Econostrum | Economic News in the Mediterranean

Southern Mediterranean private sector failing to create enough jobs

Written by Frédéric Dubessy, in BRUSSELS on Tuesday, August 27th 2019 à 15:22 | Read 418 times

In Southern Mediterranean countries, the private sector is having trouble hiring. Faced with this sizeable problem, companies are also failing in their lack of ambition or inadequate financial capacities. All factors that are hindering their development and preventing their positioning on export markets. Version française

Southern Mediterranean private sector failing to create enough jobs

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Accoding to Chahir Zaki, "Southern Mediterranean companies have a growth problem." (photo : F.Dubessy)
Accoding to Chahir Zaki, "Southern Mediterranean companies have a growth problem." (photo : F.Dubessy)
MEDITERRANEAN. “Given the forecasts for demand, the private sector’s inability to create sufficient jobs is clear,” says Chahir Zaki, pointing out the continuing difficulty companies have in hiring people. Speaking at the annual EMNES (Euro-Mediterranean Network for Economic Studies) conference in Brussels on 27th June, 2019, the associate professor of economics at the Faculty of Economics Political Sciences, Cairo University, observes that the majority of jobs created are in the services sector, which accounts for 80.1% of employees in Jordan, 49.6% in Tunisia, 47.1% in Egypt and 38.3% in Morocco. This sector produces less added value and lower margins, meaning companies have less chance of increasing staff numbers.

These countries’ private sectors are polarized around a majority of very small enterprises and a few major groups, which dominate the market. The former lack the ambition, or the finances, to develop. Changing dimension involves costs, which they cannot fund due to their poor productivity, very limited finances and total inability to move into the export markets.

Southern Mediterranean companies have a growth problem. They start off small and are incapable of expanding. They are therefore excluded from the worldwide value chain,” observes Zaki, citing, “non-tariff barriers blocking market access for products from the region and a lack of sustainable financing sources.”

Becoming part of the worldwide value chain

The economist and EMNES member also blames “weak institutions” that lead companies to specialize in traditional sectors instead of high technology. “The reforms to facilitate trade, exports, have to be led at a local level,” he says, citing in particular the need for a harmonization of regulations and norms, an increase in the number of laboratories and certification bodies, as well as the vital need to seek governments’ technical assistance, plus international donations, in order to attain the objectives.
Chahir Zaki insists on the absolute importance of attracting foreign direct investment to industries, especially those manufacturing high added value goods. “This would stimulate job creation and, as a result, foster inclusivity,” he stresses. According to him, “reinforcing workers’ skills would help the Southern economies become part of the worldwide value chain. This would increase the demand for competent employees, rather than battling fierce competition in international markets.” To this end, the European Union’s External Investment Plan (EIP) is an initiative likely to attract more investment in private-sector businesses. 

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