Understanding the informal economy - Tunisia Young Leaders Programme -13th January 2021

Ten years on from Tunisia's revolution there remains widespread demands for economic reforms that can increase growth and provide jobs. These calls are loudest from young, university educated Tunisians, who are disproportionately affected by unemployment and limited opportunities.At the request of participants in our Tunisia young leaders programme, we convened a workshop on the 13th January to look at one aspect of Tunisia's economic crisis - the informal economy. To inform discussions, we were joined by economist and businessman Sherif El Diwany who has carried out extensive research on informal economies in the Arab world.While every economy in the world has an informal sector, Tunisia's is estimated to make up at least 43% of all economic activity. This denies Tunisia an enormous amount of growth, as businesses in the informal sector have few incentives to grow larger due to the fear that this will attract negative attention of authorities. This keeps informal businesses in stasis - only producing enough to ensure their survival but no more than that.Governments in the region actively want to decrease the size of the informal economy. However, Sherif argued they often approach this problem in a counterproductive way - viewing it as a means of increasing tax revenues (which automatically raises the fears of informal businessmen) rather than asking how to incentivise businesses to formalise.Throughout the workshop, participants debated potential policies that could be adopted in Tunisia. For change to happen, it was agreed that a compelling new narrative needs to created around the informal economy that does not frame it as a problem but an opportunity for the country. It was suggested that young people should take the lead in creating this narrative and begin the work of a building a political constituency for change.Sherif El Diwany served as the Executive Director of the Egyptian Center for Economic Studies (ECES), based in Cairo. He held several prominent positions in a number of international corporations and organisations, including advisory board member at EP Global Energy, Head of the Middle East and North Africa at the World Economic Forum, and Senior Vice-President for business development at Cotecna (Geneva). He was also CEO and founder of Public Interest Incorporated, which provided advice to several Middle Eastern governments and international development agencies such as the World Bank and USAID. He led the regional agenda for the Forum’s activities in the Middle East in education and corporate social responsibility. He worked with the Arab Business Council of the World Economic Forum. He holds a M.Sc. in Planning from the University of Houston and a B.Sc. in Architecture from Cairo University.