The Informal Economy Mainly in Egypt

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(Case Study EGYPT)

Prepared for:         Dr. Ehab Nadeem

Prepared by:

• Menna Ghozal
• Ranya Tawheed
• Kareem Abdelhameed
• Mohamed Kotb
• Ayman Saad

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Table of Contents:

Abstract:

This Report is discussing The Informal Economy mainly in Egypt; Informality has always been a challenge for Egypt as a developing country. The informal employment has been booming through the last 15 years. The main reasons behind the increased informality are varied, numerous and different. Moreover, the negative impacts of informality are not only confined to the individuals, households or companies that are working in the informal sector but on the economy of the country as a whole. Accordingly, there should be a gradual approach adopted to rescue Egypt’s economy and get it out of a more ruined future. This Approach is deeply analyzed through the report.

It really worth discerning the case, as it is considered an illegal segment encompasses all types of activities ranging from minor to major ones, which may include critical ones as money laundering, while one of the biggest implications of this black economy, is the massive loss of taxes and revenue for the government.

Assessing how the informal economy share in the whole economy of Egypt, either in terms of size or value is a tough prospect, the assessment is difficult due to the presence of hidden and underground activities, therefore it is clear that the impact of the illicit informal economy is far reaching and it is an issue the government should plan how it has to deal with. Also the Report refers to the current situation of this sector in comparison to Egypt before 2011 revolution as well as late of 90’s.

Basically, this sector is one of the most important issues that should be firmly and wisely handled by Egypt’s government, accordingly we can achieve a better economical position assuring a better political and financial condition.

Last but not least, the report team is hoping that their clarified recommendations might help overcoming this informal black economy issue. In particular, upon this study, the report team acknowledges the valuable financial contribution that might be added to Egypt economy based on this sector elimination. We hope that this will be a useful starting point towards further refinements in the termination process.

Keywords:

• Informal Sector.  
• Formal Sector.
• GDP.
• Grey Economy.
• Unemployment.
• Economic, political and social aspect.
• Advantages and disadvantages

Introduction:

The volume of the informal economy activities has remarkably increased after the 25 January Revolution as a result of the absence of entities that monitor economic activities and increased insecurity. The formal employment decreased by 5% in the industrial sector, 8% in the construction sector, and by 15% in the services sector in 2013. Meanwhile, the informal employment has increased by 40% in 2012 and by 45% in 2013 compared to a 30% rate in 1998, reaching 60% by 2015. The rise of the informal economy is an outcome of a set of non-inclusive policies adopted during Mubarak era. It is also noteworthy to highlight that most poor people in Egypt are members of the informal economy. According to researches, the informal sector has lost the government EGP 300bn in potential taxes.

What’s informal sector?

The Informal sector is also known as the Informal economy or Grey economy, It is the part of an economy that is neither taxed nor monitored by any form of the government. Also By having is informal sector it would be very difficult to measure the GDP (Gross Domestic Product) of a country.[pic 3]

Although it may seem so illegal but in fact it gives opportunities for the poor.

The Informal sector has been expanding since the 1960s in all the developing countries.

Characteristics of The Informal Sector & Volume.

The Informal sector could be characterized by having easy penetration to the market, Like everyone who wants to join the informal sector could easily join, It has a very small scale of operations, any education level, The type of work in the informal sector could be diverse.

Also in terms of the capital invested to make up the business is very low or won’t be compared to the formal sector, the technology used and the income generated.

The informal sector doesn’t have a specific operation hours, They work anytime they want to and take days off as they wish, It’s basically there own business, they are free to do anything at anytime. No security around them or policies they should follow, they follow there own rules and there own policy.