Dear Cohen, Urban informal sector is fast growing sector in the emerging economies in Africa and in Asia. While there are several pathways for integration of formal and informal sectors in urban areas, what has worked is building the capacity of the informal workers to make them integrated into the manufacturing, construction and service sectors. For example, the demand for services such as plumbing and driving could be made more formal by organizing the labor with effective skills needed for specific jobs. this will also increase the quality of services and provide opportunity for formalizing several service sectors. Observing the trend in one region can give clue for the strategy in another region.

Hope this helps.

Some of the so called informal sector activities are already in the supply chain of formal sector activities. Under the AIT-CIDA project we supported a couple of metal recycling enterprises located in the outskirts of Hanoi City. They basically melt scrap aluminum in a rudimentary hearth and turn it into aluminum billets. Their buyers are Honda and Yamaha companies. This is just an example for my point. On the other hand forma sector enterprises sub-contract work to informal enterprises. For your question, my answer is simply further integration of informal enterprises in the supply chain. 

Dear Choen,

In developing countries is very common informal economy generating income for the poor. But often this service does not have government permission and ends up interfering in the formal economy, selling similar products (or almost perfect copies), but much cheaper by not having to pay for taxes.

This generates a negative vicious circle for the economy in general.

There are two good papers about:

Urban challenges: the formal and informal economies in mega-cities by P.W. Daniels

http://urbandevelopment.yolasite.com/resources/Daniels%20-%20Formal%20and%20informal%20economies.pdf

Unlocking the Informal Economy: A Literature Review on Linkages  Between Formal and Informal  Economies in Developing Countries by Kate Meagher

http://wiego.org/sites/wiego.org/files/publications/files/Meagher-Informal-Economy-Lit-Review-WIEGO-WP27.pdf

Regards,

Vanessa

This is an interesting question. However, are you assuming that they are not already linked? Although dualist theories assume that the informal and formal sectors are disconnected and that informal sector enterprises operate in separate 'bottom of the pyramid' markets, structuralist perspectives view them as linked. For example, they argue that the informal sector is an inherent feature of contemporary capitalism, used in the supply chains and for outsourcing and subcontracting production. 

The question for me is why one would want to increase the linkages. For what purpose? To benefit the formal sector? Or the informal sector? For me, it is not clear that there are advantages to be gained by increasing the linkages. The more appropriate question is whether and how one can encourage the formalisation of the informal economy. 

Perhaps you would like to explain a little more what you are seeking to achieve by promoting such linkages and why you are interested in developing such linkages

Thank you Professor Colin for your kind response. In developing countries in Asia, and to be specific like in Thailand, many informal sector entrepreneurs have wide ranges in size, i.e. micro, self-owned or small enterprises. They are rather weak in terms of opeartion, access to credit and finance, marketing and management depending on its size.But they are important source of employment and economic growth. Their growth is quite isolated from the urban formal sector. It would be helpful if they can establish linkages with formal sector. If so, how can they do to foster this connection?