Informal Economy in Egypt: Realities of Marginalization and Illusions of Empowerment

The private sector in Egypt is the informal economy. It makes up most of the Gross Domestic Product (GPD) and employs most of the wage-earners. This sector, however, is characterized by activities of low productivity and limited developmental benefits. Most of these activities are motivated by seeking sustenance rather than by plans of development or accumulation.

Amro Adly

Assistant Professor in the department of Political Sciences at the American University of Cairo.

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Houmam Al Sayed - Syria

This publication has benefited from the support of the Rosa Luxemburg Foundation. This text may be reproduced in part or in full, provided the source is acknowledged.

Since the outbreak of the 2011 revolutions and the subsequent political and social events, the informal economy in the Arab world has become a major topic of discussion. Many observers and analysts (from the political Left and the Right alike) considered it an expression of economic and social marginalization. Although their opinions regarding its causes and factors may differ, they agree that informal activities expose the absence of development for large sections of Arab societies, especially for the young people. "Informality" has prevailed over a wide range of economic activities in the Arab countries that have witnessed popular uprisings, causing many to correlate this proliferation with the economic and political marginalization that the people of the region suffer from. The breadth of the informal economy is by no means confined to the Middle East and North Africa, of course, but extends to many aspects of economic activity in many "developing" countries in South and South-East Asia, Sub-Saharan Africa, Central America and Latin America. As a general rule, the presence of informal activities can be said to increase whenever the levels of income decrease, which can be considered as an indicator of the decline of economic and social development.

What is Informal Economy?

As the term itself indicates, informal economy is defined by a negation, i.e. it is the absence of the characteristics of formality in economic activities. This usually refers to activities related to the production or distribution of economic values in the form of final goods or services, as well as to self-employment or the employment of others in a manner inconsistent with the rules, laws, resolutions and regulations of the state’s institutions. Thus, the informal economy encompasses the virtual and material area that produces and distributes economic values without compliance with the laws of registration in the government’s institutions. The informal economy includes units based on the production and distribution of goods and services, such as unregistered enterprises and production units operating without official authorization from the legal authorities. These activities cover everything from the workshops and factories of "Beer el-Sellem” in the province of Qalyubia - especially in the city of Shubra Al-Kheima adjacent to Cairo-, to the family businesses based in and around houses, and to the hawkers and sidewalk street vendors who explicitly violate the established rules of law or occupy parts of the public spaces.

The informal economy is not completely separate from the formal economy; it permeates all economic and social life through its widespread transactions that may be carried out by institutions that are themselves official, or even by members of the state itself. These transactions are nevertheless informal, as long as they are not organized according to legal regulations.

This issue is not only limited to productive units. In fact, informal economic transactions may also include different elements of production. This type of work is an exemplary manifestation of informal activity in developing economies, such as the egyptian one. Any work that results in small or large values, carried out in violation or disregard of the official rules and regulations, is part of the informal economy. This includes the unpaid work of women and children in micro family projects directed towards self-sustenance, especially in agriculture, or the selling of their cheap food or goods in the markets of the cities. It also includes the various forms of self-employment in which people work for their own accounts using a limited capital; street vendors are a prominent example, as well as craftsmen such as electricians, carpenters and plumbers - especially the ones who do not have workshops or fixed work stations.

The informal economy includes all forms of paid work which is not subjected to the labor law, and where the workers are denied formal employment contraction and social security. This applies to informal workers in formal establishments too. In factories and, in some cases, in government agencies, workers are employed without contracts or through seasonal or temporary contracts, and without any insurance. Of course, this case also applies to work in informal establishments that operate without obtaining permits or registration in the first place.

The most distinguishing feature of the informal economy is that it contains all transactions of economic value that are not regulated or registered by the state apparatuses or public authorities and which are carried out without recourse to, or in direct violation of, the rules established and presumably enforced by the State.

According to this definition, the informal economy is not an "informal sector" separated from the formal economy. It is the widespread transactions that permeate all economic and social life. It may be practiced by institutions which are themselves official, and even by some state institutions. This does not necessarily mean that informal activities violate the law in the sense of breaching the public order, such as drugs, arms and human beings trafficking, financial or in-kind bribery and other criminal activities, which are informal by definition, as they intrinsically defy the legal system. Most of the informal economy does not involve a violation of public order as much as it involves alternative regulation and subjection to social mechanisms supervised by non-governmental institutions, such as families, friends or other private ties, which may be more effective in enforcing the various commitments of the different parties involved in the economic process.

By adopting this flexible definition of the informal economy, the size of the phenomenon can be better grasped. In 2010, the economist and statistician Friedrich Schneider estimated the size of the informal economy to be 40 to 50 percent of Egypt's gross domestic product (GDP), which means it accounted for the largest part of what was produced and distributed annually, and included the bulk of private sector enterprises and working manpower (1). Egypt is not an exception. Schneider's estimates in some developing countries reveal that the informal economy is the predominant mode of production and distribution in most countries of the South, and that it also has a presence, albeit smaller, in the high-income countries of the North, which confirms the relativity of the phenomenon.

What is the “Problem” of the Informal Economy?

Is it a problem at all? The predominance of the characteristic of informality in economic activity in modern times is usually associated with low rates of development. Economically, informal activities tend to be characterized by low productivity, poorly skilled workers, and a limited share of capital, both financial (such as bank loans), or physical (such as land, machinery, equipment, etc.). Such characteristics are in accordance with the small size of informal businesses, which, no matter how prolific they may be, usually remain limited to one or two individuals (usually members of the same family), or take the form of micro enterprises employing a small number of workers or family members. These activities are weakened by the fact that poor skill levels and limited access to capital translate into diminished opportunities for growth and expansion. Consequently, most informal activities are marked by low productivity and low returns. Their goal is usually earning daily livelihood rather than generating profits sufficient to accumulate and grow. This has prompted several economic schools, from both the Right and the Left, to consider that informality and the extent of its proliferation are expressions of "economic backwardness" in the literal sense of the word, meaning the absence of the features and institutions of a modern economy.

Marginalization is evident not only in the distribution of income, wealth and power, but also in physical space. Most of the people who practice informal forms of work in the cities of the “Third World” countries inhabit the "slums" or "shantytowns"; the unplanned human colonies created in the mid-20th century due to the influx of rural migrants to the cities.

When the term "informal" appeared for the first time in the literature of the International Labor Organization (ILO) in the 1970s, it was used to describe situations in African countries where the agricultural sector represented the biggest part of their economies (2), and where the labor force was subject to informal rules, reflecting the low levels of development and leading to the perpetuation of these levels. In other words, informality in this case expresses underdevelopment and implies the narrow chances of circumventing it. In the Right, the writings of the neoclassical founding economists, such as Hernando de Soto, correlate the expansion of informal transactions with the absence of free market relations, where production leads to a financial exchange driven by the relative prices that reflect the forces of supply and demand (3). De Soto and others believed that the informal economy demonstrated pre-capitalist (and thus pre-modern) patterns of economic activity, mainly caused by the inability of state institutions to protect the rights of private property or to intervene to enforce contracts. It raises the costs of economic transactions and increases risks in market exchanges, whether by representatives of the public authorities themselves, who may use their powers to attack private property rights, or by other market players who may take advantage of the weakness or corruption of some state institutions such as the judiciary system and the police, to evade their contractual obligations. Therefore, one possible solution to avoid this and minimize risks would to limit the production and exchange of goods and services to the direct circles of individuals and families. Needless to say, this is done at the expense of opportunities to maximize the economic value that characterizes the functioning of the free market.

The prevalence of informal activities is almost always linked to low standards of life and underdevelopment, irrespective of the implicit or explicit ideological bias in the economic analyses of the Left and the Right. It is always discussed in the context of the social marginalization of those associated with the informal economy, especially wage earners and self-employed workers in small and micro-enterprises who are often part of the lowest social classes. Their informal activity often reflects their lack of social protection, job security, or exploitation prevention, both from employers and even within the frameworks of family work where economic exploitation is intertwined with gender inequality and domination of women and children.

Marginalization is evident not only in the distribution of income, wealth and power, but also in the physical space. Most of the people who practice informal forms of work in the cities of the “Third World” countries live in "slums" or "shantytowns"; the unplanned human colonies created in the mid-20th century after the influx of rural migrants searching for employment in the cities of most developing countries in Latin America, Africa and Asia. In the absence of advanced levels of industrial activity, the majority of these workers have ended up in marginal, informal, service-oriented activities characterized by poor productivity, small returns and, hence, poverty. The wave of migration led to the emergence of these slums which are illegally constructed and deprived of many basic services. They are an economic and social embodiment of the lack of formalism and an expression of the weak capabilities of the governments to control and regulate such economic activities, including housing and migration.

The Political Aspect of the Informal Economy

Not only does the informal economy have economic implications and manifestations, but it also has political ones that involve the relationship between the state and the society in many developing countries, including Egypt and other Arab countries. The prevalence of informality in economic transactions reflects the fragility of the state, or even its complete powerlessness, as the responsible public authority, in controlling and organizing a large part of the society’s activity. Writers such as Nazih Ayyoubi regarded this as a sign of the state’s weakness, its lack of institutional and political capabilities, its inability to penetrate the societies it governs, and, even, its lack of legitimacy (4). Many aspects of the economic and social activity of large groups of people remain independent from the State’s control. It cannot manage work relationships, such as protecting workers or rectifying the status of women or child workers. The government is incapable of coordinating capitals in specific sectors to achieve goals that serve economic or social development, and is likewise incapable of extracting economic resources from society through tax collection. Its ability to redistribute income and wealth diminishes, as a result. All of these are signs of the institutional frailty of the state and the decline of its political legitimacy - no matter how authoritarian it may be - versus the society. Ayyoubi went as far as asserting that the excessive repression practiced by many Arab governments and the frequent use of violence by regimes to assert control are further evidence of these governments’ utter weakness.

The neoclassical proposition bypasses the problem. It ignores the social and political conditions for creating markets in a capitalist system which is capable of growth and development. The conditions are ignored in favor of a largely technical conception that involves building the efficiency of bureaucratic and judicial apparatuses in certain domains that are usually affiliated with foreign capital, represented by the major companies or the grand local enterprises.

There is no denying that the predominance of the informal economy reflects, from a sociological standpoint, the state’s weakness. It indicates the presence of several entities and organizations, other than the state, that have the capacity to control and regulate, regardless of the official laws. Informality may even reach the point of penetrating the state bodies themselves and subjecting them to the private interests of individuals or groups. In such cases, the representatives of the public authority may engage in illicit activities that are in clear violation of the laws. All these are proving signs of the decline of the state's ability to organize society and govern its activities. These are indicative attributes of a non-modern economy and society, where informality is a feature that easily permeates all activities.

It must be noted, though, that informality does not necessarily imply pre-modern economic, social or political arrangements. It is not a traditional remnant of the Middle Ages that has been able to survive the pressures of modernization. Nowadays, informality is easily detectable in human activity in developing countries and in sectors that are not directly related to agriculture, like the services sector. It is clear that migration to the city and the escape of large groups of people from the dependence on agriculture are all undeniable parts of the process of modernization itself. Urban informal and non-agricultural economy is thus a reflection of the problems of modernization in most countries of the South. It results from the difficulties in maintaining an industrial sector, leading to a structural imbalance in these economies due to their inability to absorb the migrants from the agricultural sector into high-productivity activities or stable working conditions. Instead, the marginal service sectors, characterized by poorly skilled workers and limited capital, grow and inflate, outpacing the ability of developing countries to regulate or control, especially when these countries already suffer from weak institutional capacities and an inability to properly collect taxes. In these countries, the infiltration of public institutions by private interests gravely undermines the “public” nature of the state’s authority, rendering it a tool of service for the direct material interests of certain officials or of powerful social groups capable of exploiting the state for their own advantages.

Emergence from the Margins

How can the afflicted countries emancipate themselves from the informal economy which suppresses financial and social progress and which is synonymous with underdevelopment? The neo-classical economists argue that the solution is first and foremost legal and institutional. It involves finding legislative, executive and judicial frameworks to protect private property rights: shortening the procedures for registering real estate such as land and apartments, increasing the efficiency of the judicial system that deals with property disputes, bankruptcy cases and companies’ liquidations, and enforcing contracts and agreements at a low cost for investors. These economists further argue that making the state an effective guardian of private property rights, trusted to reduce corruption and inefficiency, means free market relations can be created, encouraging all to engage in production, exchange and labor, and thereby increasing the opportunities for improvement. The neoliberal concept of development, which revolves around enabling as many actors as possible to engage in free market exchanges, is based on the assumption that the generation of growth is reflected positively on everyone through the creation of jobs and the expansion of consumer markets.

The neoclassical proposition bypasses the problem. It ignores the social and political conditions for creating markets in a capitalist system which is capable of growth and development. The conditions are ignored in favor of a largely technical conception that involves building the efficiency of bureaucratic and judicial apparatuses in certain domains that are usually affiliated with foreign capital, represented by the major companies or the grand local enterprises.

The creation of a developmental capitalism in a country like Egypt is not only about the equal distribution of private property rights, especially when the majority does not own any property in the first place, but rather about the requirements for integrating this majority.

The general presumption is that the market is capable of absorbing everyone and providing better opportunities through labor, production and consumption. One cannot talk about broadening the role of the state in the first place, as its role is confined to protecting property rights, enforcing contracts and raising the efficiency of litigation in legal cases involving commerce and investment. This means that the state would have no role in the redistribution of income and wealth or in the investment in education, vocational trainings, health care and social security; which are areas that fundamentally affect the conditions of the "integration" or "assimilation" of large segments of the poor and marginalized population into the free market. Even when the workers want to or have to join the labor market, finding high-paying jobs remains an impossible task for the majority of the population which is deprived of proper education and lacks the required vocational skills. The situation is also very critical for small and microenterprises. If they are unable to have access to capital in the form of land and credit or to the data needed for market exchange, it becomes impossible to grow or survive in such volatile economic markets in developing countries.

The creation of a developmental capitalism in a country like Egypt is not only about the equal distribution of private property rights, especially when the majority does not own any property in the first place, but rather about the requirements for integrating this majority in the economy. The expansion of the informal economy in the markets of goods and services, in the legal formalities of productive enterprises, and in the labor and capital markets (informal loans and loans from family / friends) is merely a sign of the defective integration of the poor and the marginalized in urban and rural areas. In a free market theoretically dominated by the private sector, this marginalized group owns neither material nor symbolic capitals (in terms of skills and education). In reality, marginalization continues and the private sector itself becomes the informal economy in countries like Egypt (and Morocco, Tunisia, Jordan and other non-oil-producing Arab countries). It comprises most of the GDP and provides work for most of the wage-earners or self-employers. However, it is a false private sector composed of low-productivity activities of low developmental returns. Most of these activities are driven by making a daily livelihood rather than growth and accumulation. This sector and its activities are thus characterized by stagnation.

Today, in Egypt, work relations are not formal, regardless of whether the establishments are officially registered with the state or not. This practice affects unskilled laborers in the major formal establishments that try to circumvent the fulfillment of their obligations to their employees by treating workers unequally with regard to wages or capital contributions for their insurances.

The spread of informal economic transactions is an expression, a cause and a consequence of weak development and economic and social backwardness. This vicious circle can be broken only by allowing larger groups of people access to capital (desert land, credit facilities, skills, education, training, etc.), particularly the young adults of both sexes (especially women who bear the greatest burdens of unemployment and masked unemployment), both in the cities and the villages (with the rural areas suffering the greatest portions of impoverishment due to neoliberal transformations in the Arab region). If integrated into the free market, these young people can produce valuable and profitable goods and services. Once this happens, social and political norms will be formulated to support the development of institutions that protect private property and achieve justice and efficiency, and not the other way around. Even though the World Bank and the American Aid organizations would promote the establishment of such institutions as preconditions to the creation of a capitalist system of development, this is actually unattainable on the ground. It contradicts the historical development of the advanced capitalist countries in North America and Western and Central Europe, where the bourgeoisie accumulated capital first, and then became capable and interested in reshaping state and societal institutions. Otherwise, the situation would be more like placing a cart in front of a horse and then waiting for the cart to move forward on its own.

It is necessary to consider the constraints and opportunities that the globalized economy has come to offer in the past few decades. The economies of developing countries have been merged into the globalized economy, especially those that do not have enough weight and importance to define the rules of economic exchange, unlike influential developing countries such as China (and, to a lesser extent, India and Brazil). This economic model, with its market centers, major financial institutions and investment banks, adopts the premises and outcomes of the neoliberal ideology, and consequently imposes certain criteria and requirements on the policies and institutions of developing countries. This model thus reinforces the above-critiqued concepts, and narrows down the chances of creating institutional arrangements at a national level that may create a capitalist pattern of development.

Annex: Inspecting the Informal Economy in Egypt

Some Definitions

Informality, according to the aforementioned mentioned definition, is a key feature of economic activity in Egypt. The phenomenon involves many, if not most, economic transactions, the majority of economic establishments, and the bulk of the labor force. This means that a substantial part of the economic activity occurs under the radar, unmonitored by the official institutions, unregistered, unorganized, and irrespective of the laws, regulations and procedures. It is difficult to determine accurately whether the informal economy is an old phenomenon that had only been detected later on, or whether it is indeed a relatively recent phenomenon that can be attributed to excessive urbanization or to the disintegration of the state’s economic development models (since these models rely on expanding the public sector and the government assuming a central role in allocating resources through production, distribution, redistribution, and the direct employment of the labor force). It is a question that may not be answered at all.

However, it should be pointed out that the problems of the informal economy are modern by definition. The issues of regulating and registering economic activity and dealing with it as an area where the rule of law must prevail came into being relevant only when modern states took their current bureaucratic form at the end of the nineteenth century in Western Europe and the United States. That was when the organic link was revealed between the rule of law and the protection of private property rights on the one hand, and the evolution of the capitalist system on the other, especially in the process of industrialization, which in turn was linked to the expansion of cities physically, in terms of population, and politically and economically in terms of weight and importance. When the majority of the countries of the South - known as the “developing countries” after World War II - became independent, the problem of informality in its relation with development was raised. This largely applies to the Egyptian situation.

Historic Context

Until the First World War, the Egyptian economy was purely agricultural, with most of its international relations almost entirely dependent on producing and exporting raw cotton. The majority of the population lived in rural areas and worked in agriculture through a web of diverse and interrelated relationships. During the years of World War One and throughout the following decades until the independence of Egypt in the mid-1950s, tireless efforts were made by the national Egyptian bourgeoisie (and its non-Egyptian allies, contrary to the common narrative). These efforts were encouraged and supported by the state after the 1936 treaty which enabled the government to acquire regulatory prerogatives in economic matters of vital importance, such as enforcing customs, protecting national industries, and finally extending the authority of the national judiciary system to gradually include all forms of capital activities.

Simultaneously, the cause of national independence, in its economic dimension, forced the governments of the 1940s to address workers' rights and social security, and worked on nationalizing foreign capitals operating in Egypt. In any case, the government’s role in regulating economic issues was amplified and continued to increase until full independence was achieved in the wake of the 1956 Suez War and the subsequent nationalization of French and British interests in Egypt (in addition to the capital owned by Jewish people of various nationalities). This formed the nucleus of the emerging public sector, especially after Abdul Nasser’s regime carried out large-scale nationalizations in the early sixties, wiping out the sizable Egyptian private sector, while striking heavy blows to senior landowners through implementing the laws of agrarian reform starting from the year 1952.

At that time, the informal economy was not much of a hot topic since the government’s role in Egypt and in other developing countries was focused on industrialization. According to the modernization theory, agriculture is the traditional sector that employs the majority of laborers while using the most underdeveloped technologies, and its place was the rural areas. Opposite the agricultural sector are the modern industrial and service sectors, which the state developed in various ways, either through cooperation and partnership with the private sector - as in Turkey and many Latin American countries between the 1940s and the 1970s - or by replacing the private sector with the public one, as was the case in the communist countries of Eastern Europe, the Soviet Union, China, and -to a large extent- Egypt in the 1960s.

In the decade that followed, several political and economic changes coincided to produce the current situation in Egypt’s economy, where informality prevails. It is difficult to consider a particular singular factor to track the outbreak of the informal economy without considering its relationship to, and interaction with, other factors on the ground. On the one hand, the economic liberalization since 1974 marked the revival of the actors in the private sector with the support of the state, after a decade of encroachment of property rights through expropriations and nationalizations. This was the backdrop of the scene whilst Sadat’s regime tackled the complicated economic and financial imbalances that Egypt suffered after six decades of war with Israel. He attracted capital from abroad in the form of grants, loans and investments, especially from the Arab Gulf countries (and Iran prior to the Islamic Revolution) which had huge surpluses of petrodollars. Indeed, Egypt had its share of oil wealth, not only in the form of official revenues that went to the government’s pocket, but from the financial remittances sent by Egyptian workers in the Gulf and Libya, which generated new patterns of consumption in cities and rural areas.

Sadat's economic openness was not based on ideological liberal economic convictions or on biased principles regarding the market economy. It was rather a confession of the fracture of Abdul Nasser's “public-sector-based” model of development, either as a result of its internal contradictions or due to the blow of the 1967 defeat. The Egyptian state was simply too weak to continue to dominate economic activity, and it was time for the private sector to re-emerge. But has the private sector really been “gone” in the first place?

The short answer to the question is “no”. The Nasserist measures did not eliminate the private sector, but eliminated institutions, companies, individuals and families with a high concentration of capital, whether it was foreign or Egyptian. The small and micro private sector that existed in the cities, in the form of workshops, grocery stores and shops, had remained the same. Some may find it strange that small-scale enterprises continued to dominate the construction sector even in the prime of the Nasserist era. Less than one third of the housing units constructed during that period were established by the public sector, despite all the constraints and risks that afflicted the private sector. The same applies to the wholesale and retail trade sector, which remained almost entirely in the hands of small and major merchants of the private sector, proving their upper hand, versus the public sector, in accessing the different corners of the Egyptian market.

The small private sector, and perhaps even the micro-private-sector, (as we do not have reliable details to estimate the size of enterprises in terms of capital, labor or volume of transactions) has never disappeared. However, the period of nationalizations and the upsurge of the public sector weakened the institutional link between state agencies and private sector enterprises that were regarded as residues of a traditional economic activity that is technologically underdeveloped and unqualified to participate in the industrialization process, let alone the incitement campaigns against the small private sector accusing it of being a manifestation of capitalism’s greed. In 1966, Abdul Nasser talked about the plans to nationalize wholesale and retail trade. However, the project did not come to realization, either because of the war or due to the difficulty of implementing such procedures (5).

Then came the 1970s which witnessed an outbreak of the private sector, not only of the macro Egyptian or foreign private activities (as most studies argued at the time), but also of the small and the micro private businesses (often defined as businesses employing less than five workers). These are largely informal in their nature, and have become prosperous in urban and rural areas in sectors such as construction, trade and services. These activities benefitted from the explosion of private consumption, the influx of rent revenue from the oil countries, and the continuous migration from rural areas to the cities - especially Cairo with its extreme administrative, economic and political centrality. As the trade movement recovered, the market made room for the private sector in its various forms and sizes.

With the decrease in the growth rate of public employment since the end of the 1970s, both in the State administrative system and in the public sector, the private sector (mostly informal) expanded with millions of self-employed workers. They are neither owners of enterprises nor part of the "petty bourgeoisie", as some from the Right and the Left would call them, but they are closer to the proletariat who do not have access to the paid labor market. They are forced to work for their own accounts in the hope of making a viable living for themselves and their families. Often, they do this kind of work while waiting to find other paid jobs.

The Status Quo

Egyptians of working age rushed to get paid jobs in the private sector establishments. The labor relations in general were informal, i.e. they were not conducted according to the Labor Law, and did not enable workers to enjoy insurance protection or job security. This applied to micro-enterprises (employing fewer than five workers), which included 45 percent to 47 percent of the total private sector wage earners between 1998 and 2012. According to ‘Assaad and Krafft’ (6), 88 percent of workers in these establishments in 2012 were working in an informal manner.

A study by the International Labor Organization (ILO) in 2014 reported that about 90 percent of young people work informally. In a report by the Egyptian Ministry of Commerce issued in 2003, informal (unregistered) small and microenterprises accounted for 83.5 percent of all private sector establishments in 1998, in comparison with 82.8 percent in 1988, registering an increase in a decade’s time, while indicating that the phenomenon is actually relatively older (7).

Today, in Egypt, work relations are not formal, regardless of whether the establishments are officially registered with the state or not. This practice affects unskilled laborers in the major formal establishments that try to circumvent fulfilling their obligations to their employees by treating workers unequally with regard to wages or capital contributions for their insurances.

Since the 1970s, the private sector has been expanding continuously. It now constitutes two-thirds of Egypt's GDP and employs almost the same proportion of wage earners and self-employers. However, the development of this private sector is characterized by its limitedness, low productivity, informality, and high concentration of workers. This guides us back to the same points mentioned in the article’s introduction about the political and social requirements of a capitalist model of development at both the national and regional levels. These political and social criteria inevitably influence the institutional procedures that govern the relationships between the State –with its agencies, laws and regulations- and the macro and micro private economic activities at the levels of capital, labor, and everything in between.

The content of this publication is the sole responsibility of Assafir Al-Arabi and Rosa Luxemburg Foundation cannot accept any liability for it.

Translated from Arabic by Sabah Jalloul
Published in Assafir Al-Arabi on 10/05/2018


1) Schneider, Friedrich, Andreas Buehn, and Claudio E. Montenegro. "New estimates for the shadow economies all over the world." International Economic Journal 24, no. 4 (2010): 443-461

2) Mosley, Paul. "Implicit models and policy recommendations: Policy towards the informal sector in Kenya." IDS Bulletin 9, no. 3 (1978): 3-10

3) De Soto, Hernando. The other path: The economic answer to terrorism. Basic Books (AZ), 2002

4) Ayubi, Nazih N. Over-stating the Arab state: Politics and society in the Middle East. IB Tauris, 1996

5) Refer to the text by Mahmoud Abdel Fadeel, "The Egyptian Economy Between Central Planning and Economic Openness", Institute for Arab Development, 1980, for an extensive presentation of the Egyptian economy in the Nasserite period and immediately after the economic openness.

6) Assaad, Ragui, and Caroline Krafft. "The Egypt labor market panel survey: introducing the 2012 round." IZA Journal of Labor & Development 2.1 (2013), p.10

7) Barsoum, Ghada, Mohamed Ramadan, and Mona Mostafa. Labour market transitions of young women and men in Egypt. ILO, 2014

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