Tag Archives: Egypt

The private sector, its role as an engine of growth and job creation, at the heart of FEMISE research

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FEMISE Brochure

Mediterranean countries suffer from a lack of dynamism of their private sector, which is not sufficiently competitive nor job-creating.

Therefore, FEMISE has placed the theme of the private sector, and in particular its role as an engine of growth, job creation and inclusivity, at the center of its research activities. A special attention is paid to the causes that prevent the sector from reaching its potential, in particular the constraints faced by firms in the Southern Mediterranean Region, and to the importance of innovation in the development of the Mediterranean private sector.

One of the specificities of the FEMISE network, coordinated by the Economic Research Forum (ERF) and Institut de la Méditerranée (IM), is to always strive to integrate the points of view of politicians, of private operators and, more broadly, of all local actors, in the discussions carried out under this theme. This approach provides better feedback on the research, and ensures its policy relevance.

The private sector at the center of the FEMISE academic research

Patricia AUGIER (Scientific Pres. of Institut de la Méditerranée, Coordinator and Scientific Pres. of FEMISE), coordinates the 2018 EuroMed report

Firstly, the 2018 FEMISE EuroMed report, the flagship publication of the network, will focus on the private sector in the Mediterranean countries. The objective of the report will be to take stock of the economic dynamics of the Mediterranean countries over the last 20 years (ie since the Barcelona Process), and to understand the blocking points. The general idea is that growth in Mediterranean countries must accelerate to absorb a growing number of incoming individuals in the labor market, and that this growth must be based on productivity gains rather than on factors accumulation : the development of the private sector is therefore at the heart of the definition of a new development model. One of the chapters will focus more specifically on the role of central banks in private sector development. Finally, the major concern of a more inclusive growth will lead us to consider social entrepreneurship as a potential opportunity for the Mediterranean countries.

A “Science for Business” partnership dynamic with technical and operational support actors

Secondly, FEMISE participates, in partnership with ANIMA, in THE NEXT SOCIETY project, which brings together public and private actors from 7 Mediterranean countries with the aim of supporting innovation ecosystems. This collaboration gives the opportunity to FEMISE and ANIMA to pool their complementary skills, which are analysis and production of academic knowledge on the one hand, and technical and operational support on the other hand.

FEMISE’s contribution is firstly to draw-up a scoreboard and analyze the position of each country in terms of innovation and competitiveness indicators, such as the Global Innovation Index, at different stages of innovation (inputs, process and outputs). FEMISE also carries out an analysis of the national innovation strategies and of the ecosystem of involved actors (government, associations, private operators…).

Next, FEMISE identifies high-performing sectors and products to highlight new national comparative advantages and investment opportunities.

Dr. Maryse LOUIS (General Manager FEMISE, Programs Manager ERF) and Dr. Constantin TSAKAS (General Manager Institut de la Méditerranée, General Secretary FEMISE) presenting FEMISE research at THE NEXT SOCIETY panels in Tunisia and Jordan.

FEMISE presents its findings on the occasion of advocacy panels bringing together academics, entrepreneurs, investors, managers of incubators and innovation structures and public actors. This allows to benefit from their feedback and, above all, from their point of view regarding the factors that led to the emergence of these new comparative advantages. This approach ensures that the findings and recommendations from FEMISE work can contribute to elaborate public policies. The challenge of these panels is to establish, for each country, a roadmap for innovation, from implementation to evaluation, with the objectives of strengthening national innovation systems, fostering coordination between stakeholders, and improving the instruments of innovation policies and strategies.

An opening towards South-Mediterranean institutions in a “Science for Policy” approach

Les jeunes chercheurs du FEMISE participent activement aux recherches, Karine MOUKADDEM et Jocelyn VENTURA (Institut de la Méditerranée, FEMISE) et Dalia RAFIK (ERF, FEMISE)

Thirdly, FEMISE is opening-up by cooperating with South Mediterranean actors and institutions directly concerned by these issues. Therefore, FEMISE co-authored and will publish in 2019 the2019 EuroMed report which will identify the constraints to growth and integration in the global value chains of Moroccan SMEs. This document results from the cooperation of the network with the African Development Bank, a main regional funder for development aid, and with the Institut supérieur de commerce et de gestion d’administration des entreprises (ISCAE) established in Morocco.

It is essential for the Mediterranean countries to better integrate SMEs into the global value chains in which most international trade takes place. In this report, we have chosen to focus on the case of Moroccan firms. It will be based on surveys and field interviews of SME managers and representatives of professional associations as well as on the Enterprise Surveys and Doing Business indicators of the World Bank. It is in this approach of discussions between researchers and public and private operators that the preliminary results of the report were presented before publication, in order to gather comments, suggestions and recommendations to enrich the research.

A triple anchoring to obtain research that is relevant from a political and operational dimension

To conclude, in addition to the ongoing academic research conducted by network members and supported financially by FEMISE funds (research available on the website), 3 other types of work devoted to the private sector are currently mobilizing the FEMISE team: (1) an analysis of the situation and a general discussion covering the entire region (EuroMed2018 Report), (2) a targeted and co-authored thematic analysis with a national focus (EuroMed2019 Report) and (3) a project on innovation in partnership with ANIMA.

Our analysis feeds on both (i) the knowledge and contributions of academic research, (ii) the consideration of concrete situations within the countries, as well as (iii) the points of view and insights from politicians and business actors. This triple anchoring allows us to develop products that are relevant from a political and operational dimension.

To get the FEMISE Brochure, with a presentation of the activities of the network and its new thematic approaches please click here.

To find out more about the preliminary findings of the report co-led with the AfDB, some answers are available in the interview below:

Article written by Jocelyn Ventura (Economist Institut de la Méditerranée)

Report “The Challenges of Climate Change in the Mediterranean” (2018)

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FEMISE is pleased to announce the publication of the final version of the 2018 edition of the report on “The challenges of climate change in the Mediterranean: the Mediterranean in the new International Climate Agenda”, in the “Guides for Action” series. The report is a ENERGIES2050 – Institut de la Méditerranée – FEMISE coproduction.

 

The report (in french)  is available for download by clicking here

 

This report, coordinated by Stéphane Pouffary (ENERGIES 2050), Guillaume de Laboulaye (ENERGIES 2050) and Constantin Tsakas (Institut de la Méditerranée, FEMISE), presents in an updated way the realities of climate change in the countries around the Mediterranean basin and the actions implemented by stakeholders to respond to the challenges of the fight against climate change. The Mediterranean is one of our planets’ “hotspots” and the impacts of climate change are very pronounced and particularly visible on countries of the South and East shores. International mobilization on the climate issue shows there is a real awareness whether for the signatory States of the UNFCCC or for the non-state actors and subnational governments that are strongly mobilized.

However, the ambition of collective and individual commitments is unanimously recognized as very insufficient in view of the realities and challenges to which all  countries and territories concerned are and will be confronted. Moreover, beyond commitments, implementation and action remain insufficient, sporadic and fragmented. The Mediterranean is no exception and more than ever there is a need for setting up a common agenda for action as the pace of international negotiations is not the same as the speed with which changes and alterations take place.

The report will be presented at a dedicated session of the Workshop on “Climate Change in the Mediterranean and Economic Attractiveness of local Territories”, Marseille, May 15th 2018. 

A first draft of the report had been presented on the occasion of the 23rd Conference of the Parties (CoP23) to the United Nations Framework Convention on Climate Change (UNFCCC) held in Bonn, Germany from 6 to 17 November 2017. This report is intended to become a regular publication and to be accessible to the entire community of actors involved in these issues. The idea of this action being i. to produce politically relevant research and ii. to encourage the emergence of an ecosystem of EU-Med actors (macro, meso and micro) to respond effectively to the posed challenges.

For a Policy Brief (Med Brief) issued from the report click here.

For a “Med Change Makers” interview (video and text) on the case of Lebanon click here.

For an overview of the presentation of the report at COP23 at the Pavillon of France, click here.

To rediscover the past FEMISE publications on “Environment, Energy, Climate Change” please visit here.

For a journalistic article (french) in AfricaPress.Paris on the presence of IM and FEMISE at COP23 click here.

The need to promote vocational training in Egypt

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University education is considered as the royal road in Egypt. It has contributed to the education of far too many students in recent years compared to the needs of the labor market. Vocational education suffers from a lack of image and does not attract young people. However, according to the latest report of Femise, it deserves to be valued given its relevance in the labor market.

In industry, the shortage of technicians hinders the development of companies

Out of 90 million inhabitants, Egypt currently has 2.5 million students. On the benches of the university, enrollment jumped 20% in four years. The budget devoted to higher education has increased from 18 billion pounds in 2013/2014 to 21 billion in 2015/2016 (ie one billion euros). Admittedly, higher education plays a key role in developing countries. But is it necessary to bet on the university when it is skilled workers that lack Egypt? Is vocational training not also a factor in reducing inequalities?

Femise asks these questions in its latest report (FEM 42-10) published in March 2018 entitled ” Inequality and inclusive growth : Are education and innovation favoring firm performance and well-being?” in three parts. The first, coordinated by the economist Inmaculada Martinez-Zarzoso (Jaume I Universities in Spain) in collaboration with Javier Ordonez from the same University and Dr. Mona Said from the American University in Cairo (AUC), analyzes vocational and technical secondary education in Egypt in 1998, 2006 and 2012.

Femise starts from an observation: “The vocational-general education divide results from a phenomenon of class struggle. The elite relegates the members of the “lower class” to technical schools”. In industry, the shortage of technicians hinders the development of companies.

 

Match vocational training to the needs of the enterprises

Despite the government’s effort to encourage technical education, the number of students dropped by 3% in 2012. According to the study, this phenomenon can be explained by the relatively low level of returns to technical education, which continues to decline, compared to returns to university education (especially for men in the public sector). For women, the returns to education are even lower in the public and private sectors, regardless of their education. Note, however, a smaller gender gap exist in the private sector.

Redesigning technical education could help promote social mobility and equity. “The quality and relevance of vocational education are the keys to effective reform. The labor market lacks skilled workers. The technical pathways suffer from social stigmatization” underlines the report. It is high time to revalue the image of vocational education, believes Femise. Apprentices are generally poorly paid. The Skills Development Project, with the support of the World Bank, directly benefits Egyptian enterprises of vocational training schemes.

Femise suggests strengthening partnerships between training institutions and companies with financial support from the European Union. But, “encouraging private companies to invest in vocational education will be of no use if trainees still face social stigma,” warns Femise.

Access the FEMISE FEM42-10 report by clicking here

Article by in partnership with Econostrum 

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FEMISE MED BRIEF no5 : Egypt and the WTO Government Procurement Agreement

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FEMISE is launching its new Policy Brief series MED BRIEF aspiring to provide Forward Thinking for the EuroMediterranean region. The briefs contain succinct, policy-oriented analysis of relevant EuroMed issues, presenting the views of FEMISE researchers and collaborators to policy-makers. 

The fifth issue of MED BRIEF “ Should Egypt join the WTO Government Procurement Agreement (GPA)?” is available here.

Ahmed Farouk Ghoneim (Professeur d'économie, Faculté des sciences économiques et politiques, Université du Caire, FEMISE)

Ahmed Ghoneim (Faculty of Economics & Political Science, Cairo University, FEMISE)

It is also available in Arabic here.

“This Policy Brief, by Ahmed Farouk Ghoneim (Professor of Economics, Faculty of Economics & Political Science, Cairo University), tries to answer the critical question of whether Egypt should join the WTO GPA? The debates on theoretical and policy levels have not reached a clear cut answer regarding the pros and cons of a developing country joining such an agreement. Yet, we try in this policy brief to clarify some of the misconceptions associated with the joining of such agreement, and identify what are the steps needed for membership to be fruitful”

The list of FEMISE MED BRIEFS is available here.

 

The policy brief has been produced with the financial assistance of the European Union within the context of the FEMISE program. The contents of this document are the sole responsibility of the authors and can under no circumstances be regarded as reflecting the position of the European Union.

Inequality and inclusive growth : Are education and innovation favoring firm performance and well-being?

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FEMISE is pleased to announce the publication of its research project FEM42-10, “ Inequality and inclusive growth in the South Mediterranean region: Are education and innovation activities favoring firm performance and citizens’ wellbeing?”.

The research project was coordinated by Inmaculada Martinez-Zarzoso (University Jaume I and University of Goettingen) and includes the following 3 papers:

Returns to Vocational and University Education in Egypt

While tertiary skills are important for growth in developed countries, it is primary and secondary education that are related to development in developing countries. Despite the substantial expansion in technical and vocational education in Egypt, the labor market lacks technical skilled workers not only in numbers but also in competences. This paper examines the impact of education on labor market outcomes in Egypt, with a focus on returns to vocational secondary and technical higher education in 1998, 2006 and 2012. We provide estimates of incremental rates of return to education based on selectivity corrected earnings equations and quantile regressions that give credence to the view that technical education has generally been inequality reducing in Egypt. The main policy implication of this paper’s analysis is that quality and labor market relevance of vocational education remains the key to an effective reform. Encouraging private businesses to invest in vocational education will be of little use if the trainees are still faced with social stigma that relegates them to low-paid jobs. Therefore, a policy recommendation is to design governmental measures to improve the ‘image’ of vocational education in Egypt.

Gender Gap and Firm Performance in Developing Countries

This paper uses firm-level data from the World Bank Enterprise Survey (WBES) to investigate productivity gaps between female and male-managed companies in developing countries and to compare the outcomes obtained for different regions in the world. We depart from the previous literature by using the gender of the top manager as target variable, which is newly available in the 2016 version of the WBES. The main results indicate that it is crucial to distinguish between female management and female ownership and also the confluence between both. We find that when the firms are managed by females and there are not female owners, they show a higher average labour productivity and TFP. However, if females are among the owners and a female is the top manager, then their productivity is lower than for other firms. These results are very heterogeneous among regions. In particular, results in South Saharan Africa, East Asia and South Asia seems to be driving the general results, whereas in Latin America and Eastern Europe and Central Asia, female participation in ownership seems to be negatively related to firm performance.

Real convergence between ENP and southern European countries: a cluster analysis

This paper analyses the convergence pattern of GDP per capita, productivity, inequality and unemployment in both ENP and southern European (SE) countries. It follows the methodology proposed by Phillips and Sul (2007, 2009) in which different convergence paths can be distinguished among heterogeneous economies involved in a convergence process. This heterogeneity is modelled through a nonlinear time varying factor model, which provides flexibility in studying idiosyncratic behaviours over time and across section. The main results from the convergence analysis show that whereas there is convergence in unemployment, GDP per capita and productivity between EU and ENP countries, no convergence is found for inequality. Among the challenges of an evolving neighbourhood, inclusive economic development should be included in the new ENP approach.

8th Mont Blanc Meetings: IM and FEMISE at the International Summit of Social Economy

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How can the Social and Solidarity Economy (SSE) contribute to supporting growth and employment in Mediterranean Partner Countries (MPs)? This is the question to which the presentation of Dr. Constantin Tsakas (General Manager of Institut de la Méditerranée, General Secretary of FEMISE) offered elements of response at the 8th Mont Blanc Meetings (RMB) (6-8 December 2017, Archamps, Greater Geneva), the International Summit of the Social and Solidarity Economy (ESS) organized by ESS International Forum (Permanent Co-Secretary of the International SSE Pilot Group, Observer Member ate the UN Inter-Agency Task Force on SSE).

Dr. Constantin Tsakas (Institut de la Méditerranée, FEMISE) (photo:RMB)

Dr. Tsakas presented the preliminary results of a chapter of the forthcoming FEMISE EuroMed 2018 report produced by Institut de la Méditerranée (IM) during a session on “Effective responses to sustainable impacts: social cohesion, solidarity and inclusion”.
Dr. Tsakas emphasized that SSE could become a tool for economic, financial and social innovation adapted to MPs. The latter are facing today many problems related to unemployment, lack of inclusiveness, the informal economy, limited growth… The SSE sets a frame of reference for rebuilding social ties around the economy, to better value resources and assets of territories and anchor development, to provide training and mobilize available skills in an entrepreneurial dynamic. The SSE allows for :

  • The mobilization of numerous young people, which are looking for a job and are progressively oriented towards entrepreneurship.
  • The establishment of a more inclusive economy because the SSE knows how to create jobs for vulnerable people that neither the State nor traditional companies can integrate.
  • Economic diversification and upgrading.

As civil society has understood, since the Arab Spring there has been an effervescence and increased emergence of SSE structures. Real success stories help meet the needs of the people …

In Morocco, which counts 15700 cooperatives (including 2287 women’s cooperatives) and 120 000 associations (with more than 15 million members), the value chains of SSE entreprises are made up of private sector companies: production cooperatives in the agricultural sector, crafts and / or fishing market their production in the private sector (local, regional, small and large retail markets).

In Egypt, initiatives are led by the private sector and have emerged to address the growing inability of governments and traditionnal private sector activities to meet the diverse needs of poor households for certain services and products.

In Tunisia, the country has nearly 20000 associations with more than 12 million members, half of whom have been created in the past five years under the impulse of the post-revolution civil society. The agriculture and fisheries sector is one of the sectors with the most SSE entreprises.

Panelists at session on “Effective responses to sustainable impacts: social cohesion, solidarity and inclusion” (photo :IM).

However, in general, the state does not sufficiently support the SSE in the South Mediterranean and does not create the necessary conditions for its sustainability. Dr. Tsakas emphasized that at the heart of the SSE dynamic lies the issue of project funding and resource mobilization. Preliminary results indicate that the financing of SSE enterprises must be a priority of concern for local, national and also EuroMed authorities. A “SSE finance” allowing access to liquidity and credit in relation to shared coordinated objectives is necessary. It would be appropriate for each MP to support, most notably through the establishment of an enabling regulatory framework, the emergence of “social”, “participatory” or “ethical” banks to channel funds to useful, sustainable and inclusive projects. It would also be wise to encourage SSE financing by microfinance institutions that have a developed territorial network. It would also be possible to innovate by proposing types of Social Impact Bonds (SIB), very popular in the Anglo-Saxon world, which make it possible to finance social programs (fair trade, social tourism, access to culture etc.) by private investors. The 2018 EuroMed report will suggest tools that can be supported by all local, national and international actors and which allow addressing the identified funding obstacles.

In conclusion, Dr. Tsakas emphasized the need to develop a strategy for the emergence of SSE ecosystems and social entrepreneurship on 3 axes (Macro-Meso-Micro). Dr. Tsakas provided an overview of FEMISE’s vision for the emergence of such ecosystems:

  • Support to the development of a policy and regulatory environment conducive to the growth of social enterprises through national strategies and advocacy panels.
  • Raising awareness and building the capacity of meso actors in the ecosystem to support the growth of social enterprises. MED mapping of these support actors, the generalization of training activities and the exchange of good practices would contribute to this process.
  • Finally, there is a need to better demonstrate and promote the economic potential of social enterprises in creating value and jobs in MPs. A true methodology that quantifies the social impact is needed here. The same is true for financial support for social entrepreneurship, for entrepreneurs training and for mentoring initiatives.

These and other issues will be developed in detail in the next FEMISE 2018 Report, which will focus on private sector development in the Mediterranean (Q1 2018).

The powerpoint presentation of Dr. Tsakas to the RMB is available by clicking here.

Prior to the publication of the FEMISE2018 EuroMed report coordinated by Pr. Patricia AUGIER (Pt of the Scientific Committee of IM and FEMISE, Coordinator of FEMISE), we also suggest some excerpts from interviews with three key actors of social entrepreneurship in the EU -MED.

You can also  revisit the FEMISE-EIB pilot study (2014) coordinated by IM on the potential of SSE inclusivity in Southern Mediterranean countries.

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Potential Accession to the Revised WTO Government Procurement Agreement: The Cases of Egypt and Turkey

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Government procurement concerns how public authorities spend taxpayers’ money on goods, services and infrastructure. In each country public procurement is typically governed at the national level by setting rules that try to balance a number of goals. Of these goals, transparency, non-discrimination, integrity and competition are probably the most important.

The aim of transparency is to ensure that the rules are followed and that non-compliance can be identified and addressed.

The Research Project considers the benefits and costs of accessing the WTO Government Procurement Agreement (WTO GPA) for Turkey and Egypt. While Paper 1 considers the case of Turkey, Paper 2 analyzes the case of Egypt. Finally, Paper 3 provides a Synthesis Report.

The project shows that:

  • The WTO GPA significantly increases the probability that a foreign firm will win a public procurement contract in the EU member and affiliated states.
  • The WTO GPA promotes a more competitive environment by increasing the number of offers for a given contract.
  • The WTO GPA significantly lowers the risk of corruption by decreasing contracts with a single offer, reducing the success ratio of firms and allowing firms with lower network strengths to win contracts.
  • The competitive environment in a country is a significant determinant of the efficiency of public procurement. An increase in the number of offers decreases the contract price with respect to the estimated cost.

Thus, the WTO GPA commitments will secure better value for the money spent by governments in their procurement processes as a consequence of applying the WTO GPA principles of transparency, non-discrimination, integrity, and competition.

Given that the WTO GPA’s provisions will certainly benefit Egypt and Turkey, it is surprising that to date neither of the two countries have become signatories of the WTO GPA.

Simon Neaime : “Reducing the public sphere to preserve macroeconomic balances”

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Professor of Economics at the American University of Beirut in Lebanon, Simon Neaime coordinated the latest Femise report on “Twin Deficits and the Sustainability of Macroeconomic Policies in Mediterranean Countries”. ©N.B.C

Professor of Economics at the American University of Beirut in Lebanon, Simon Neaime coordinated the latest Femise report on “Twin Deficits and the Sustainability of Macroeconomic Policies in Mediterranean Countries”. The report suggests a reduction of the public sphere and invites countries to rethink their fiscal and monetary policies. An analysis of the causes of a double phenomenon ensues : the public deficit and the balance of payments deficit.

The Femise report is entitled “ Twin Deficits and the Sustainability of Macroeconomic Policies in Selected European and Mediterranean Partner Countries: Post Financial and Debt Crises”. Which countries are affected by the twin deficits? :  Greece, Portugal, Ireland, Italy and Spain have accumulated budget deficits of 5 to 10% of GDP on average, resulting in a public debt exceeding 120 percent of GDP on average in 2016. The situation is almost similar in the Mediterranean where social, political and military tensions have aggravated an already depressed macroeconomic environment. While the trade balance seems to contribute to the budget deficit in the Mediterranean countries, the relationship seems to be reversed for European countries, where the fiscal balance seems to be the one influencing the current account.

The Femise report assesses the introduction of macroeconomic stabilization programs to propose new combinations of monetary and fiscal policies. Sustainable policies that lead to growth, development, and debt and budget reduction.Femise recommends better coordination of macroeconomic policies between EU countries and those on the southern shore of the Mediterranean. In concrete terms, what should countries of both shores do? :  European and Mediterranean governments will first have to reduce their spending but also the size of the public sector in favor of the private sector. They will also have to channel liquidity through loans and encourage investment in productive enterprises. Given the commercial dependence of the Mediterranean countries on the European Union and the fact that most Member States have implemented austerity policies, we consider that the export-decline in the Mediterranean countries has increased their budget deficit. We therefore call for better coordination of macroeconomic policies between the EU and these Southern Mediterranean partners.

“The flexible exchange rate helps absorb external shocks and limits inflation”

You recommend a restriction of the public sectors’ perimeter and, at the same time, you encourage the same sector to play a central role in macroeconomic balances. Isn’t this a paradox? : We advocate for reducing the size of the public sector to the benefit of the private sector and for playing a central role in maintaining macroeconomic balances and debt reduction through economic policies. This is not paradoxical but complementary. Monetary policies will remain ineffective if private sector expectations are not met and if the banking sector remains in poor health, especially in the case of the Italian and Greek banks.

How can the trade balance be rebalanced? : A first solution would be for the Mediterranean countries to favor the transition from a fixed exchange rate regime to a flexible one, as Egypt has already done. The flexible exchange rate helps absorb external shocks and limits inflation. Egypt has been able to improve the effectiveness of its monetary policy to deal with external shocks through this strategic choice. Tunisia and Morocco also seem to be following this direction. Another option would be for European countries to consider lowering tariffs on some targeted products and move towards further integration with the MENA region. The Euro-Mediterranean trade agreements must be improved to make Mediterranean products more competitive in European markets


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Tax reform in Egypt could make its companies more efficient

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The latest FEMISE report (FEM41-08) highlights the obstacles to productivity faced by companies in the Middle East and North Africa. Even before corruption or lack of visibility in the business sector, the taxation burden is the main impediment to corporate productivity. A better understanding of this reality by political circles could encourage companies in becoming more competitive.

 

Les entreprises égyptiennes subissent une pression fiscale qui affecte leur productivité (photo : F.Dubessy)

The tax burden is the main impediment to corporate productivity (photo : F.Dubessy)

Did you know that, in Egypt, companies have to pay 29 different types of taxes and that form-filling alone takes up around 392 hours of work time? Furthermore, the tax levy represents 42.6% of profits. Therefore, it should not come as a surprise that the country is at the bottom of the tax burden table, 148th out of 189! The FEMISE report recommends that “in order to boost corporate productivity, the Egyptian government must overhaul its tax policy”.

The report, entitled “Corporate Performance in Transition: The Role of Business Constraints and Institutions in the South Mediterranean Region” (available here) coordinated by Inmaculada Martínez-Zarzoso, professor of economics at the Universitat Jaume I (Spain), was published in December, 2016.

Twenty-two constraints were identified as being responsible for reducing productivity globally. Undoubtedly, internal factors such as workers’ skills and abilities need to be taken into account when analysing a company’s overall level of competitiveness.

While the tax burden tops the list of impediments, other external factors such as corruption, the lack of visibility in the area of legislation, property prices, access to and the cost of financing, or simply the cost of water and electricity can be real problems for companies.

A new reality after the 2011 revolution

The study looks into the negative effects on corporate efficiency before and after the 2011 revolution. It appears that new obstacles have emerged that have made the business climate less attractive to investors, including regulatory and political uncertainty, corruption and crime. As the report underlines, “The aim of the revolution was to generate economic and social opportunities that would open the way to economic growth and jobs. However, the country has become unstable from a political point of view. This transition period has had a direct impact on efficiency in the private sector.”

Prior to the events of the Arab Spring, interventionist policies were the norm in Egypt, as they were in most Middle-Eastern and North African states. In the report, FEMISE economists also focus on other countries in the region: Lebanon, Jordan, Morocco and Tunisia.

Here again, indicators of regulatory and political uncertainty, corruption and criminality appear to have worsened. The report concludes, “These results have important political implications. Measures aimed specifically at businesses should enable a reduction in the number of obstacles and, consequently, encourage Egyptian manufacturing companies to become more competitive.”

For more on this subject, please download the report available here.

Article produced in partnership with Econostrum.

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