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Incentives to attract companies away from the grey economy

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Ministry of Investment uses incentives to divert grey economy into formal economy

Ministry of Investment is willing to divert grey economy into formal economy (file photo) KHALED DESOUKI/AFP/Getty Images

Ministry of Investment is willing to divert grey economy into formal economy (file photo)

By Lamia Nabil

With the Egyptian economy deteriorating and job opportunities in short supply, many Egyptians are trying to cover their expenses through the massive grey economy, which operates outside the tax system and most government regulation.

Osama Saleh, Minister of Investment, said that “non-regular employment is estimated at 50% of the total regular workforce in Egypt, and takes place in various sectors starting with the construction sector, service sectors, industrial and commercial sectors, and workers in mines and quarries”.

Saleh added that the Ministry of Investment has experienced some strategic success in bringing 70 companies to work under the umbrella of the formal economy. There is an ongoing agreement with the ministry to provide these investments and projects with incentives to encourage engagement with the formal economy.

The ministry’s strategy includes various incentives, such as exempting these projects and investors from taxes on work carried out before joining the formal sector.

Such projects can be issued with a temporary licence to attract more engagement with the formal economy and must gain a permanent licence within three months.

These intensives will also include facilitating procedures such as employment insurance, technical help for investors, help with marketing resources, and providing business owners and small enterprises with legal consultancy. Additionally, the strategy aims to facilitate access to funding from banks, the Social Fund for Development (SFD), and other small financing funds.

The ministry has allocated special windows for those projects at all General Authority for Investment (GAFI) service branches, which will help to provide better services to this sector.

The Egyptian Business Development Association (Ebda) will also provide assistance, supporting small businesses and entrepreneurship. Ebda is providing training for project owners, helping them to obtain economic expertise and the necessary knowledge to join the formal economy.

Member of the member of the board of directors of the Federation of Egyptian Industries (FEI) vice president Dr. Mohammed Al-Bahey said that the grey economy is important to the economic cycle, although it works outside the law. He added that the Egyptian government has to generate real and effective mechanisms to bring grey economy businesses into the formal economy.

Abdallah Qandil, chairman of the North Sinai Chamber of Commerce, said that the fact that the government does not have accurate figures regarding the grey economy in Egypt is of major concern.

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