News Column

Private sector reforms are crucial to reducing unemployment in Egypt: WB

August 6, 2014

Daily News Egypt



Private sector reforms are crucial to reducing unemployment in Egypt: WB.

(AFP Photo)

By Evline Meshreky

The private sector's ability to grow and create employment is contingent on medium- and long-term policies to provide a competitive environment, said a World Bank July report entitled "More Jobs, Better Jobs: a priority for Egypt".

Such policies must ensure that firms have fair access to resources as land, capital, and credit, the World Bank argued. Policies should also encourage transparency in implementation of laws and procedures and set productivity as the key determinant of entry, growth, and exit.

An element that would spur investment and growth is easing bankruptcy, liquidation, and restructuring procedures. This would encourage firms to reorganise, and strengthen creditors' incentives to lend, according to the report.

Another reform should be the removal of costly energy subsidies, the World Bank said. This would reduce the relative cost of labour and consequently have a positive impact on job creation.

The World Bank also recommended that the policy framework strike a balance between efficiency and social justice, long-term and short-term, and between a Cairo-oriented vision and one that provides economic opportunities in the entire country.

Costs and benefits of those policies must also be weighed to prevent potential ramifications of policy interventions.

Boosting the private sector will expand the quality, quantity, and distribution of jobs especially to excluded groups including women, youth, and peripheral parts of Egypt.

The World Bank also advised Egypt on addressing the informal sector. Larger and more profitable informal firms should be allowed into the formal system in a way that does not require enterprises whose workers are kept at subsistence level, such as agrarian enterprises, to register.

The paper further explained that the lack of a competitive environment in the private sector reduces incentives to invest in new technologies or higher-productivity products, which results in insufficient economic dynamism and employment creation.


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Source: Daily News Egypt


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