ILO to Launch Groundbreaking Report on the Impact of Multiple Crises on Sri Lanka’s MSMEs

• The report is based on extensive analysis, including surveys of over 550 MSMEs across 10 districts
• One of the main findings indicated that tourism, manufacturing, construction, transport and storage, wholesale and retail trade were among the severely impacted
• Outlines recommendations to facilitate the growth of MSMEs, focusing on areas that can have a broader impact on Sri Lanka’s job recovery

The International Labour Organization (ILO) has announced the launch of its flagship report, “Impact of Multiple Crises on Sri Lanka’s Micro, Small, and Medium Enterprises,” scheduled for release on the 7th of November 2023. The report is the result of extensive analysis conducted by the ILO and NielsenIQ, involving surveys of over 550 MSMEs across 10 districts and sector-based interviews with government representatives and non-government organisations.

By analysing the impact of the multiple crises on MSMEs, this comprehensive and timely groundbreaking study will serve as a crucial resource to inform labour market recovery and transformation strategies, providing insights into the policy support necessary to enhance performance and stimulate job creation within the sector.

“A substantial portion of Sri Lanka’s employment recovery and future economic growth hinges upon the performance of MSMEs . We hope these findings will help inform the process of formulating policies and strategies to support the recovery of MSMEs and their growth, with job creation at the heart of Sri Lanka’s economic recovery and regeneration,” said ILO Country Director of Sri Lanka and Maldives, Simrin Singh.

One of the main findings from the report indicates that the COVID-19 pandemic severely impacted the business operations of nearly 80 percent of surviving MSMEs, while the economic crisis of 2022 affected 89 percent of those surveyed, especially in the tourism, manufacturing, construction, transport and storage, wholesale and retail trade, and other services sectors. Furthermore, it was found that the overwhelming majority of MSMEs did not receive support from institutions dedicated to supporting MSME development and instead struggled or closed on their own.

Additionally, MSMEs that survived adopted more agile mechanisms, such as utilizing digital technologies for business operations and adjusting their operations based on the availability of labour. Furthermore, the study identified entrepreneurial orientation, technological adaptation, factor substitution, minimizing waste and searching for new markets as the primary resilience factors.

The report also provides wide-ranging recommendations for change, highlighting 12 key areas of action to facilitate MSME growth, which will have a broader impact on Sri Lanka’s job recovery and should be prioritised. This includes creating a conducive macroeconomic environment, monitoring labour market effects associated with macroeconomic policy reforms, and implementing institutional reforms to control energy and utility costs while increasing market access to local and foreign markets.

This report is an invaluable resource for policymakers, business leaders, and stakeholders concerned about the future of Sri Lanka’s MSMEs. It offers a comprehensive overview of the challenges faced by these critical businesses and provides key insights into the support mechanisms required to enhance their performance and stimulate job creation.

“The ILO is committed to supporting Sri Lanka’s path to labour market recovery and transformation, and we believe this report represents a significant step in that direction,” concluded Simrin Singh.