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The Informal Sector

Opinion: Interconnectedness, partnerships and continuity with the formal sector

The formal sector is usually sub-divided into small, medium and large-scale enterprises. With the growing size of the enterprise, control by, but also promotion through, the government normally increases. Small-scale formal enterprises may face to some extent similar problems as the informal sector. However, the dividing line between the two consists in the fact that the latter is left more or less completely to itself whilst the former has easier access to assistance.

Especially in urban areas, there exist links between the formal and the informal sector. In periods of economic difficulty when the formal sector is obliged to reduce manpower, this may be partly absorbed by the informal sector on a temporary or permanent basis. Skills acquired in the formal sector are thus put to use in the informal sector. Furthermore, the informal sector sometimes works under sub-contracts for the formal sector.

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