1. Introduction

The concept of informal sector was used in the early 1970’s to describe the underground economic activities [25] but it has taken many dimensions and has raised debate in both academic and policy circles. In the sequel, it was defined the concept of informal entrepreneurship [3] and the employment in the informal sector and informal employment [2]. In view of to the growth activities informal sector, the international Expert Group informal sector statistics (Dehli group) has proposed the measurement of informal employment and employment in the informal sector, see [11] or [14] and [9]. All these notions vary in different countries due to the nature and composition of informal sector.

The republic of Djibouti maintains a growth rate of 7% in 2017, see [22]. These good macroeconomic figures do not create jobs for the young out of whom 80% are jobless, see [1]. In the republic of Djibouti, there exists three type of enterprises: the enterprises registered at Djibouti National Security Fund (DNSF), those registered at Djibouti Chamber of Commerce (DCC) and the thirty which are illegal. As other countries, our study is then to give a national definition of informal sector enterprises and to measure the generated employment. This definition is linked to the definition of employment in the informal sector adopted by the International Labour Office in 1993. Another observation concerns the institutions like that DCC and DNSF do not have the same definition of informal sector enterprises. Our contribution provides a harmonization of economic activities of both institutions (DCC and DNSF). Another part of our study completes the preceding article, see [1] regarding the employment opportunities which exist in the illegal entrepreneurships.

The purpose of this paper is to formalize the entrepreneurships in the informal sector and illegal entrepreneurships. This will allow to create the formal employments and then to reduce the unemployment in the Republic of Djibouti (the rate of unemployment that is 48%).

In the sequel, this paper is organized as follows: Section 2 gives background and literature reviews. Section 3 presents a national definition of enterprise in the informal sector and we also provide the different classification of economy activities and detailed structure of DNSF, DCC, SDSO and our harmonized classification of economic activities. Section 4 highlights employment opportunities in the illegal sector and section 5 estimates the number of employments of informal sector and informal employments and the last section concerns the recommendations and conclusions.

2. Background and Literature Reviews

2.1. International Background and Literature Reviews

In the literature, the informal sector has been well studied for a long time. For example [4] showed that the employment in the informal sector account for fifty percent (50%) in the total employment in the developing and transition countries. The authors [5, 6] explained the existence of the informal sector is attributable to the implementation of many regulations for example the taxation, the safety and health certifications. Also, there exist other constraints like that financial access, see [22]. Other studies focus on estimating the employments in the informal sector, for example we can mention the articles [9] and [10]. Previous research has shown that the size of informal sector entrepreneurships reaches around 70% of economic activities in many countries, see [16] and [25].

2.2. National Background and Literature Reviews

In the Republic of Djibouti, few studies dealt with an informal sector. A first study was the project entitled “Informal sector: fiscal and institutional constraints (PATARE, 2002), see [8], then there was the thesis entitled “Institutional and Regulatory Constraints on Informal sector”, see [7].

In 2015, the Statistic and Demographic Studies Office (SDSO) conducted a survey (EDISEC, 2015, see [15]) on informal sector in Djibouti. This work gave characteristics, the description and the financials of the informal sector. It also provided the difficulties linked to the registration in the official administrations (legalization, taxation…). Our work is different from the preceding studies in so far as our initial focus is on the classification of economic activities of formal sector in Djibouti. Then we list the existing economic activities in the informal sector; see [1]. Similarities are drawn between the economic activities of formal and informal sector. The understanding of main barriers to move the informal sector to formal sector is then crucial. On other hand, the ultimate goal of our work is to create the formal employments by structuring the informal entrepreneurships and illegal entrepreneurships.

3. State of Informal Entrepreneurs in Djibouti

3.1. Definition of Informal Enterprises in Other Countries

According to the 15^th ICLS (International Labour Office), the informal enterprise can be defined as below

- Small size of the enterprise about the employment;

- Non registration of the enterprise with the administration;

- Non registration of its employees.

However, this definition differs from one country to another, due to the nature and component of the underground economic activities. For examples, the definition is used in Ethiopia is: Household unincorporated enterprises without an accountant book which have less than eleven employees or no license (agriculture included). The Mali’s definition is: Private enterprises with less than eleven persons engaged where not registered with the National Institute for Social Protection and do not have accounts (agriculture excluded). The Afristat’s definition is: Household unincorporated enterprises that are not registered with the national statistical institute or other administrations, and/or that do not have formal written accounts according to the standard plan (agriculture excluded).

3.2. Definition of Informal Enterprise in the Republic of Djibouti

In Djibouti, we distinguish three types of companies: companies registered by Djibouti National Security Fund (DNSF), companies enlisted by Djibouti Chamber of Commerce (DCC) and companies which are illegals (no registered by DCC and DNSF). On other hand, recently International Monetary Fund (IMF) gives an another definition of informal sector: For IMF, the Informal sector means underground production resulting from productive activities that are carried out by registered businesses, but may not be reported to authorities for the purpose of avoiding regulation or taxation, or because they are simply illegal. Due to the component of different enterprises, we believe that the definition used by IMF is adapted in the republic of Djibouti. Consequently, in this paper we consider that the formal enterprises at Djibouti are the companies registered by DNSF. The enterprises listed by DCC and unregistered by DNSF are informal enterprises and the remaining are illegal enterprises.

Table 1. Typology of Djiboutian enterprises according our definition

3.3. Statistics and Data Analysis

In this subsection, we give the classification of economic activities used by the institutions such that DCC, DNSF and the Statistic and Demographic Studies Office (SDSO).

3.3.1. Classification of Economic Activities Used by DCC

Table 2. Economic activities registered by DCC

The following tables corresponding the detailed of economic activities.

Table 3. Detailed structure of Handicraft industries

Table 4. Detailed structure of Insurance and Financial activities

Table 5. Detailed structure of Agricultural-Fisheries-Farms

Table 6. Automobiles and related products

Table 7. Trade

Table 8. Construction and engineering Project

Table 9. Catering-Hotel-Tourism

Table 10. Petroleum

Table 11. Industries

Table 12. Services delivery

Table 13. Libéral professions

Table 14. Health

Table 15. Information and Telecommunication technologies

Table 16. Transport-logistics and related activities

3.3.2. Classification of Economic Activities Used by DNSF

Table 17. Economic activities registered by DNSF

Below, the detailed structure of economic activities.

Table 18. Production activities

Table 19. Construction and engineering project

Table 20. Bussiness activities

Table 21. Delivery services

Table 22. Transport-Communication-Tourism

Table 23. Social and Medical activities

Table 24. Social and Medical activities

3.3.3. Classification of Economic Activities According to SDSO

Table 25. Classification Economic activities by SDSO

3.3.4. Analyses and Remarks

We remark that the classification of economic activities used by the institutions DCC and DNSF are different. On other side, the SDSO gave a classification which did not take into account economic activities. It was well known that the harmonized classification of economic activities of a country allows in practice to give a continuing flow of information that is indispensable for monitoring, analysis and evaluation of the performance and of its economy over time. The harmonized classification allows to give better visibility when it comes creating jobs for business sector and will also help single desk service.

The unemployed youth will benefit trainings for developing their employability in relation with employment activity sectors. This employability will be carry out by the government of Djibouti in partnerships with donors such as United State Aid (USAID). It will reduce the unemployment and the poverty (see, [1]).

By consequent, we given below, a harmonized classification for the republic of Djibouti. It will be periodically adapted by the new Djiboutian National Statistical Institute (DNSI).

3.3.5. Harmonized Classification of Economic Activities in the Republic of Djibouti

We built this classification by consistency with economic activities in the Republic of Djibouti. Our proposed classification is subdivided in a hierarchy and has a reading facility of Djiboutian economic activities. More of, this harmonized classification of economic activities has an international comparability.

Ÿ Broad harmonized classification economic activities

We propose below the broad harmonized classification economic activities.

Table 26. Harmonized Classification Economic Activities

Ÿ Detailed harmonized classification economic activities.

We detail below the harmonized classification economic activities

Table 27. Manufacturing and Handicraft industries

Table 28. Insurance and Financial activities

Table 29. Agriculture, fishing, Farm

Table 30. Trade

Table 31. Manufacturing industry

Table 32. Construction and engineering project

Table 33. Administrative and support services activities

Table 34. Other service activities

Table 35. Transportation- Storage and Related Activities

Table 36. Accommodation - Restoration

Table 37. Education

Table 38. Information and Communication

Table 39. Human health and social action

3.4. Legal Framework for the Classification of Economic Activities in Djibouti

As far as we known, there are gaps concerning laws and decrees dealing with the classification of economic activities in Djibouti. However, below we identified laws and decrees proposing the implementation and classification of economic activities.

Ÿ Law

Law on handicraft industries

- Law 81/AN/10/6^ème L on the organization of Handicraft industries in Republic of Djibouti.

- Law 82/AN/10/6^ème L adopting the National Strategy for the Development of Crafts.

- Decree n°2011-035/PR/MCI instituting the classification of craft trades in Djibouti.

Law on Insurance and Financial activities

- Law n°119/AN/11/6èmeL on the constitution and supervision of credit institutions and financial auxiliaries.

- Law n°117/AN/11/6èmeL, on regulation of financial cooperatives.

- Law n°112/AN/11/6èmeL on the establishment of Islamic Banks in Djibouti.

- Law n°71/AN/04/5èmeL on ratifying the creation of the Islamic Investment and Export Credit Insurance Corporation (SIAICE).

- Law n°17/78 on the conditions of Approval and Control of Insurance companies.

- Decree n°85-027/PRE relating to the opening, operation and control of banking and financial institutions.

- Decree n°2000-0203/PR/MEFPP on application of the law n°40/AN/99/4ème L of 08/06/1999 on Insurance companies.

Ÿ Decree

Decree on agricultural, farms and fisheries.

- Decree n°2007-0014/PR/MAEM adopted pursuant to Law No. 187/AN/02/4ème L of 09/09/2002 on the Fisheries Code.

Decree on the trade.

- Decree n°83.045/PR/MCTT approving the classification of activities and products.

4. Estimation of Informal Sector Employment in Djibouti

4.1. Methods of Data Collection used in the Literature

There exist many methods in the literature like this Household surveys, mixed Household and Enterprise surveys, Establishment surveys and Census and Methods of indirect estimation. All methods depend upon the data requirement, the structure and the national system statistics. Each method has strengths and weaknesses items. Others countries like Mali, South Africa, Republic of Moldova, Ecuador, United republic of Tanzania, Mexico use the methods slightly different as described above. The Labour Force Survey is used by Mexico, the labour force survey integrated is used by Mali and the Republic of Tanzania, the continuous labour force is used by Republic of Moldova and the quarterly labour force survey is used by South Africa.

4.2. Statistics of Employment in the Informal by the Statistic and Demographic Studies Office (SDSO)

In Djibouti, the SDSO has published a document titled ‘’ Enquete Djiboutienne sur l’emploi, le secteur informel et la consommation des menages’, see [15]. The page 43 of [15] is established a table that we give below.

Table 40. Statistics of employment in Djibouti according to SDSO

Remarks: The method used by SDSO does not precise in this document [15].

4.3. New Approach for Measuring the Employment in the Informal Sector in Djibouti

Ÿ Classification of employment in Djibouti

First, according to the definition given on the table 1, we can say there are three types of employments in Djibouti: The formal employment registered in DNSF, the informal employment in the informal sector and the informal employment. For illustrating this, we give the below table.

Table 41. Classification of employment in Djibouti

Our main goal is to measure or estimate the employment in the informal sector and the informal employment. We propose the following methodology for measuring the employment in the informal sector and estimating the informal employment, we use the result of [1].

Ÿ Methodology

1) In each economic activity, we compare the number of enterprises registered in DNSF and those enlisted on DCC.

2) Then, we clearly obtain the number of enterprises unregistered on DNSF but registered in DCC. According to our definition on formal and informal enterprises, these enterprises are in the sector informal.

3) We study the characteristic of enterprises in the informal sector. The characteristics are the size of enterprise, the kind of economic activity occupied, the gender and the age of informal entrepreneurs. Thanks to DCC, that all information is available.

4) The statistics of employment in the formal sector are available to DNSF.

5) Finally, we use the similarity that exists between the unregistered enterprises and the registered enterprises in DNSF for estimating the number of employments generated by the enterprises in the informal sector.

Ÿ Estimation of employments in the informal sector

In the below table, we provide in each economic activity, the number of enterprises in the informal sector by comparing the enterprises registered in DNSF and those registered in DCC.

Table 42. Number of enterprises in the informal sector in Djibouti according our definition

Following table gives the estimation of employments generated by using the items 3), 4) and 5) of the methodology.

Table 43. Number of employments in the informal sector in Djibouti according our definition

Remarks:

- We estimate that there are at least 178 enterprises and 790 employments in the informal sector.

- We can not estimate the number of informal enterprises which find in Agricultural-Fishing-Farms and Accommodation and food services activities due to lack of available statistics on DCC and DSNF. This explains that our estimation of 790 employments in the informal sector do not exhaustive.

- Our method is linked to the method of survey enterprises, here we can use the real available statistics on DCC and DNSF.

5. Employment Opportunities in the Illegal Sector

Table 44. Jobs created in the illegal sector

In the preceding article [1], we have established the illegal employments. These activities can be structured as the formal enterprises and then will turn into formal businesses, see [17]. These created enterprises will have better working condition such as safety and national labour standards, see [18] and [19]. On the one hand, they can benefit financial credits, advice and support in the new Leaderships and entrepreneurships Center (CLE) and its employers will have access insurance cover, see [20]. There is also another advantage will secure their formal intellectual property and products in Office of Industrial Property and Commerce of Djibouti (ODPIC), see [21]. On the other hand, the government improve the tax base and this structuration of the illegal sector creates formal jobs and reduce the unemployment [1]. Below, we give the activities in the illegal sector and the number of enterprises and the generated jobs.

Remarks: As indicated in [1]; these concerns on illegal party employments but we can do on all illegal employments, then the structuring illegal employments will create many enterprise opportunities. Clearly, this allows to reduce the unemployment of order 6%, see [1].

6. Conclusions and Recommendations

In this work, we have established a harmonized classification of economic activities allowing to analyze flow information on economy in Republic of Djibouti. On another advantage of our harmonized classification is to allow the training of unemployed persons in relation of economic activities. The academic trainings provided by the University of Djibouti should be in line with the sectors of activities highlighted in harmonized classification. The students will be easily integrate into the labour market.

We have remarked during our work, that there are not laws which clearly defined on detailed structure of economic activities, except the classification of handicrafts industries. We then recommend that the government of Djibouti does the same for other economic activities. This allows the monitoring and the evaluation of the performance of Djiboutian economy.

Like other countries, we also recommend the government of Djibouti to establish the laws concerning on the definition of informal enterprises and the definition on the employment in the informal sector.

Like other countries, the newly Djiboutian National Statistical Institute should adapt periodically the classification of economic activities.

Our work shows that the formalizing of entrepreneurships thus appears the solution for reducing the unemployment in Djibouti.