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As part of Egypt’s efforts to encourage the integration of unofficial economy projects into the official economy, it has introduced a law that stipulates lawsuits against businesses once they obtain a temporary license.
Article 80 says that all penalties are dropped once the legal conditions of the businesses are reconciled. However, there are exceptions to this law. The Article does not apply to businesses that have significant risks to security, the environment, the safety or health of people, or if their transfer to the official economy conflicts with the public interest. The law has been promulgated to bring more business enterprises to the official economy.
Egypt, the largest state in the Middle East and North Africa region, has long been distinct since the 1970s for its large informal economy. The informal economy is defined loosely as the economic activities, services, and related jobs and enterprises that are not regulated or protected by the state. Egypt has experienced forms of social unrest, including several instances of large-scale protests. Three protests—in 1977, 2011, and 2019 shook the country.
Egypt’s informal economy is variously defined. Some estimates say that it could be between 40% to 50% of the national economy. An informal economy or grey economy is the part of any economy that is neither taxed nor monitored by any form of government. This segment of the economy has faced several large-scale protests at various points in time.
Egypt’s legal framework, which includes patchy contract enforcement, represents a significant barrier to market entry and discourages informal enterprises from formalising. According to the World Bank’s “Doing Business” 2016 report, Egypt was ranked 155th out of 188 economies, with resolving a dispute taking more than 1000 days. Access to capital is another hurdle. Banks have historically been reluctant to extend credit to start-ups and SMEs, preferring the high-yield, big-ticket deals, while non-banking financing mechanisms, such as venture capital, private equity, and crowdfunding, have only recently begun to emerge in the Egyptian market.
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However, recent years have seen a combination of government effort and private sector interest start to bear fruit in the form of an increasingly deep entrepreneurial ecosystem. In the “Doing Business” 2016 report Egypt was ranked among the best-performing countries in the MENA region in terms of starting businesses, with eight days to register a company, compared to 40 days 10 years ago. This has further improved in recent years.
