The volume of the informal sector registered between EGP 1.2tn and EGP 1.5tn, which is 65-70% the size of the formal economy, said head of the Egyptian Centre for Economic Studies (ECES) Abdel Moneim El-Sayed in a recent report.
El-Sayed explained that Egypt’s informal sector consists of 18m establishments, 40,000 of them are factories.
The volume of the informal economy activities has notably increased after the 25 January Revolution as a result of the absence of entities that monitor economic activities and increased insecurity, the study said.
The study also said that 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.
According to the study, the informal sector has lost the government EGP 300bn in potential taxes.
Criticising the growth of the informal sector, the study said that workers of the sector do not obtain insurance or health insurance, stressing that local consumers are eventually getting products and service from informal factories that do not comply with the specifications.
The informal sector also weakens the formal one as the former provides products at lower prices due as they can avoid paying taxes and custom fees, the study said.
In order to encourage the informal sector to join the formal market, the study suggested reducing the taxes imposed on small and medium enterprises by 10%.
A recent World Bank study stated that the rate of informal employment in Egypt is high by world and regional standards, and the Egyptian labour market has been deformalising even as the rest of the world trends towards more formal employment arrangements.