The Department of Economic Affairs, Commerce and Industry (DEACI) conducted a study of the informal economy, also known as the shadow economy, in Aruba.
It is the first time that the size of the informal economy has been mapped in Aruba. The study was conducted by an internationally renowned expert in the informal economy, Professor Doctor Friedrich Schneider, and local expert Drs. Jason Lejuez, DEZHI’s Economic Policy and Research Officer.
Professor Scheider published extensively in leading economic science journals and has been a consultant to various organizations, including the European Union Commission of Brussels, the International Monetary Fund (IMF), and the World Bank.
Last week on Wednesday, February 16, the study results were presented to Minister Geoffrey Wever. The estimation of the informal economy was made using calculations made for the period 1991 to 2021. The average size of the informal economy over the period from 1991 to 2019 is equal to 18.8% of the Gross Domestic Product (GDP). Over the period 1991 through 2020, the average size of the informal economy equals 19.7% of GDP. The average result, including 2020, is higher because of the shock to the tourism sector due to the COVID-19 pandemic. In addition to the research report, a policy note with recommendations was also included. A first concrete step is to establish a multi-departmental committee led by DEZHI to make a concrete plan to reduce the informal economy.
Minister Geoffrey Wever: “An average percentage of 19.7% for the period 1991-2020 is high. The study contains interesting recommendations for the government to counteract the phenomenon of informal economy by ensuring that the amounts that now end up in the unofficial system end up in the legal system where the government can collect those tax monies.” “Persons working in the informal economy do not enjoy the benefits of labor rights protection and do not always have adequate access to social security.”
On Friday, January 18, Minister Geoffrey Wever was invited to give an opening speech for the lecture given by Professor Schneider at the University of Aruba. This lecture was organized by the University of Aruba in cooperation with the Aruba Chamber of Commerce and Industry (CoC), Aruba Trade and Industry Association (ATIA), and DEACI. On Tuesday, February 22, Professor Schneider made a presentation to the Council of Ministers. Minister Geoffrey Wever: “There is no protection for the people working in the informal economy, there is no protection for the consumer, there is unfair competition for entrepreneurs, and the government does not receive the necessary tax money.” “An integrated approach to countering the informal economy is needed.”
