Majority of Lankan MSMEs left to fend for themselves during pandemic, economic crisis: ILO report

A new International Labour Organisation (ILO) report has revealed that an overwhelming majority of micro, small and medium-sized enterprises (MSMEs) did not receive support from institutions dedicated to supporting MSME development during the pandemic and economic crisis and instead, struggled or closed on their own.
The 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 November 7, 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.

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. 
The 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.

By analysing the impact of the multiple crises on the 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 Sri Lanka and the Maldives Simrin Singh. 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.