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Employment challenges in MENA linked to economic governance: World Bank - Daily News Egypt

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Employment challenges in MENA linked to economic governance: World Bank

Governments can help job creation by reforming policies protecting politically-connected companies, World Bank study says

The World Bank said that reforming policies protecting politically-connected companies needed to help create job (Photo courtesy of the world bank)
The World Bank said that reforming policies protecting politically-connected companies needed to help create job
(Photo courtesy of the world bank)

Employment challenges in the Middle East and North Africa (MENA) region are linked to economic governance challenges, Inger Andersen, World Bank’s MENA Regional Vice-President said in a recent statement.

According to a World Bank study released this month, the MENA region has been struggling to generate enough quality jobs for its “large and increasingly educated workforce”.

The study added, however, that the situation can be turned around as governments can make “significant strides” in job creation. This can be done by reforming policies which protect politically connected companies, in order to promote competition and ensure equal opportunities for all firms.

“The economies of the region will need to be more open and provide a level playing field for job creation to increase and meet the needs of the citizens,” Andersen added.

Discussing the harm to competition caused by politically connected firms, the study said that in Egypt, the employment growth drops by 1.4% annually when connected firms enter new, previously competitive sectors. The study added that 71% of connected firms in Egypt, compared to 4% of all firms, sell products that are protected by at least three technical import barriers.

“In Tunisia, 64% of politically connected firms operate in sectors subject to restrictions on foreign direct investment (FDI) relative to only 36% of non-connected firms,” the study added.

 Marc Schiffbauer, World Bank Senior Economist and the report’s lead author said start-ups and innovative firms are the “engines” of job creation in MENA, but they are having trouble growing.

“These firms currently face a host of obstacles in the business environment that are too often there because they benefit a few politically connected firms,” Schiffbauer noted.

With regard to Egypt, World Bank said in a September report that Egypt’s labour laws and industrial policies discourage employment by raising labour costs and artificially reducing the price of non-labour inputs. They also directly encourage the production of non labour-intensive products by tariffs and other policies.

The low-quality, insecure and unstable jobs can be reversed through adopting reforms aimed at reviving the private sector, promoting formal employment and engaging vulnerable population, the World Bank added.

The World Bank’s country director for Egypt, Yemen and Djibouti, Hartwig Schafer, said at the time that the private sector has the potential to provide Egyptian youth with the needed job opportunities. He stressed that the World Bank is committed to supporting Egyptians “in improving their livelihood to participate in prosperity and growth”.

A Gallup survey said 80% of Egyptians believe the country is currently worse off than it was before 2011, with 50% believing it will recover in the next five years, the report said. The report attributed the pessimism to the negative view of the labour market.

Meanwhile, 70% of Egyptians believe that employment opportunities in the public and private sectors have declined. Over 50% believe the situation will take five years or more to improve, according to the same survey

Egypt’s youth are facing major challenges, as the unemployment rate registered 13.3% during the second quarter (Q2) of 2014. This figure compares to 13.4% during Q1, the Central Agency of Public Mobilization and Statistics (CAPMAS) stated in August. Unemployment recorded 9% during the same quarter in 2010, the statistics agency added.

CAPMAS also reported in August that approximately 27.8% of Egyptian youth live in poverty, while 24.1% live near the poverty line. The figure is a minimal increase compared to last year, where poverty and near-poverty among youth registered 51.3%.

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