Informal Sector and the Economy in Sri Lanka: A Survey of Literature

The Nexus Between Foreign Direct Investment, Informal and Formal Sectors in Sri Lanka

“…As per UNCTAD, this consists of a share of the capital and reserves owned by the parent enterprises, plus the net indebtedness of affiliates to the parent enterprises. GDP estimation in Sri Lanka does not include the contribution of the informal sector (Senanayake et al, 2016), and it is assumed that informal economy production is not captured in official estimates of GDP (IMF, 2021). Therefore, the Gross Domestic Product at a constant price in million US dollars is the proxy of the formal sector because it is the formally measured value of all resident producers in the economy.…”

“…According to the Labour Force Survey Annual Report (2017) of the Department of Census and Statistics, 60% of Sri Lankan workers are in the informal sector, through one or the other kind of employment, and even more, might be in the outlying districts not covered in the survey. However, the function of the informal sector in Sri Lanka cannot be separated from the function of the formal sector as it plays an essential role by interacting with and it is understood and visible most of the time as these two sectors are highly interdependent and together contributing to the present system of the economy of the country (Senanayake et al, 2016).…”

“…This integration is classified in one way into two as backward and forward linkages. The backward linkage involvement includes the flow of finance, materials, equipment and consumer goods from the formal to informal sector whereas forward linkage includes subcontracting agreements with domestic and foreign companies as well as government agencies from the informal to the formal sector (Arimah, 2002; Moreno-Monroy et al, 2014; Senanayake et al, 2016). Further, foreign companies in the formal sector can enjoy fewer operating costs by accessing the labour force from the informal sector at a low wage, and marketing informal finished products through the formal sector is another form of subcontracting (Chen, 2006; Hemmer, 1989).…”

Examining the Influence of Network Ties on Self-Efficacy and Entrepreneurial Performance in the Informal Sector in Sri Lanka

“…The general consensus is that developing the informal economy fosters regional development and employment creation in Sri Lanka (Sanderatne 2001). Despite the direct linkage between these sectors, the data on micro-entrepreneurial activity in the informal sector are limited (Senanayake et al 2012;Sanderatne 2002Sanderatne , 2014, and the characteristics and contribution of micro-entrepreneurs in the informal sector have yet to be explored (Sanderatne 2014). Therefore, under the Sri Lankan post-conflict agenda, there is a pressing need to explore the factors which determine the performance of micro-enterprises in the informal sector.…”

On Standby? But for How Long?

“…While for Sri Lanka as a whole the poor are unevenly distributed and particularly skewed towards rural regions, including inland plantations, there is a substantial urban population working in the informal sector in Sri Lanka's cities and towns (Turkstra et al, 2018). Because of stagnant informal sector income, by and large, they have profited little from the economic growth that the country has achieved over the last decade (Senanayake et al, 2015).…”