Informal economy calls for country-specific solutions not global prescriptions: Former EFC Chief

Sriyan de Silva, former CEO of the Employers’ Federation of Ceylon (EFC), a one-time Deputy Director of the ILO’s Bureau for Employer Activities and a Senior Adviser to the International Organisation of Employers (IOE), in a press statement by the EFC, notes that the informal economy is a response to poverty and the failure of governments and policy makers to formulate and implement inclusive policies which include employment generation. 

He further notes that for modern concepts such as ‘decent work’ to be realised in the informal sector, there should also be in place an education system which creates a workforce with the necessary skills and aptitudes to function in the formal economy. He adds that, despite the informal economy remaining one of the most important features in all emerging and developing economies, it hardly figures in many national development policies. 

The former EFC Chief who had authored several publications including on the informal economy, will speak on the global perspective of the informal economy at the upcoming EFC/ILO Symposium on ‘Informal Economy: Dilemmas, Issues and Challenges of the Informal Economy’. He will explain the causes, consequences, results of informality, barriers to entry into the formal economy, local economies and social capital, labour rights in the informal economy and remedies and solutions. The two-day symposium on 4 and 5 April will deliberate on globally identified issues concerning the informal economy including local challenges and dilemmas. 

Critical of certain “prescriptions” to deal with the informal economy, de Silva maintains that some of them rather than identifying the reasons for its existence and helping those in it, in reality develop policies which have the effect of destroying it. “It is often not recognised that this sector nurtures entrepreneurship and that not everyone in it wishes to move into the formal economy. It should be a voluntary move.”

Citing some of the best examples of research into the informal sector in Latin America and elsewhere, de Silva states that policy-making should reflect ground level realities. Moreover, they should be country-specific solutions sensitive to each setting as opposed to neo-liberal economic policies perceived as ‘one-size-fits-all’ remedies. 

“When developing countries are compelled to or voluntarily implement such policies without regard to their socio-economic, environmental and cultural costs, unlike the more influential nations that can pick and choose their policies, the consequences often include an expansion of the informal, rather than of the formal economy,” observes de Silva. 

The continuous expansion of the informal economy mirrors its relevance and resilience. A substantial number of people in both the informal and formal economies are dependent on the goods and services provided by the informal economy. “There is evidence that in recent times, in some countries certain shops and supermarkets are disappearing in local communities, and consumers instead patronise local markets,” observes de Silva who alludes to the largest informal market in South America found in the suburbs of Buenos Aires in Argentina which market draws about a quarter million people each week. This, as de Silva illustrates, is a classic example of returning to the ‘localisation of markets’ despite globalisation, and thereby creating the scope for the development of social capital. 

It is predicted that by 2020 two-thirds of the global workforce will be a part of the informal economy. This should make policy-makers sit up and revisit the issues relating to the informal economy, says de Silva.The symposium will address several other subjects relative to the informal economy such as ‘Optimising Global Trade in Formalising the Informal Economy – the Case of the Tea Industry’, ‘The Character of and Challenges to Sri Lanka’s Informal Economy’, which will be dealt with by Dr. Nimal Sanderatne, and ‘Informality and the Welfare Dimensions of Employment Change in Sri Lanka’s Labour Market’ which will be addressed by Dr. Ramani Gunatilake. 

The symposium will also address ‘Remedies and Solutions for Transiting to Formality – Gender and Regional Disparities’. The symposium will close with an interactive discussion among and with the participants to arrive at their views on the subject and to formulate conclusions and recommendations.