The papers in this volume attempt to survey definitions of informal activities with reference to those Arab countries that deal with informal activities using the Egyptian census of establishments. The features of informal finance are studied with references to Egypt and Sudan, and by tackling the institutional aspects of informal activities.

The first paper, by Nedelec and Destremau, discusses the concept and definition of informal activities. They believe that interest in the concept of informality began in 1971 with Hart in his study on Informal Income Opportunities and Urban Employment in Ghana. The term informal was used to refer to those workers who were surplus to the requirement of wage labour in African cities (Hart, 1973). Since then, the heterogeneity of the concept has been the main characteristic of informal activities, which includes illegal, underground and moonlighting activities. Having surveyed the main definitions of informality from such institutions as the ILO, Economic Research Forum (ERF), the Moroccan Statistical Office, and the Conference of Labour Statisticians, the paper moves on to provide some Arab examples of definitions of informality. Egypt, for instance, emphasises on size criterion in terms of employed workers. Another example is provided by Algeria where, contrary to the situation in Egypt, there is no consensus on the criterion used. The criteria used there vary from the size of activities and the existence of a parallel currency exchange market, to the existence of a black market for goods and services. If there is any common factor among the definitions of informal activities in Algeria, it is that all operate outside the state control.

This first paper recommends, among other things, the need for full cooperation between Arab national statistical offices and international community in implementing the recommendations of the International Conference of Statisticians regarding a common definition of informal activities.

The second paper, by Fergany, addresses the relations between informal activities and structural adjustment, again with application to the Egyptian case. The paper starts by refuting the single-criterion definition approach to informality, and selects instead five characteristics with which to distinguish informal activities, namely, the number of establishments, employment, failure rate, workers earnings, and value-added. Special attention is paid to the first three characteristics.

Using statistical evidence derived from Labour Force Sample Survey (LFSS) and census of establishments, the paper tests the ability of the public sector and informal activities to absorb any more employmees because of the implementation of adjustment policies and the effect of such policies on informal activities. The paperâ??s findings indicate that the public sector will not be able to accommodate all the surplus employment resulting from the adjustment policies, whereas the informal activities are qualified to absorb more employment but at a slower pace and with lower productivity. Responding to the second question, the effect of adjustment policies on informal activities, the paper indicates that the effect is negative. The evidence is provided by the decline in the number of self-employed and other small-scale establishments during the last three decades coupled with an increase in the number of large establishments.

The third paper, by Al-Kawaz, relates to informal finance. Due to the severe lack of information, reference is made to only two Arab countries: Egypt and Sudan. The paper starts with a discussion of informality and informal finance as they relate to the financial markets in those two countries.. Then a survey of the different types of informal finance, e.g., rotating saving and credit associations (ROSCAs), moneylenders, pawnbrokers, and community groups, is provided.

Later, the paper focuses on the Egyptian experience with ROSCAs in terms of borrower groups, the average life span of ROSCAs, the number of required rotations, the average kitty size, the leaders reasons for initiating ROSCAs, default problems, etc. The Egyptian case shows that no rate of interest is involved due to the nature of ROSCAs, the alternative sources of formal finance in operation, and the fact that a few members of ROSCAs are engaged in other types of informal finance, such as trade credit.

The Sudanese case, on the other hand, shows the sheil system prevailing in the rural areas. This system is alleged to be a legal substitute for usury. Informal finance, according to the sheil system, depends on the locationâ??s distance from the source of water, the farmerâ??s indebtedness, and reputation of the tenant. On contrary to ROSCAs, the sheil system burdens farmers with a heavy rate of interest, which represents the difference between the lenderâ??s selling price at market and the price paid to the borrower before harvest.

In order to formalise informal finance, the paper suggests the need to encourage micro-finance institutions in Arab countries, in such a way to reduce the borrowing cost, especially in rural areas, and to maximise the number of people who are eligible for credit in the hope of reducing poverty in the medium and long run. In this respect, two cases on micro-finance are provided, i.e., Grameen Bank in Bangladesh, and Alexandria Business Association in Egypt.

After discussing how informal finance is influenced by a financial liberalisation policy, the consequences of financial repression and liberalisation on informal financial markets is explored. The interdependence between informal and formal financial markets under a policy of liberalisation is also investigated.

The fourth and last paper, by Mansour, studies the institutional framework of informal activities in a number of Arab countries. This aspect is tackled through Arab macroeconomic policies, state regulations, and role of government organizations and non-governmental organizations (NGOs) in promoting informal activities.

Macroeconomic policies in most Arab countries are biased against informal and small-scale industries and in favour of large-scale ones. Many examples of investment cases are provided, such as Syria, Jordan, Egypt, Qatar, and the United Arab Emirates. For instance, in Jordan, projects are entitled to benefit from the exemptions and incentives of investment law if their capital exceeds a certain amount, which is beyond all informal activities. The same is true in other Arab countries as well.

State regulations are seen in terms of labour, and tax regulations, licensing, and registration. In case of Oman, for example, the state empowered the Ministry of Social Affairs and Labour to fix minimum wages. In Maghreb countries and Egypt, workers enjoy more protection than in other Arab countries. They have stronger labour union, fixed wage laws, protection from firing, and reasonable social benefits.

Generally speaking, incomes generated from agriculture, poultry, cattle, etc., are exempted from income tax in most Arab countries. Despite the difficulty of distinguishing between formal and informal activities, Arab countries do exempt capital and income which does not exceed a certain amount from taxes. As for licensing, Arab countries have attempted to demolish this type of barrier, since it is part and parcel of the economic liberalisation policies followed by most of them. Registration of new projects, however, is required in most Arab countries. Only few, as Oman, and Saudi Arabia, exempt small-scale industries and handicrafts from registration.

This paper creates a picture of the role of governmental organisations and NGOs in the informal sector. With the support of the United Nations Development Programme (UNDP), most Arab Ministries of Social Affairs have initiated poverty-combating programmes which include the promotion of small-scale industries and informal activities. The Social Fund for Development in Egypt, Noor Al Hussein Foundation and Queen Alia Fund in Jordan, are good examples of such efforts.