By Dr. Reem Abdel Haliem
This post originally appeared in Arabic on the CIPE Arabia blog.
I currently work with CIPE partner the Federation of Economic Development Associations (FEDA) on a study to bring Egypt’s informal sector into the formal one. Since there are number of studies on this topic, FEDA chose to focus its study on producing a guide – more of a roadmap – that outlines practical steps to facilitating the informal sector’s formalization.
A series of focus groups based on a robust methodology was a must to achieve sound findings and to draw evidence-based conclusions. Through those focus groups, we formed a logical and comprehensive understanding of the problems that the formal sector faces, so to grasp the disincentives that make the idea of formalizing unattractive to the informal sector. Formal sector operators face these problems almost on a daily basis and with a variety of local and national government authorities. This understanding could not be reached through a typical literature review.
Through my experience in the focus groups and with drafting this roadmap, it became clear to me that with the right field research tools, grasping the on-the-ground reality makes policy recommendations more accurate and relevant to addressing the stakeholders’ needs and, as such, makes these recommendations of higher value to the state and the general public.
This post originally appeared at CIPE-Arabia in Arabic.
In a brief interview with CIPE-Arabia, Dr. Ahmed Fikry Abdel Wahab shared some of his thoughts on the pervasive informal sector in Egypt. His concerns center on the potentially negative consequences a large informal sector has on competitiveness, market values, and norms and quality of products. Abdel Wahab explained that while one might not necessarily describe the competition between the formal and informal sector as dishonest, it could easily be described as unfair.
Unlike informal businesses, formal enterprises have higher costs, which are reflected in the pricing of their products. In order to be able to compete, some enterprises compromise on the quality of their products thereby creating negative impacts on the industry and the overall market, as well as undermining consumer rights and the competiveness of the Egyptian products in the global market. He acknowledged that informal businesses suffer from marginalization, lack of access to credit, and meager opportunities for training, advancement and business relations. Abdel Wahab also noted problems faced by informal enterprises in terms of limited market size, attributing this issue to the quality of their products, which are often not fit for export because they do not meet the minimal quality standards. As a result, all these factors create unfair conditions with consequences for both sectors as they generate unhealthy competition, negatively impact the market, and undermine the foundations of industry and its values and norms.
Following is a summary of the main points raised by Abdel Wahab during the discussion.
Sayed Diab makes his living providing sound systems and digital services for events like this CIPE discussion. (Photo: CIPE Egypt)
By Ahmed ElSawy
This post originally appeared in Arabic on the CIPE Arabia blog.
Sayed Diab spent 26 years of his life working as a technician supplying organizations with sound systems and related digital services for their events and conferences. Six years ago he started his own business in this field and has since made his living providing his services to CIPE, other NGOs, business associations, and think tanks in Cairo, Egypt.
Diab recently sat down for an interview about his experiences running his own business in Egypt and what he has learned as a small business owner from the many CIPE events and discussions he has worked on.
By Otito Greg-Obi
Recently, African heads of state gathered together in Egypt to sign the Tripartite Free Trade Area agreement (TFTA) which will join the forces of the East African Community (EAC), the Common Market for Eastern and Southern Africa (COMESA), and the Southern African Development Community (SADC).
Free trade is crucial to global economies because it reduces tariff barriers which in turn results in trade creation. The benefits of trade for developing nations in general are numerous. To name a few: first and foremost, trade allows for specialization meaning countries can build a comparative advantage by focusing on producing goods with low opportunity costs. Secondly, trade encourages healthy competition which incentivizes businesses to increase efficiency and cut costs. Lastly, trade can reduce dependence on existing markets and stabilize countries affected by seasonal changes in markets.
Photo: Muhammad Mansour
Hiba Safi is a CIPE-Atlas Corps Think Tank LINKS Fellow at the Tahrir Institute for Middle East Policy.
This post originally appeared on the Tahrir Institute for Middle East Policy blog
Over the course of the past several months, a revolt has taken place in Egypt’s banking sector. Seeking better opportunities and higher salaries in private sector banking jobs, hundreds of banking officials have resigned in protest since July 2014 legislation placed a cap on salaries for employees in Egypt’s public sector. While most public servants had little cause for concern, the law also applies to those working in state-owned companies. Suddenly executives at Egypt’s many state-owned banks would earn a maximum monthly wage of 42,000 Egyptian pounds (roughly US$6,000)—a mere fraction of their earning potential.
Former Minister of Finance Samir Radwan has spoken out against the implementation of a maximum wage, stressing that such an approach deprives public servants of their rights and does not meet demands for social justice. On February 17, a Cairo administrative court sided with workers from the Housing and Development Bank and the Export Development Bank of Egypt, ruling the maximum wage law to be unconstitutional. Tasked with fulfilling revolutionary calls for social justice and repairing an Egyptian economy on the ropes since the January 2011 uprising, President Abdel-Fattah El Sisi’s decision to cap a maximum wage at “no more than the president earns” aims to promote equality and social justice, halt the growth of income inequality, and bolster the middle class. But the actual impact of a maximum wage merits more consideration: Should there be a maximum wage in Egypt? Would the economy really be better off after capping earnings, particularly given the landscape of public and private ownership of many key sectors in the Egyptian economy?
The popular uprisings in Tunisia and Egypt in 2011 were sparked by citizen frustration based on a range of grievances including lack of opportunity, dissatisfaction with local governance, corruption, and unemployment. The public self-immolation by Tunisian informal entrepreneur, Mohamed Bouazizi, was a shocking demonstration of the frustration and hopelessness felt by some sectors of society and led to calls for political and economic reforms to address citizen grievances. Today, however, North African economies still urgently need economic reforms to promote greater economic inclusion and provide opportunities for youth.
The Center on Development, Democracy, and the Rule of Law at Stanford, in cooperation with CIPE, has conducted a survey of 131 Egyptian and Tunisian entrepreneurs and business owners to find what that the greatest barriers are to the growth of businesses in these countries. As Global Entrepreneurship Week comes to a close, CIPE is releasing an Economic Reform Feature Service article by Amr Adly about the study to contribute to the continuing conversation on supporting entrepreneurs around the world.