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In its latest economic brief, the AfDB analyses employment and productivity dynamics in Egypt.
The brief states that the private sector has been the main provider of jobs, while the public sector lost jobs in almost all activities in the last decade. Small businesses account for nearly 96% of all Egyptian companies and employ approximately 70% of non-agricultural workers. Small informal firms are in the majority (78%) and employ about 42% of the workforce.
The note shows that labour productivity growth in Egypt is mainly due to the movement of labour between sectors form low productivity to high-productivity activities. The most attractive sectors for labour are those using modern production techniques that require upgrading the skills of workers. However, certain sectors such as agriculture, construction, communications and social services have also seen their productivity increase through capital injections and the use of advanced technologies.
However, the note indicates that overall labour productivity increased slowly between 2001 and 2008. Moreover, from the employment perspective, labour productivity is relatively low in major sectors such as agriculture, social and community services, construction, trade and tourism.
In this regard, the paper recommends improvements in the institutional framework within which the private sector operates in Egypt with the introduction of tax incentives to encourage research and development in firms. The productivity of small businesses can be improved through the development of firm clusters in which the transmission of new production techniques would be facilitated. Improving productivity could eventually help to improve workers' incomes in Egypt.