80 pct of Sri Lanka’s MSMEs hit by pandemic, 89 by currency crisis: ILO

ECONOMYNEXT –An International Labour Organisation (ILO) survey has found that the COVID-19 pandemic severely impacted the business operations of nearly 80 percent of surviving Micro, Small, and Medium Enterprises (MSMEs) in Sri Lanka, while the currency crisis of 2022 affected 89 percent of those surveyed.

A statement from the ILO said on Thursday November 02 that MSMEs in the tourism, manufacturing, construction, transport and storage, wholesale and retail trade, and other services sectors were especially affected.

It was also 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.

A report on the study, titled ‘Impact of Multiple Crises on Sri Lanka’s Micro, Small, and Medium Enterprises’ is set to be released on November 07.

“Additionally, MSMEs that survived adopted more agile mechanisms, such as utilising 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, minimising waste and searching for new markets as the primary resilience factors,” the ILO said.

In its recommendations, the ILO has highlighted 12 key areas of action to facilitate MSME growth, which the organisation said will have a broader impact on Sri Lanka’s job recovery and should be prioritised. These include 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.

The report is the result of 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, the ILO said.

“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,” the international organisation said.

“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,” ILO Country Director of Sri Lanka and Maldives Simrin Singh was quoted as saying.

This report is expected to be useful to policymakers, business leaders, and stakeholders concerned about the future of Sri Lanka’s MSMEs and 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,” said Singh.