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Study on Informal Sector Linkages Within the Tourism Value Chain

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Study on Informal Sector Linkages Within the Tourism Value Chain Study on Informal Sector linkages within the Tourism Value Chain Table of Contents Executive Summary 2 Policy Recommendations 4 1. Introduction 7 1.1. Brief overview 7 1.2. Objectives of the study 9 1.3. Justification 10 1.4. Outline of the report 10 2. Key issues in the literature 11 2.1. Key Findings 11 3. Context 16 3.1. Size and Characteristics of the Informal sector 16 3.2. Informal Sector Contribution to GDP 17 3.3. Policy Framework Supporting Informal Sector 17 4. Methodology and Data 22 4.1. Methodology 22 5. Characteristics and Nature of the Informal Sector 25 5.1. Key Findings 25 6. Tourism Value Chain Analysis 30 6.1. Ampara District 30 6.2. Batticaloa District 35 6.3. Polonnaruwa District 39 6.4. Trincomalee District 45 7. Policy Orientated Recommendations 46 Reference 59 Annex 1: Methodology for Estimating the Informal Sector Contribution to GDP 61 Annex 2: Changes in Economic and Tourism Industry Policy Framework 63 Annex 3: Characteristics and Nature of the Informal Sector – Tables 66 Annex 4: Value Chain Analysis Tables 71 Annex 5: Supply Chain Analysis Figures 75 Annex 6: Case Study Profile Tables 87 Annex 7: Summary of Case Study Findings 91 Executive Summary The Tourism Industry has been identified as one of the key drivers of growth and development in Sri Lanka by the successive governments. The Tourism Strategic Plan 2017 was formulated to transform the sector and support move towards achieving sustainable development goals. In contrast to more advanced countries, the Tourism Industry in Sri-Lanka is largely driven by the informal sector in Sri Lanka. Despite the significant of the informal sector, the government policy framework pays limited attention on how to improve the livelihood of people engaging in informal economic activities in the sector. Indeed, the government formulated a policy framework, Tourism Strategic Plan 2017, for transforming tourism in to a sustainable industry, but limited attention to informal economic activities in tourism despite emphasizing the need for inclusive growth and development. This situation may have occurred due to a lack of comprehensive understanding on the sector and related value chain. This study aims at filling the knowledge gap identified above and to; (a) understand the current policy environment for the informal employment, (b) map out the characteristics of those engaged in informal activities, (c) explain reasons why people continue to operate in the informal sector, (d) examine how women and those people with disabilities in the informal sector connect with tourism value chain, and (e) estimate the size of the informal sector contribution to gross value addition. Through addressing these issues it is possible to make policy orientated recommendations for implementation. In order to collect the data and understand the situation a mixture of methods were used, including, a combination of quantitative and qualitative approaches. A literature survey is confined to developing countries helped us understand key issues that should be investigated. A detailed descriptive analysis was conducted to map the characteristics of informal sector employment in the important sub-sectors of the Tourism Industry. The main data source for this analysis was the Labour Force Survey (LFS), conducted by the Department of Census and Statistics (DCS) of Sri Lanka. A case study approach was employed to investigate informal activities around the Tourism Industry, with special reference to women and people with disabilities.. Finally, an indirect method was used to estimate the contribution that the informal Tourism Industry to gross domestic value for tourism in Sri Lanka and in the Eastern Province. There are a number of boundaries and assumptions underpinning this study. The study is conducted in four selected districts, namely Ampara, Batticaloa, Trincomalee (Eastern Province) and Polonnaruwa districts. When the study was initially designed it was assumed that it would investigate the different sub-sectors contained in the tourism and hospitality sector. However, once the secondary data analysis had taken place it was clear that the vast majority of those engaged in informal activities were located in the food and beverage sub-sectors and to a lesser extent transportation. Given this situation any attempt to improve earning and employment opportunities must focus upon these sub-sectors. Therefore, in order to reflect realities on the ground this study focused upon the former sub-sectors and where possible made reference to other sub-sectors in the tourism and hospitality value chain. Using this approach, the key findings can be summarized as follows: 1 • According to our research in the Eastern Province, the Tourism Industry accounts for 15 per cent of the provincial GDP, while the Tourism Industry accounts for 11.4 per cent of the nation’s GDP in 2016.At the same-time informal sector account for 1.1 percent of tourism activities of the total provincial gross domestic product (GDP) in the Eastern Province, and 0.9 per cent at the national level. These figures imply that the informal sector plays relatively a larger role in the Tourism Industry in Eastern Province, compared to the rest of the country. • The food and beverage sub-sector, and the transport sub-sectorare dominated by relatively older female, and young or middle-aged male workers. Also, women involvement in the informal tourism activities is relatively higher in Ampara than in other districts. • Firm size in the informal sector is very small, consisting of one or two persons and reason include: structural weaknesses such as unwillingness to expand or lack of business confidence, severe competition, and seasonal fluctuation in sales. • Understandably, the levels of education and training remained relatively low among persons engaged in the informal activities for these sectors, including soft and technical skills.Those who obtained some training, have received lower level of training, i.e. certificate level training. • A clear demarcationexistsin the Tourism Industry where limited linkages exists between large and informal small operators. • In contrast small & medium businesses in the Tourism Industry connect largely with the local economy/community for theirlabour services and inputs. • The tourism value chains has failed to connect with the local economy in the selected districts. The only exception to this statement is in Ampara where the community benefits from linkages. .. • The limited linkages between locals and Tourism Industry is due to number of reasons; ranging from local skill levels, domination of value chains by larger players, limited capacity of small & medium businesses,unfavourable state policies, , poor quality, lack of market information, limited product market, as well as cultural concerns. Most of the former are more pronounced in small businesses run by women. • There is also a general unwillingness to hire female workers due to barriers such as working hour restriction, limited areas of placement, security issues, and attitudes towards working women at tourist hotels. • The research showed that women-run businesses have positive attitude towards employing female workers as against the male-run businesses. It is possible that female workers prefer working at women-run businesses due to security and cultural concerns • People with disabilities receive very limited opportunities to engage in economic activities in the Tourism Industry. In particular, little support is provided to people with disabilities even ex-combatants. 2 • Foreign language ability is extremely poor at small businesses in the food and beverage sub-sector. This has become one of the major stumbling blocks for both small and medium businesses reaching out to foreign tourists. • Tourism Industry has enormous potential in uplifting the livelihood of people living in the four selected districts. However, the present state of affairs may not automatically generate such wide-spread benefits due to factors just highlighted above.. In the light of above findings, it is imperative to implement a comprehensive policy package in uplifting the livelihoods of people engage in informal economic activities around the Tourism Industry. This study identified a set of policy interventions for consideration by government, as well as the Skills for Inclusive Growth program, and these can be summarized as follows: Policy Recommendations Policy Interventions for the Government The Government of Sri Lanka formulated a Tourism Strategic Plan (TSP) 2017 with a broader objective of transforming the industry in achieving Sustainable Development Goals (SDGs). Some of the recommendations made below may reiterate some of the already identified areas while others are new and equally important in achieving government’s ultimate objective of achieving SDGs, particularly around inclusivity and the informal sector: Public Invest in tourism site and product development -A number of owners/managers highlighted the fact that one of the key issues faced by the industry in the Eastern Province (including Polonnaruwa district) is the fewer tourist attractions (tourist sites) and/or fewer number of tourism products. It is required that central and provincial governments allocate sufficient resources for developing tourist sites and products. Developing a regional talent pipeline in collaboration with the private sector operators-One of the key concerns of the industry is that current public funded human resources development programmes do not meet the industry
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