale cross-border traders and brokers, and transporters—of their rights and duties could be instrumental in improving border crossing conditions. The Charter, the exact contents of which should be discussed with stakeholders, would list the authorities allowed to operate at border checkpoints, which authorities are allowed to collect taxes and fees and which are not. The Charter would also state rules of conduct, including no discrimination in tax rates by gender and no verbal or physical violence. Its main benefits would be to enhance the bargaining power of the most vulnerable categories of border users and raise the low level of knowledge of cross-border trade rules and regulations that characterizes SSCBTers. The conception of the Charter could benefit from experience from the World Bank’s initiative currently piloted at the Mwami/Mchinji crossing between Malawi and Zambia (World Bank 2014b). As in southern Africa, the Charter would be displayed at strategic locations, translated in local languages and disseminated to stakeholder groups.

Finally, the existing tax schedule creates a disincentive effect for women and such a tax wedge should be smoothed. Women enjoy a preferential treatment when working as brokers, a less remunerative and more physically demanding activity. Such discounts may be justified as smallscale cross-border brokering is considered a less suitable activity for women and customers are reportedly reluctant to rely on their services. On the other hand, the combination of discounts for female brokers and higher tax rates on female than male traders is tantamount to double jeopardy for female traders: Their margins are reduced and female brokers who would be willing to upgrade to own-account trading or non-traders who would like to enter SSCBT—“hippos” tempted to settle in the “Sahara”—face a deterring tax wedge that hinders their ambitions.

# References

Cambodia Development Resource Institute. "Cambodia's Cross Border Economy: An Exploratory Study." Working Paper 32 by K.A.S. Murshid and Tuot Sokphally, Phnom Penh, 2005.

Cambodia Ministry of Agriculture, Fisheries and Forestry. _Agricultural Market Information:_ _Gender Roles in Agricultural Marketing._ n.d.

http://www.agriculturalmarketinformation.org.kh/en/information-resources/gender (accessed June 6, 2014).

EMC. _Time Release Study 2012 Lao PDR._ Vientiane: Emerging Markets Consulting, Ltd., 2012.

> 35 We nevertheless acknowledge that this fairer approach would come at a cost for border authorities if they need to assess the type of goods first and then randomly decide whether to control further the contents of a shipment. One way around this issue would be to apply the same control probability to all shipments and vary penalties instead.

Cambodia and Lao PDR 22
Glass Barriers Financial ministry of the Lao PDR. "Financial ministerial instruction on the implementation of the law and enforcing decree to implement the Custom Law No. 05/NA." Vientiane, May 25, 2005.

- Hausmann, Ricardo, Bailey Klinger, and Rodrigo Wagner. "Doing Growth Diagnostics in Practice: A 'Mindbook'." _CID Working Paper No. 177_ , September 2008.

- Kraay, Aart, and Peter Murrell. "Misunderestimating Corruption." _World Bank Policy Research Working Paper 6488._ 2013.

Kusakabe, Kyoko, Prak Sereyvath, Ubolratana Suntornratana, and Napaporn Sriputinibondh. "Gendering Border Spaces: Impact of Open Border Policy Between Cambodia-Thailand on Small-scale Women Fish Traders." _African and Asian Studies_ 7 (2008): 1-17.

Lesser, Caroline, and Evdokia Moisé-Leeman. "Informal Cross-Border Trade and Trade Facilitation Reforms in Sub-Saharan Africa." _OECD Trade Policy Working Paper No. 86._ 2009.

Ministry of Economy and Finance of the Kingdom of Cambodia. "Circular on Management of Imported Non-Commercial Goods No. 009 SHV." Phnom Penh, December 1, 2005.

- —. "Prakas on Procedures of Payment of Duties, Taxes and Other Levies on Imported and Exported Goods No. 571 MEF.BK." Phnom Penh, August 19, 2010.

National Institute of Statistics, Ministry of Planning, Kingdom of Cambodia. "Cambodia SocioEconomic Survey 2013." Phnom Penh, July 2014.

Prud'homme, R. "Informal Local Taxation in Developing Countries." _Environment and Planning C: Government and Policy_ 10, no. 1 (1992): 1-17.

- UN Women. _Walking in the Dark: Informal Cross-Border Trade in the Great Lakes Region._ New York City: UN Women, 2012.

UNIFEM, WB, ADB, UNDP and DFID/UK. "A Fair Share for Women: Cambodia Gender Assessment." Phnom Penh, 2004.

- USAID. "Women in Cross-Border Agricultural Trade." _Enabling Agricultural Trade Project Policy Brief._ no. 4. October 2012.

- Walker, Andrew. _The Legend of the Golden Boat: Regulation, Trade and Traders in the Borderlands of Laos, Thailand, China and Burma._ 1999.

Warner, S. "Randomized-response: A survey technique for eliminating evasive answer bias." _Journal of the American Statistical Association_ 60 (1965): 63-69.

- World Bank. _Cambodia Lao PDR Trade and Transport Facilitation Assessment._ Phnom Penh: World Bank, 2012a.

- World Bank. _Facilitating Cross-Border Trade between the DRC and Neighbors in the Great Lakes Region of Africa: Improving Conditions for Poor Traders._ Washington, D.C.: World Bank, 2011.

Cambodia and Lao PDR 23
Glass Barriers World Bank. _Lao PDR - Mapping the gender dimensions of trade: A preliminary exposition._ Vientiane: World Bank, 2012b.

World Bank. _Lao PDR Trade and Transport Facilitation Assessment._ Vientiane: World Bank, 2014a.

World Bank. _The Republic of Zambia Diagnostic Trade Integration Study (DTIS)._ Washington, D.C.: World Bank, 2014b.

World Bank. _Toward Gender Equality in East Asia and the Pacific: A Companion to the World Development Report._ Washington, D.C.: World Bank, 2012c.

- —. _World Development Indicators._ 2005 and 2009. http://databank.worldbank.org/ (accessed June 6, 2014).

Cambodia and Lao PDR 24
Glass Barriers

# Appendix

- A. Random-Response procedure included in the IDI survey

- 5.8 In the last 12 months, have you ever omitted to declare goods or underreported their quantity or value on purpose in order to avoid taxes? 1 Yes <u>0 No 997 Doesn’t know 998 Refuses to answer</u>

## **_<u>Please read out the following script,</u>_**<sup>**_36_**</sup> **_<u>making sure the interviewee understands the procedure:</u>_**

## **_Enumerator: Please make sure the card deck is well shuffled (do it a minimum of 5 times before the interview)._**

I am going to read out a set of questions that describes acts or behaviors that people have expressed. Unlike other questions where you would just respond with a “yes” or “no,” this set has a slight variation to it. Before you answer each question, you will pick a card from this deck. There are 50% of black (spades/clubs) and 50% of red (hearts/diamonds) cards, randomly mixed. Based on which color you pick, I will give you an instruction to provide the appropriate response. Are you ready? I will now read the first question. Please pick a card from the deck, and if it’s a red card, just say YES regardless of whether you have done this or not. If it’s black, please just answer the question. Please do not let me see the card and do not put it back into the deck. This is very important.

|||1 Yes|0 No|
|---|---|---|---|
|5.9|Have you ever liedto protectyourself?|||
|5.10|Have you everdeliberately spoken illofamemberofyour family orafriend?|||
|5.11|Have you everdeliberatelytriedto cheatanotherperson?|||
|5.12|Have you everbrokena promise?|||
|5.13|Have you ever takensomethingthat isnotyours withoutpermissionandkept it?|||
|5.14|Have you ever bought, sold, bartered or been given something that you knew was<br>stolen?|||
|5.15|Have you ever mistreated someone because they did not share your opinions or<br>values?|||
|5.16|Have you ever been nice to a person only because you thought it would bring you<br>some benefit?<sup>37</sup>|||
|5.17|If you received some extra money that your family did not know about, would you<br>ever hideitfromthemand spendit onyourownenjoyment?|||
|5.18|Have you ever insulted yourparents,relatives orotherelders?|||
|5.19|Have you everbribed a policemanbecause you did something wrong ontheroad?|||
|5.20|Have you everdamaged somebody’s property tohurt them?|||
|5.21|Have you everstolen moneyfromamemberofyour household?|||

**_Please mix in front of the respondent the cards s/he has picked with the rest of the deck. Do not look at the cards._**

- B. Adjusting Answers to Sensitive Questions

Answers to survey questions about sensitive topics, e.g., corruption or illegal activities, are notoriously unreliable because respondents put little faith in guarantees of survey data anonymity or want to avoid negative judgments from enumerators.

> 36 Adapted from Kraay and Murrell (2013).

> 37 This question was not exploited in the reticence adjustment procedure because of a very high proportion of “Yes,” suggesting a different rate of guilt.

Cambodia and Lao PDR 25
Glass Barriers Kraay & Murrell (2013) have designed a new methodology that uses randomization but does not assume that reticence decreases—contrary to Warner (1965), for instance. Besides the “conventional question” (CQ), i.e., a sensitive question (set in binary terms) that the respondent is asked to answer directly, their approach includes a set of “random-response questions” (RRQs), for each of which the respondent privately tosses a coin (we used playing cards instead). She is instructed to answer “Yes” whatever the true answer to the sensitive question if the coin comes up heads and to answer the question otherwise. The RRQs are also sensitive—a crucial assumption is that the proportion of respondents who have done the sensitive action, which Kraay and Murrel call the “rate of guilt,” is the same across the CQ and RRQs— and far from assuming that randomization elicits more truthful answers, the known probability of a “Yes” is used to estimate the incidence of reticence in the sample thanks to the generalized method of moments (GMM). Reticenceadjusted rates of tax evasion are presented in Table 2.

The RRQs included in the IDI questionnaire are presented in Appendix A. Some of the questions come from Kraay & Murrell’s battery, which was used in Cambodia among other developing countries to estimate the share of the population who had been in a situation where a bribe was expected in the past year. The others were developed based on preliminary observations and qualitative interviews of SSCBTers. They were then fielded along with the other sections of the survey during pilots in all three checkpoints.

_Table 2: Reticence Estimation and Adjustment of Answers to Sensitive Questions Following Kraay & Murrell’s (2013) Methodology_

||Pooled|Bavet|Poipet|Vangtao|Men|Women|Brokers|Traders|
|---|---|---|---|---|---|---|---|---|
|Guilt|.189***|.121*|.183*|.270**|.165**|.221***|.202*|.109**|
|Reticence|.796***|.712***|.779***|1.02***|.749***|.871***|.708***|.756***|
|Probability reticent person<br>answers question reticently|.476***|.596***|.439***|.361***|.508***|.432***|.540***|.508***|
|Effective reticent|.379***|.424***|.342***|.369***|.381***|.376***|.382***|.384***|
|Number of observations|157|55|54|48|65|91|45|63|
|Naïve guilt rate estimated<br>directlyfrom surveyresponses|.117***|.070**|0.120*|.170***|.102**|.138***|.125*|.113***|

_Source:_ Authors’ calculations. The Stata code for estimating these parameters was graciously shared with us by Peter Murrell.

_*p_ <.1 ** _p_ <.05 *** _p_ <.01 Cambodia and Lao PDR 26