The Informal Sector in an Intermediate City: A Case in Egypt

Abstract

Overurbanization in developing countries is the result of rapid population growth and an urban bias in the predominant development strategies. Since the number of jobs created in industry and modern services has been insufficient to absorb the growing urban labor force, the informal sector (i.e., small-scale activities in handicrafts and manufacturing, construction, transport, trade, or other services) became the last economic resort for the underemployed. Research on the informal sector has been concentrated on metropolitan cities, and numerous reports by the International Labour Organisation (ILO) have urged governments not to hamper but rather to assist this neglected sector.1 With renewed emphasis placed on rural development, intermediate and small cities have been receiving more attention as potential centers for agricultural services and a labor-intensive rural industrialization. By creating new jobs in nonfarm activities, these cities could curb out-migration and thereby relieve the pressure on the big cities. Employment opportunities in rural areas are of great relevance within the Egyptian context, since Cairo and other agglomerations in the Nile Delta are all showing symptoms of overpopulation. But deconcentration policies have traditionally focused on costly satellite cities in the desert, with only passing interest shown in the employment and growth potential of existing small and intermediate cities. Assistance for the productive segments of the informal sector could be the focus of job creation in smaller cities, because it is reasonable to assume that various weaknesses exist in small workshops, such as inadequate skills, outdated equipment, and insufficient managerial resources. But enterprises with severe problems will rarely expand their operations; low productivity and returns raise economic survival and the avoidance of unemployment to the top priority. Secu-