Almost 5.6 million of the 8.2 million Sri Lankans at work in 2017 were informal workers, according to a World Bank study published in 2020 titled “Informality, Job Quality, and Welfare in Sri Lanka.” That is 68% of the workforce: people without contracts, without social security, without a formal economic identity. About seven in every ten.
What makes the figure striking is its stubbornness. The same report tracks informal employment from 2006, the earliest year such data was available, to 2017. As it puts it, “the share of informal jobs in total employment was 69.8% in 2006 and remained fairly stagnant until it slightly decreased to 68% in 2017.”
The scale of the problem is not lost on those who have spent careers trying to fix it elsewhere. Elena Panaritis is an economist and social entrepreneur who has worked as Chief Economic Advisor and a leading Member of Parliament, advising three consecutive Greek Prime Ministers through the Greek sovereign debt crisis and Euro Zone crisis since 2009, designing policies that brought over 15 million people from the margins of informal and marginalised economies into the formal system. Echelon sat down with her to understand what Sri Lanka’s informal economy problem is really about, why it has proved so resistant to change, and what it would actually take to fix it.
Her central argument is simple. Informality is not a paperwork problem. It is a trust problem. People stay outside formal systems not because they cannot access them, but because they do not believe those systems will work in their favour. “The moment people do not trust the system, they stop feeding it information,” she says. The moment people do not trust that guarantee, she adds, “they will never give the information to the system, so that’s where you have informality.”
When people say “informal economy,” most think of street vendors and unregistered shops. Is that the right picture?
It’s one example of it. What informality really is, is a feeling of complete insecurity. You wake up in the morning, and you don’t know how to prepare for your day. You prepare knowing it’s going to be another hustle. That is the extreme of informality. The insecurity can come because your documentation has mistakes, like a name with a misspelling that doesn’t match across systems. Or you may be completely undocumented, born in a village where no one registered your birth. Both produce the same result: you cannot participate fully in the economy, because the formal systems that protect and enable participation don’t recognise you.
Most people hear ‘property rights’ and think land. How do you define it?
Property rights is all the rights we have over elements that exist. We own ourselves. We are not property of somebody else. Ideas are the property of our heads. Movable things belong to us or belong to someone else. It is the right of any property, including the property of your existence as a human being. If we don’t understand informality in those terms, we will not really resolve it.
What does it actually take to fix labour informality?
You cannot fix labour informality without understanding the entire system. It is a function of civil registration, whether you exist in a system at all. It is a function of licensing, how easy or difficult it is to get formal permission to operate as anything from a food vendor to a contractor. And it is a function of what I call the cost of remaining formal. If staying formal requires satisfying too many overlapping, conflicting requirements, people will fall out of the system; they leave, not because they want to, but because it is becoming impossible to stay formal. If however, the formal system is functional and easy to process and one decides to operate outside the law it’s complicated. At that point, this is not informality. It is illegality.
You describe this as a trust problem. What does that mean precisely?
A property rights system is a trust system. Only and solely trust. Think of a central bank that issues currency. It functions because people trust that the paper they hold carries value they can exchange. A registry of property is exactly the same. It is a Central Bank of information about ownership rights or other rights (leases, usage, etc). The moment people do not trust the formal system, either because it has fettled the registered information, or because the same plot of land or home is registered to multiple owners, or because the information has been used to expropriate plots, people will not furnish the registry system with their information. And when they don’t give this continuous flow of information at the registry, you will have informality. This is a serious consideration. Bear in mind that digitisation of existing information can be a very important and powerful tool once the information is correct over time. Technology applied to an untrusted system produces an untrusted digital system.
Why does this persist even when governments try to fix it?
The answer is almost always the same: governments fix the technical elements. They say, we will use this mapping technique, this surveying technology, this new form. They ought to concentrate on why people don’t trust the state. You depend on people giving you accurate information. If they don’t trust the government collecting it, they will not give you the right information. The technical investment, then, can produce serious challenges, because the data it collects is not reliable.
“You Wake Up In The Morning, And You Don’t Know How To Prepare For Your Day. You Prepare Knowing It’s Going To Be Another Hustle.”
If you had one thing to say to Sri Lanka’s policymakers?
Create a trusting economy. That is the strategy. Informality is not a paperwork problem or a registration problem. It is what happens when people do not trust the system enough to participate in it. And that distrust has roots. It does not appear from nowhere. It builds over decades, through systems that were too complicated to navigate, through land that was seized without a legal basis, through registries that were used against people rather than for them. Fix the roots, and you fix the trust. Fix the trust, and you fix informality. Technology and digitisation can be very important elements of the process, but they are not sufficient. A trusting economy that empowers all the factors of production: land, labour, capital, and ideas. You want people to come here not only because your beaches are gorgeous — out of this world, but because they trust that when they put something into this system, the system will protect it. That requires a great deal of design. It requires going back to exactly where the system broke. But there is no shortcut around it.
“Informality Is Not A Paperwork Problem Or A Registration Problem. It Is What Happens When People Do Not Trust The System Enough To Participate In It. And That Distrust Has Roots. It Does Not Appear From Nowhere. It Builds Over Decades, Through Systems That Were Too Complicated To Navigate, Through Land That Was Seized Without A Legal Basis, Through Registries That Were Used Against People Rather Than For Them.”
Why Land Titles Matter For Informal Workers
Sri Lanka’s land ownership deeds system, inherited from the British who introduced it in 1863, has a fundamental flaw. As Dhananath Fernando, Chief Executive of the Advocata Institute, a Colombo-based economic policy think tank, wrote in The Morning in 2025, “a deed records the history of a land transaction but does not guarantee ownership. Multiple deeds can exist for the same plot, leaving ownership contested.” A title, by contrast, he notes, “is conclusive proof ” that “cannot be disputed once registered, and gives families and businesses the security to invest, sell, or borrow against it.”
To fix this, the government launched Bim Saviya in 1998, a programme to replace deeds with state-backed titles. Nearly three decades later, Fernando notes, out of 16 million land parcels, just over a million titles have been issued. At the current pace of around 50,000 per year, he writes, “the process will take 300 years.” By then, he says, “the world will have moved on, but Sri Lankans will still be queuing at banks, waiting months for loan approvals while surveyors sift through deed histories stretching back three decades.”