Hi What to do with Egypt's Informal Economy?

Hi What to do with Egypt's Informal Economy?

The rise of the informal economy is an outcome of a set of non-inclusive policies adopted during the Mubarak era.

Despite its significance, the informal economy seems to be overlooked in public discussions over future economic reform in Egypt. Informality is a predominant feature of private entrepreneurship in the vast majority of developing economies in total output, employment, and the number of economic enterprises. The percentage of the informal activities in Egypt is estimated to be 40-60 % according to a study by the center for International Private Enterprise. The informal economy is regarded as the economic unit which does not adhere partially or totally to the enforcement of official procedures. These procedures are license to exercise activities, trade or industrial registration, social insurance coverage, and payment of taxes on economic activities based on regular auditing.

Informal employment status refers to employees of informal enterprises as well as wage employment in formal enterprises, households, or those with no fixed employer, who are not covered by social security and/or have no contract. Informal employment includes all remunerative work both self-employment and wage employment that is not recognized, regulated, or protected by existing legal or regulatory frameworks and non-remunerative work undertaken in an income-producing enterprise.

Notwithstanding its massive share of employment in Egypt, the informal economy is characterized by the low skills of its workers, its labor-intensive nature, low productivity, access to markets, scanty wages and limited potential for growth and collaboration with the formal sector. Moreover, informal enterprises are often family-owned business that provides income or safety net for its members. Since they are not part of the formal economy and lack official accounts, informal enterprises do not pay taxes and are not subject to audits.

Informal employment has several drawbacks for workers: lack of job security, lack of social security coverage (including access to health care and pensions), and lack of rights, to name just a few. Also, women are discriminated against in that sector in both hiring and earnings. Yet, there are many reasons why people choose to enter the informal economy rather than secure a job in the formal sector. The low education level and proper training of many workers naturally excludes them from the formal sector. Additionally, the social and financial status of those unprivileged workers as well as their lack of connections contribute to their natural exclusion from the formal economy.

There are also deep institutional constraints that inhibit the formalization of the informal economy. Those entail lack of access to sufficient credit, limited access to technology and adequate infrastructure and a discouraging tax system. Moreover, workers in the informal economy are often discouraged by the web of complex bureaucratic regulations and procedures that they have to go through to start a formal business.

The existence of the phenomenon itself has several reasons too. The non-inclusive nature of economic growth in Egypt leads people to seek opportunities in the shadows of the formal sector. Furthermore, the lack of lucrative economic opportunities in rural areas in Egypt increases migration to urban centers and this consequently leads to an over demand on formal jobs in major cities that have a limited capacity to absorb this large influx of workers. Accordingly, an expansion of the informal sector and slums arise in the outskirts of the urban cities and in many cases in the city center itself. For instance, one easily observes the massive number of people selling low quality products on the streets of Cairo as well as many unlicensed enterprises that operate in the slums of the ancient city.

There is no one-size fits all strategy to combat this phenomenon. However, understanding the deep-rooted reasons of the phenomenon allows for a better policy recommendation. The government of Egypt has to play on a number of fronts in order to allow for the inclusion and enhancement of the status of formal workers. The government shall target the existing informal enterprises and provide incentives for them to formalize. The sort of incentives they might require is better working conditions, better access to markets, improved access to credit with very low collateral and access to better and affordable technology. This would be in exchange for their registration in the formal economy. The government can exempt those enterprises from taxes until they reach a certain threshold of growth and profitability. The government may also facilitate linkages between those enterprises and big formal businesses. Formal businesses may benefit from the cheap materials this sector supplies in exchange for training and teaching them better organizational techniques and methods to increase profitability and growth.

Policy makers in Egypt have to reduce the cost of entering the formal economy. Both the reduction and transparency of time-consuming and expensive bureaucratic procedures would be a great incentive for future informal entrepreneurs to formalize. The expansion of economic opportunities in rural Egypt can significantly contribute to lessening the rural-urban migration, which results in many informal and low wage jobs in urban centers. It is important that any strategy that targets the informal economy and the SME sector be devised based on a broad consultation with owners and workers as well as with students who will soon be looking for jobs. Large firms could also contribute to the debate with the aim of increasing interfirm linkages and subcontracting.

The rise of the informal economy is an outcome of a set of non-inclusive policies adopted during the Mubarak era. It is noteworthy to highlight that most poor people in Egypt are members of the informal economy. Hence, devising policies to improve the status of informal sector and its formalization is a quest for poverty alleviation and empowerment of the majority of Egyptians. What Egypt needs in the foreseeable future is a pro-poor growth strategy that realizes the importance of including the masses in the growth-generation process itself. The youth who started the revolution are asking for a change in their economic situation, and they are probably not willing to wait until the benefits of growth “trickle down” to reach them, they want to trigger growth themselves and utilize their innovative ideas to make their dreams come true.

Hi Why Egypt Crushes at Squash.

Hi Why Egypt Crushes at Squash.

On Friday, Egypt’s Ramy Ashour won the squash World Open—basically the Wimbledon of squash. The tournament attracts the best players from around the world. But the final game lacked a certain element of suspense: Both players, Ashour and Mohamed El Shorbagy, were Egyptian. Even that was predictable. Egyptians dominated the international rankings this year—including El Shorbagy and Ashour, three of the Professional Squash Association’s top five players based on tournament results are Egyptian. As of Friday, Egypt has won seven of the past 12 World Opens—in the history of the tournament, which began in 1976, only Australia and Pakistan have more World Open titles. Egypt’s prowess in the sport is beginning to extend to international women’s tournaments, junior tournaments, and even American college sports: Egyptian men have won the last three U.S. Intercollegiate Individual Championships, a tournament for the best players attending U.S. universities.

How did so many Egyptians get so good at squash?

The dominance of Egyptian players dates back to squash’s earliest days as an internationally competitive sport. After being invented at a British prep school in the 19th century, the sport spread throughout the empire, including to Egypt. The British built clubs for their colonial officers in Cairo and Alexandria, but Egyptian ball boys and service staff had access to the squash courts in off-hours.

The sport’s first great international champion was F. D. Amr Bey, an Egyptian diplomat who started playing while stationed in England. He went on to win six consecutive British Open championships—then the sport’s biggest international competition—in the 1930s. His success inspired Egypt’s ball boys, one of whom, Mahmoud El Karim, racked up four of his own British Open championships in the 1940s.

Egypt didn’t produce many international champions between the 1950s and the 1990s. Repeated wars and domestic turmoil during the period made it difficult for the country’s best players to travel for tournaments while based in Egypt. “All the top players left the country and lived in Europe, and that’s when the drop [in Egyptian squash] happened,” Amr Shabana, a four-time squash world champion from Egypt, told me. The best players who stayed in Egypt couldn’t tour internationally. “[T]he country was on lockdown,” Shabana said.

Former Egyptian President Hosni Mubarak hits a squash ball. (Farouk Ibrahim/AP).

But in the late 1980s, Shabana, then 10 years old, and another player named Ahmad Barada, age 12, planted the seeds of Egypt’s resurgence when they started playing together at Cairo’s Maadi Club. Because Egypt’s remaining squash talent couldn’t tour, those players trained and competed in Cairo, meaning Barada and Shabana could practice and compete against some of the country’s best from a very young age. As Shabana explained, “There’s a quote that says ‘you’re only as good as the people around you.’ Around us were the best players—maybe not the best in the world, but we thought they were.” And they were also helped by the geography of Cairo, where, Shabana said, the squash clubs were all within a half hour's drive of one another. (This is in contrast to the U.S., where the major squash hubs are scattered between Philadelphia, New York, and Boston.) The result was a tight squash community centered on Cairo’s clubs. “This is the main reason squash thrived,” Shabana said. “Everybody pushed each other. This was I think quite unique.”

Beyond exposure to top professionals, Shabana and Barada had other advantages. The most noteworthy is that the rules of Egyptian tournaments permitted them to play many more matches than they would have been able to in England or the U.S. A 10-year-old Shabana competed in the bracket for players under 12, the U12, as well as the Under-14, Under-16, Under-19, and men’s tournaments, meaning he could potentially play five matches a day. More rigid conventions in the U.S. and England guide young players to compete in one bracket at a time, meaning they might only play one-fifth as many matches as their Egyptian counterparts have.

At the same time that Shabana and Barada were honing their art on the local level, President Hosni Mubarak—a squash player in his own right—was promoting squash’s prestige at the national level. In 1996, Mubarak brought a major international tournament to Egypt, and had a glass court built in front of the pyramids. Barada, then 19, reached the finals, and Mubarak congratulated him personally. Barada later reached second place in the Professional Squash Association’s World Rankings.

Shabana says Barada’s ranking gave Cairo’s young squash community a new target. Seven years later, at the age of 24, Shabana beat it, becoming the first Egyptian to win the World Open in 2003. After that, Shabana says, “the kids younger than me ... wanted to beat me.”

Mubarak, who was deposed in 2011, increased squash’s popularity, but not its accessibility. The sport remains an upper-class game in Egypt, populated by those who can get access to and pay fees for the same athletic clubs that the British built near the turn of the 20th century. Yasser El Halaby, a four-time Intercollegiate Champion from Princeton, explained to me that squash, for all the glory its players have attained, is not widely played in Egypt. He noted that there are a few thousand people who play squash in the country of some 82 million people. But the game’s profile—El Halaby says it’s Egypt’s second-most-popular sport, after soccer—means it draws some of the country’s best athletes. In most other parts of the world, this is not the case. “LeBron James is not playing squash,” El Halaby pointed out.

* * *

The reasons Egypt became so dominant in squash—the sport’s national prestige, combined with the access talented young people have to the country’s top players—persist to this day. Amr Khaled Khalifa, who in 2010 won squash’s Junior World Championship, the sport’s biggest tournament for players under 19, grew up training at the same club as and hitting with Shabana and Barada. He was just 11 when Shabana became a world champion. “I started playing squash at the Maadi Club, where world champions used to play,” he told me via email. “I had the chance to watch them training, which inspired me to take squash seriously and set my goals.” And, like his predecessors, he played as much as he could starting at a very young age, practicing twice a day and playing 15 tournaments a year.

Despite the fact that this year's squash world champion and the runner-up are Egyptian, Shabana said he believes the end of Egypt’s squash dominance is in sight. “I think it’s changing a bit,” he said. The top Egyptian players are once again living outside of Egypt due to lack of government support for the sport. “I’m living in Toronto, Ramy [Ashour] is mostly based in New York now, [El Shorbagy] is in England, and quite a high percentage of players now go to college in England and America. So there’s a gap,” he said. Though the logic works—it will be hard for the current Egyptian juniors to train with the best players in the world if none of them live in the country—Shabana’s view is contrarian. Results in junior tournaments suggest that an Egyptian successor will rise after the country’s current champion retires.

*See original article on The Atlantic: Click The Following Link Here. 

Hi Echoes Of Mubarak!. Sissi is militarizing the courts system. Sound familiar?

Hi Echoes Of Mubarak!.

Sissi is militarizing the courts system. 

Sound familiar?

Egyptian President Abdel Fattah el-Sisi has passed a law that extends the reach of the country's military courts and places all "public and vital facilities under military jurisdiction for the next two years and directs state prosecutors to refer any crimes at those places to their military counterparts," according to a report released by Human Rights Watch Monday. The new law allows for the militarization of prosecution of protesters and other government opponents -- a mandate similar to those implemented during the reign of former President Hosni Mubarak, who was ousted in February 2011 at the start of the Arab Spring.

Under Mubarak, Egypt's military arrested nearly 12,000 civilians for various charges, including inciting violence at protests, during the revolution in 2011, and brought them before military tribunals. According to officials from the Supreme Council of the Armed Forces (SCAF), Egypt tried 11,879 civilians in military tribunals from Jan. 28 to Aug. 29, 2011. Of that number, more than 8,000 were convicted.

Now, under Sisi, Egypt is getting back to widespread civilian military trials. Sisi issued the new law just days after an attack in the Sinai Peninsula killed dozens of soldiers, the deadliest attack yet in an insurgency that has grown since the ousting of former President Mohammed Morsi by SCAF in July 2013. According to the Human Rights Watch report, since the ouster of Morsi, Egypt's military courts have tried at least 140 civilians. It is still unclear what charges each individual faced, but many were arrested during protests against Morsi's removal from power.

“This law represents another nail in the coffin of justice in Egypt,” Sarah Leah Whitson, Middle East and North Africa director, said in the report. “Its absurdly broad provisions mean that many more civilians who engage in protests can now expect to face trial before uniformed judges subject to the orders of their military superiors.”

Sisi's crackdown on civilian protestors started earlier this year during the beginning of the school semester. Egyptian police officers armed with tear gas canisters stormed lecture halls at Alexandria University, arresting and wounding dozens. Students at other universities such as Bani Swaif and Assuit were also protesting the removal of Morsi. In one weekend, Egyptian police officers arrested more than 90 students. On Nov. 16, a criminal court in Cairo referred five students from al-Azhar University to the military because of their involvement in the protests. The students have been charged with joining a terrorist organization, displaying force, threatening to use violence, possession of Molotov cocktails and vandalism, according to Human Rights Watch.

“This new decree is pernicious and contrary to basic standards of justice,” Whitson said in the report. “Egypt’s authorities should annul all the military court verdicts against civilians handed down since the new government took power, and President el-Sisi needs to act quickly to amend his decree.”

Historically, Egypt's military has influenced politics. Mubarak formed strong ties between his administration and SCAF, relying on the army to take over most of the security in the country. The military, in essence, replaced the police forces. Since Mubarak's time in office, the military has remained in tact and has continued to influence the political process in Egypt. Sisi, like Mubarak, is supportive of SCAF and its power to rule in the streets.

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Hi Egypt's gas exports fall 81.4% in September.

Hi Egypt's gas exports fall 81.4% in September.

- "Natural gas exports continue to drop as more production is used to meet Egypt's rising electricity demands."

Egypt's exports of natural gas in September declined 81.4 percent compared to the same period last year, the state-run Information and Decision Support Centre (IDSC) reported on Thursday.

The value of exports totalled $18.1 million, compared to $97.1 million in September 2013.

Meanwhile, natural gas production fell 12.2 percent lower than its September 2013 level, totalling 3.01 million tonnes of natural gas, compared to 3.4 million in the same month of the previous year.

Electric power generation accounted for some 68.7 percent of natural gas consumption, up from 59.6 percent a year before, reflecting Egypt's efforts to meet rising domestic demands for electricity.

"There have been no new concessions in the period from 2010 to 2013, which resulted in decreasing exploration areas to only 27 blocks during 2013, down from 53 in 2010," the minister of petroleum, Sherif Ismail, said earlier this week.

Delays in explorations are a result of mounting debts to foreign oil and gas companies following the 2011 uprising that toppled president Hosni Mubarak.

Gas producers currently receive about $2.65 per 1,000 cubic feet, far below the prices paid in the North Sea and elsewhere, reported Reuters last month. But Ismail said this week that the ministry plans to free prices in one of several attempts to encourage explorations.

Exports of crude oil and other petroleum products were valued at $321 million, down 20 percent from $401 million in September 2013.

Meanwhile, domestic consumption of petroleum products rose 26.1 percent year-on-year to 3.2 million tonnes.

The United Arab Emirates pledged $9 billion worth of petroleum products starting in September, to be sent over a year.

Egypt's production of Brent crude and petroleum condensates, such as gas oil and naphtha, dipped by 1.5 percent year-on-year in September to reach 2.9 million tonnes, according to the IDSC.

Hi Egyptian rights groups fear government crackdown looms.

Hi Egyptian rights groups fear government crackdown looms. 

* 2002 law tightly restricts activities, finances of NGOs.

* Rights groups say climate not safe for their work.

* Sisi has presided over broad crackdown on dissent.

By Maggie Fick

CAIRO, Nov 9 (Reuters) - Some Egyptian human rights groups shredded documents on Sunday and instructed their staff to stay home as a government deadline approached for them to register under a Hosni Mubarak-era law they say seeks to eliminate them.

Egypt's government says groups doing the work of non-governmental organisations (NGOs) but not registered as such must correct their status by Monday to comply with a 2002 law it is enforcing while it works on new legislation for the sector.

Human rights groups say the push to enforce the old law aims to restrict their activities and funding, raising concerns that President Abdel Fattah al-Sisi's government is rolling back freedoms won in the 2011 uprising that ousted Mubarak.

"Whatever happens, I don't think that the human rights movement in Egypt is going to be able to work safely," Mohamed Zaree, programme director at the Cairo Institute for Human Rights Studies (CIHRS), told Reuters.

He said his group had never tried to register under the 2002 law and refused to do so now because it was "a death sentence for our independence".

Contacted by Reuters on Sunday, neither the Social Solidarity Ministry, which is responsible for NGOs, nor the presidential spokesman were immediately available for comment.

But Social Solidarity Minister Ghada Wali told Reuters last month that the state could not let groups operate unregulated pending a new NGOs law that could take months.

She sought to assuage fears that her ministry would use the 2002 law to starve critical NGOs of funding, saying that from June 30, 2013 to Sept. 30, 2014, it had approved 812 grants to 500 NGOs from 540 donors totalling 835 million Egyptian pounds.

But she also said the government would begin going after improperly registered organisations once the deadline passed.

The government's deadline comes as executives from more than 60 U.S. businesses visit Cairo for a major investment summit.

Foreign investors have looked positively on initial economic reforms enacted by Sisi, who has pledged to revive the economy and combat an Islamist insurgency. He has been less specific on upholding the rights many Egyptians rose up to demand in 2011.

Since toppling elected President Mohamed Mursi of the Muslim Brotherhood last year, Sisi has presided over a fierce crackdown on dissent that has seen many thousands jailed.

Though most targeted in the crackdown were Mursi supporters, liberal and secular activists are now also behind bars -- many of them charged with violating a new law that limits protest.

The political climate means trust is low between the government and civil society in Egypt. Some groups have felt particularly exposed since late 2011, when authorities raided 17 local and international pro-democracy and rights groups accusing them of joining a foreign conspiracy against Egypt.

Some groups have refused to register under the 2002 law because it enables tight state control over the activities and finances of registered groups. Others are registered as civil companies or law firms because the government never approved their applications under the 2002 law.

"CLIMATE OF FEAR"

Rights defenders interviewed on Sunday said they were taking precautions such as temporarily closing their offices or working from home. Speaking on condition of anonymity, two groups said they had destroyed documents in anticipation of a raid.

Amnesty International's Egypt researcher Nicholas Piachaud told Reuters that, regardless of what happened on Monday's deadline, the damage had "already been done".

"The Egyptian authorities are sowing a climate of fear which has stopped NGOs from doing their vital work of defending human rights and the law," he said.

Zaree of CIHRS said his group and others already operated under severe constraints, constantly worried their work would be seen by the state as an attempt to "stain the national image".

He cited his group's decision not to participate in last week's United Nations Human Rights Council review of Egypt's human rights record as an example when the group had to stand down, not knowing "what the cost of participating would be."

Egypt defended its record at the meeting, saying that personal freedoms were among its prime concerns.

The Egyptian Initiative for Personal Rights (PIER), a well-known group, said it tried in 2004 to register under the law but "nothing happened", even after staff went to court to try to get the application accepted. Like other groups doing similar work, EIPR is registered as a limited liability company.

"We really don't see the point of registering under a 12 year-old-law that even the state says is inadequate," said EIPR Associate Director Gasser Abdel-Razek. "Everyone accepts the fact that this is not a democratic law". (Additional reporting by Stephen Kalin, Lin Noueihed and Shadi Bushra, Editing by Lin Noueihed and Tom Heneghan).