Egypt Youth Employment NAP 2010-15

MINISTRYOFMANPOWERANDMIGRATION(MOMM)INTERNATIONALLABORORGANIZATION(ILO)

EGYPTYOUTHEMPLOYMENTNATIONALACTIONPLAN

20102015

MAI 2009

EGYPT YOUTH EMPLOYMENT ACTION PLAN

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EGYPTYOUTHEMPLOYMENTNATIONALACTIONPLAN

20102015

PARTS II AND III


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TABLE OF CONTENTS

Foreword 3 Acknowledgements 6 Acronyms 8

Part II Policy Priorities II.1. Problem identification 9

II.1.1 Demand side: limited opportunities for young and newly graduates 9 II.1.2 Supply side: Increasing number of new entrants to the labor market who do not meet labor market requirements

11

II.1.3 Inadequate labor market policies and programs 13 II.1.4 Economic crisis 15

II.2. Policy priorities 17 II.2.1 Technical education and vocational training 17 II.2.2 Enterprise development 18 II.2.3 Labor market policies and programs 21 II.2.4 Policies undertaken to face the economic crisis 22

Part III National Action Plan

III.1. The Goal of the Youth Employment National Action Plan 24 III.2. Objectives of the Youth Employment National Action Plan 25

III.21 Increasing youth employability 26 III.2.2 Providing more job opportunities 26 III.2.3 Develop labor market policies and programs 27

III.3. Main Outcomes of the Youth Employment National Action Plan 27 III.3.1 Increasing youth employability 27 III.3.2 Providing more job opportunities 30 III.3.3 Develop labor market policies and programs 33

III.4. Resources for the Youth Employment National Action Plan 36 III.4.1 Increasing youth employability 36 III.4.2 Providing more job opportunities 37 III.4.3 Develop labor market policies and programs 37

III.5. Implementation and coordination mechanism of the Youth Employment National Action Plan

38

III.6. Monitoring and evaluation of the Youth Employment National Action Plan 40 III.6.1 Monitoring 40 III.6.1 Evaluation 40

References 42 Annex: The Expected Cost of NAP Outcomes 44


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FOREWORD

Over the past decade, youth employment has gained significant prominence on the national and

global development agendas. Commitments to achieving the internationally-agreed target of full

and productive employment and decent work for young people have been made at a number of

major international forums.

Youth employment is an issue of utmost priority for the Egyptian Government as employment

problems in the country affect young women and young men disproportionately. At least 90 per

cent of the unemployed are aged less than 30 years, and many more are affected by

underemployment. Young women fare significantly more poorly than their male peers in the

labour market. In the last years, the number of unemployed educated youth has swelled,

reflecting an incredible paradox: while the current young generation is the best educated ever,

this has not translated into better employment opportunities. At the same time, Egyptian

employers claim to face difficulties in recruiting duly qualified workers. The education and

training system seems to fail to equip young people with skills that are in demand in the labour

market. Finally, the youth employment challenge in Egypt is not only about creating more jobs.

The quality of these jobs also matters. Given that the informal economy currently represents the

main source of employment for new labour market entrants, the challenge is also about creating

better jobs.

The financial and economic crisis that started to hit the World in 2008 and continues to affect

countries more and more will have a particularly sever impact on young people who are often

kicked out first in times of a crisis and are the last to re-find a job after a crisis. This is also the

case in Egypt. Consequently, young people in Egypt have to face an even more difficult

situation.

There is increased awareness in Egypt that productive employment and decent work for young

people cannot be achieved through fragmented and isolated interventions. Rather, it requires

sustained, determined and concerted action by a wide number of actors. Importantly, it requires

a coherent approach that articulates supportive policies centred on an integrated strategy for

growth and job-creation as well as targeted interventions to help young people overcome the

specific barriers they face in entering and remaining in the labour market. This is indeed the


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general approach of the ILOs Global Employment Agenda, also embedded in the Resolution

concerning youth employment adopted by the International Labour Conference in 2005. Very

importantly, there is also a heightened recognition in the country that the youth employment

challenge requires to work in partnership with different actors.

In this respect, it is noteworthy that in 2003, Egypt became one of the Lead Countries of the

Secretary-Generals Youth Employment Network (YEN) a partnership between the United

Nations, the World Bank and the ILO. As part of its commitment as a YEN Lead Country, the

Government of Egypt has embarked in the preparation of its National Action Plan on youth

employment (NAP), with the support of the ILO Sub-Regional Office for North Africa and the

Employment Sector at the ILOs headquarters, in partnership with the YEN Secretariat. This

NAP is a result of a thorough and comprehensive process involving many important players and

stakeholders. The process has been driven and strongly supported by the Ministry of Manpower

and Migration (MoMM) that has worked in full partnership with the social partners and in close

cooperation with national and international actors, including youth organizations, development

agencies and donors.

The NAP process in Egypt started in February 2006 with a Capacity Building Workshop

organized by ILO, GTZ and the YEN Secretariat under the auspices of H.E. Aisha Abdel Hady,

Minister of Manpower and Migration. The meeting was instrumental in initiating a dialogue

among the main NAP stakeholders. Two bodies responsible for the development of the NAP

were established: i) the NAP Steering Committee (NAP-SC), that is composed of some 25

decision-makers from different Ministries, employers and workers organizations and other

key stakeholders, and is responsible for strategic and political oversight of the NAP; and (ii) the

NAP Technical Commission (NAP-TC), that is composed of some 15 technical experts from

selected institutions1 including the social partners and youth groups, and is responsible for

drafting and finalizing the NAP in consultation with and for submission to the NAP-SC. Along

the months, the development of the NAP has been organized around regular meetings of four

1 The NAP-TC included representatives from the Ministries of Manpower and Migration, Finance, Investment, Education, Higher Education, Economic Development, Trade and Industry, Information, Military Production and Investment as well as the Federation of Egyptian Industries, the Egyptian Federation of Trade Unions, the National Planning Institute, the National Council for Youth, the National Council for Women, the Egyptian Youth Consultative Group and the Central Agency for Planning, Mobilization and Statistics.


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technical working groups2 in view of the preparation of the NAP document. A NAP Secretariat

within the MoMM has also been created to support administrative and coordinating functions

for the activities associated with the NAP process. Finally, the Egyptian Youth Consultative

Group has been mandated by the MoMM to represent and give voice to the aspirations of the

Egyptian youth in the NAP process.

The present NAP document is not an end in itself. Rather, it is a useful mechanism and a

delivery vehicle that sets specific objectives and outcomes, as well as a division on labour,

financial commitments and monitoring mechanisms for an integrated and comprehensive

approach to meet the youth employment challenge in Egypt. It builds on the partnership,

contribution and commitment of a multiple number of actors.

2 The four working groups are: Macroeconomic Context, Education and Training, Enterprise Development, and Labour Market Policies and Programs.


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ACKNOWLEDGEMENTS

Egypts National Action Plan on Youth Employment is a country-owned and country-driven

document. However, it is also the outcome of a collective effort. Special gratitude is owed to

H.E. Aisha Abdel Hady, Minister of Manpower and Migration who started, supported and

encouraged this work and without whose commitment to youth employment promotion in

Egypt, this NAP would have not been developed.

Thanks are due to the members of the NAP-TC, who devoted their time and effort to prepare

the NAP document for their invaluable technical support. Special thanks go to the coordinators

of the technical working groups for their leadership: Dr. Rasha Mustafa (Executive Director),

Information Decision Support Center, Mr. Ehab El Gabass, (Business Development Manager),

Industrial Training Center, Mr. Magdy Amin, (Head of Human Resource Development sector),

the Social Fund for Development, and Ms. Iman Zakareya, (General Manager Labour

Information and Employment Unit), the Ministry of Manpower and Migration. Appreciation is

also extended to the members of the Technical Secretariat of the NAP, who organized and

coordinated all meetings and provided valuable support during the preparation of the NAP

document.

Special thanks are due to Professor Soad Kamel Rizk, Dean, Faculty of Management and

Information Systems, French University in Egypt and Dr. Nihal El-Megharbel, Coordinator,

Planning and Budgeting, Decentralization Support Unit, Ministry of State for Local

Development for coordinating and guiding the Technical Secretariat and building on their work

to prepare and continuously update this document.

The support provided by the ILO has been critical to bring the Egypts NAP to life. Special

thanks are due to Jos Manuel Salazar Xirinachs, Executive Director of the ILOs Employment

Sector, Loretta de Luca, Director of ILO Sub-Regional Office for North Africa and Nagwa

Ismail, Senior Programme Assistant of that Office, for their commitment and support to this

major endeavour. Thanks also go to ILOs Specialists from the Employment Sector for their

useful and continuous technical advice Muhammed Muqtada, Giovanna Rossignotti and

Mariangels Fortuny. Justin Sykes (former Communications Officer) from the YEN Secretariat


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played an important role in successfully bringing in the process the voices of young Egyptians

through the Egyptian Youth Consultative Group.

This NAP is expected to contribute to helping young women and men in Egypt meet their

aspirations for a decent job and a better future for themselves and their families.


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ACRONYMS

ABA Alexandria Business Association CAPMAS Central Agency for Public Mobilization and Statistics CIDA Canadian International Development Agency EU European Union FEI Federation of Egyptian Industries FGF Future Generation Foundation GAFI General Authority for Investment GOE Government of Egypt GTZ Gesellschaft fr Technische Zusammenarbeit

German Technical Cooperation ICT Information and Communication Technology IDSC Information Decision Support Center ILO International Labor Organization IMC Industrial Modernization Center IT Information Technology ITC Industrial Training Center KPIs Key Performance Indicators LFSS Labor Force Sample Survey MDGs Millennium Development Goals MKI Mubarak-Kohl Initiative MoMM Ministry of Manpower and Migration MSMEs Micro, Small and Medium Size Enterprises NAP National Action Plan NGOs Non-governmental Organizations NSSP National Skills Standards Program OECD Organization for Economic Cooperation and Development PWP Public Work Programs SEDO Small Enterprise Development Organization SFD Social Fund for Development TS Technical Secretariat TEVT Technical Education and Vocational Training TNCs Transnational Corporations WB World Bank


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PART II: POLICY PRIORITIES

II.1. Problem Identification

Labor market problems in Egypt relate mainly to the limited number of job opportunities

created in the economy, the increasing supply of labor that does not meet market requirements

and to the inadequate labor market policies that could not resolve the existing mismatch

between labor demand and supply. The current economic crisis enforces especially the problem

of limited job creation. At the same time, the challenge of the mismatch between supply and

demand and the inadequacy of labor market policies enhance the difficulties young people face

in this economic crisis.

According to the 2006 Population Census, unemployment in Egypt is the problem of highly

educated youth. In 2006, almost 91.5 percent of the total unemployed were in the age group 15-

30 years.3 In addition, the share of middle and highly educated unemployed represents 79.5

percent of total unemployed. It is also an insertion problem; 93 percent of the unemployed are

first time job seekers. Unemployment hits females more than males, as unemployment rate

reached 40 percent for females and only 19 percent for males in the age group 15-30 years.

More importantly, unemployment exists among the poor, which could not afford to remain

unemployed previously (El-Ehwany and El-Megharbel, 2008). Following is a brief listing of the

labor market problems:

II.1.1. Demand Side: Limited opportunities for young and newly graduates

During the last few years, real economic growth rate increased from 3.4 percent in 2000/01 to

7.2 percent in 2007/08. However, higher economic growth failed to reduce unemployment rate,

which increased from 8.4 to 9.7 percent during the same period. This could be attributed to the

low national investment rate during the same period. Despite its increase from 17 to 22.3

percent, it remains low compared to similar emerging economies and is not sufficient for

creating the number of jobs required to reduce unemployment and absorb new entrants to the

labor market.4 Moreover, the investment pattern, characterized by capital-intensive schemes,

3 It should be noted that the TC agreed to define the youth as those in the age group 18-30; however the 2006 Population Census data provides data for youth in the age group 15-30. 4 These data on growth and investment rates are obtained from www.mop.gov.eg, and data on unemployment is obtained from CAPMAS.


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could explain the rise in unemployment. The geographic distribution of investments indicates

that investments are mainly concentrated in urban areas in the Delta and Lower Egypt

governorates, while Upper Egypt governorates are deprived from big investments and mega

projects capable of absorbing a large share of employment.

It should be noted that the increase in the size of the informal sector prevented the over-

shooting of unemployment to higher rates. Although the exact estimation of the size of the

informal sector requires a special field survey that depends on a set of indicators, including the

number of workers per economic unit, the value of capital invested in these units and its status

in terms of formal registration, determining the size of this sector based on data from the

Population and Establishment Census is definitely less accurate, however it helps in

determining the general trends of employment in this sector. Based on Population and

Establishment Census data, workers in establishments with less than 5 workers, and workers

outside establishments excluding agriculture represents the informal employment in both cases

(Kamel Rizk, 1999).

According to the 1986 Census, workers in the non-agriculture private sector establishments

employing less than 5 workers accounted for 1.5 million workers. Non-agriculture workers

outside establishments were around 1.1 million workers. Hence, the total employment in the

informal sector reached 2.6 million representing 33 percent of total private sector employment

and 76 percent of non-agriculture private sector employment.

The 1996 Census data showed that the number of workers in the non-agriculture private sector

establishments employing less than 5 workers accounted for 2.5 million workers. Adding to

this, non-agriculture workers outside establishments which reached another 2.5 million workers,

the total number of workers in the informal sector amounted to 5 million workers representing

48 percent of private sector employment and 86 percent of non-agriculture private sector

employment. This means that employment in the informal sector grew by 9 percent annually on

average during this decade (Kamel Rizk, 1999).

Finally, the 2006 Census indicated that the total number of workers in the informal sector

increased to 7.9 million workers; 4.1 million of them are working in private sector

establishments employing less than 5 workers (calculated from the 2006 Establishment Census,


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second volume, table 13), and 3.8 million outside establishments (calculated from the 2006

Establishment Census, second volume, table 24), after excluding agriculture in both cases.

Accordingly, employment in the informal sector grew by 6 percent annually between the two

censuses. Despite the decline of this growth rate compared to the last decade (1986-1996),

employment in the informal sector in 2006 represented 58 percent of total employment in the

private sector and 92 percent after excluding agriculture (CAPMAS, 2008).

Limited job opportunities could also be explained by several other factors including tight

monetary policy in terms of limited banking credit, high inflation rate, large fiscal imbalance

related to high subsidies and government wage bill, increasing public debt, which reduce public

investment and negatively affect investors confidence in Egypts macroeconomic stability.

These factors also include anti-agriculture biases as well as inadequate business environment

for micro, small and medium enterprises (MSMEs).

There is a general consensus that MSMEs could play an important role in job creation, in

general, and for youth in particular. However, MSMEs encounter major problems in Egypt.

They are affected by over-regulation and the burden of compliance with these rules and

regulations force them to remain informal. Other constraints facing MSMEs include lack of

human and financial resources and technical support, and difficulty in complying with different

laws and regulations, especially those related to start-ups and exit from the market.

II.1.2. Supply Side: Increasing number of new entrants to the labor market who do not meet labor market requirements This could be explained by the poor education and inadequate training systems and lack of

conducive business environment for MSMEs.

Inadequate education and training systems. Despite the recent improvement in the quantitative

indicators for education in Egypt, the quality of education is inadequate and the link between

the education system and the labor market is missing. Sectors such as manufacturing and

construction lack adequate skills, despite the recent increase in demand. More importantly, the

education system is highly segmented, especially for high education. Two sets of universities

exist in Egypt; the private universities, with relatively high fees, and whose graduates are more

likely to find jobs easier, compared to public universities graduates. Even in the public

universities, several faculties established departments, where foreign languages are used for


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studying, with also higher fees, and whose graduates can find job opportunities more rapidly

than those studying in the same faculties, but in the Arabic departments.

The quality of technical education and vocational training (TEVT) system failed to deliver the

adequate education and training that meet the market demand according to international

standards. In general, private sector firms do not provide their employees with adequate

training, with the exception of very limited on-the-job training for basic production skills. Only

a small number of large local firms and transnational corporations (TNCs) allocate some

resources for training and use modern training methods. This could be explained by lack of

awareness of the benefits of training, and the fear of poaching trained workers by other firms. In

addition, the government does not provide any incentives to encourage firms to engage in

training programs, such as sharing the costs of training, or providing tax holidays for firms

involved in such activities. A major problem facing TEVT is the large number of informal

workers who do not receive proper training, except on-the-job training, which is usually

incomplete and outdated, and limited training courses offered by some NGOs. In addition,

despite the large amounts of funds available to TEVT, it still suffers from fragmentation of

efforts and the large number of various bodies involved. Currently, there is an increasing trend

to involve private sector firms in the design and delivery of the training, but these efforts are

still limited and require more involvement of businesses. Moreover, some NGOs are

contributing to the design and implementation of TEVT programs, but again more resources

and coordination are required to support these efforts.

Employment distribution by sector of ownership according to the 2006 Census, demonstrates

that almost 27 percent of workers are employed in the government and in the public sector.

Despite the fact that the Egyptian government abolished the guaranteed employment schemes

long ago, government and public sector jobs are still attracting for a large proportion of young

graduates. This could be explained by the lack of entrepreneurship spirit and the mistrust in

private sector practices which do not provide adequate work incentives for young graduates,

especially for females.

Lack of conducive business environment for MSMEs. MSMEs development programs, such as

the Mubarak Solidarity Program, the Small Enterprise Development Organization (SEDO)

affiliated to the Social Fund for Development (SFD), the Productive Family Program, Nasser


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Bank, businessmen associations and credit guarantee programs which provide financial support

to MSMEs, are not very effective in terms of employment creation and their impact does not go

beyond the loan duration. Furthermore, the impact of these programs on job creation is limited

due to the lack of follow-up and evaluation mechanisms. The death rate of these firms is high

due to limited expertise, lack of demand, and constrained borrowing procedures (De Gobbi and

Nesporova, 2005).

In 2005, the government launched The National Strategy for Microfinance with the main

objective of providing financial services to poor people and Micro and Small Enterprises

(MSEs). The strategy also aims to establish a microfinance industry and integrate it in the

development of the financial sector. However, the impact of this strategy on MSEs development

and employment creation has yet to be assessed.

II.1.3. Inadequate labor market policies and programs The failure to resolve the mismatch between labor market demand and supply could be

explained, to a large extent, by inadequate labor market policies and programs. Countries

experiences suggest that the success of the labor market policies and programs depends, to a

large extent, on the funds allocated to them. In addition, the lack of coordination among these

policies and programs reduces their effectiveness. Moreover, they should be considered as short

term solutions to overcome labor market failures. Consequently, the impact of these policies

and programs on job creation should not be overstated. These policies must also be aligned with

macroeconomic policies in a global framework of a national employment strategy that aims at

increasing employment.

Policies and programs in Egypt include:

Public Work Programs (PWP). The Social Fund for Development, which is the agency

responsible for reducing the negative impact of economic reform on the most vulnerable

groups, adopted several public work programs. These programs aimed mainly at improving

infrastructure in rural and deprived urban areas, reducing poverty in these areas and providing

job opportunities by adopting labor intensive techniques. The National Program for Integrated

Rural Development known as the Shorouk Program is another example of PWPs. This program

aimed at providing job opportunities in rural areas in order to narrow the socio-economic gap

between rural and urban areas. The main challenge that these projects face relates mainly to


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lack of resources beyond the duration of the project. Moreover, workers in these projects do not

acquire the right skills that would qualify them to the demand of the labor market (De Gobbi

and Nesporova, 2005).

Labor market information. The Ministry of Manpower and Migration (MoMM) gathers

information through its network of local employment offices regarding job vacancies and

announces them in its weekly bulletin. These offices play an important role in providing

information and advice for job seekers. However, upgrading employment offices and raising

their technical capacities will help bridge the gap between labor market demand and the supply

of skills. In addition, the IDSC also plays an important role in providing labor market

information through its newly established Labor Market Observatory, which aims at

providing up-to-date information on the Egyptian labor market and training system. Moreover,

CAPMAS issues two main publications, the LFSS5, published quarterly, and the Wages,

Employment and Working Hours, issued annually, which also provide information about the

labor force, employment, unemployment, wages and working hours in public and private sector

firms. The data provided by these surveys are broken down by economic activities, gender and

location. In addition, CAPMAS publishes, every ten years, the Population and Establishments

Census, which provides data on employment. As was previously mentioned, it is also the main

source for calculating the size of the informal sector. This indicates the availability of labor

market information. However, coordination between the different entities responsible for

providing data and information is missing. In addition, several ministries and institutions

provide vocational training; but a network for coordination does not exist to the extent that

institutions fail to get information about other institutions activities.

Social Security. The social security system in Egypt provides wide coverage as it includes

government, public and private sector workers, employees working abroad and some vulnerable

groups. However, the social security system is criticized for its high contribution rates, which

discourage both employees and employers from paying their contributions and reporting actual

wages. In addition, the maximum wage according to which the social security contributions are

calculated is very low. Another significant disadvantage of the system is the lack of financial

sustainability (Helmy, 2006a).

5 In addition, three special LFSS were carried out in 1988, 1998 and 2006.


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Minimum wage policy. The average monthly minimum wage in the public sector enterprises

amounted to LE 168, while it is only LE 154 in the private sector. Usually, private sector firms

ignore the minimum wage and the social insurance requirements determined by the Labor Law.

In addition, the non-wage benefits offered by public sector jobs make them more attractive than

private sector jobs. In general, wages have declined significantly in real terms over the past few

decades (Helmy, 2006b). Low wages might discourage a lot of young job seekers from finding

a job in the private sector, especially if these jobs are in remote areas, or in industrial districts,

which do not provide suitable services for them. They would prefer to queue for a public sector

job, with higher minimum wage and other benefits, or even join the informal sector.

II.1.4 Economic Crisis

The impact of the recent global financial crisis6 on the Egyptian economy was manifested in the

slowdown of its performance during the first six months of the fiscal year 2008/2009. More

recent data from the Ministry of State for Economic Development showed that GDP growth rate

declined from 7.7 percent during the 2nd quarter of 2007/2008 to 4.8 percent during the

corresponding quarter of 2008/2009. Sectoral growth indicated that tourism, Suez Canal,

construction, manufacturing, and transportation were among the sectors most affected by the

crisis. In addition, implemented investments increased by only 3.6 percent during the second

quarter of 2008/2009 compared to 32 percent in the corresponding quarter of 2007/2008.

Investment rate declined from 23 percent to 21 percent during the same period (Ministry of

State for Economic Development, 2009a).

The number of firms established during the first six months of 2008/2009 declined by 24

percent compared to the corresponding six months of 2007/2008 and the issued capital of the

new firms dropped by 34 percent and firms expansions declined by 6 percent during the same

period. Exports went down by 23 percent during the 2nd quarter of 2008/2009 while imports

declined slightly by 1 percent. Accordingly, the trade balance deficit increased by 25 percent

during the same period, in addition the current balance deficit increased by 75 percent during

the 2nd quarter of 2008/2009 (Ministry of State for Economic Development, 2009a).

6 The global financial crisis refer to the recent turmoil that started in the US housing market in mid 2007 through subprime mortgages and that developed and spread into a global economic shock and by September 2008 moving from the US to other European, emerging and developing countries and from the financial sector to the real economy.


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These new developments were reflected negatively on the labor market as the last Quarterly

Labor Force Sample Survey showed that despite the decline of the unemployment rate from 9.1

percent during the 2nd quarter of 2007/2008 to 8.4 percent during the last quarter of the same

fiscal year, unemployment rate went up again gradually to 8.6 and 8.8 percent during the first

two quarters of 2008/2009, respectively. The increase in unemployment affected the youth, as

the share of the unemployed in the age group 15-29 in total unemployed increased from 89

percent during the 2nd quarter of 2007/2008 to 94 percent during the corresponding quarter of

2008 /2009. During the 2nd quarter of 2008/2009, the share of unemployed with technical

education increased to 53 percent compared to 51 percent during the corresponding quarter of

2007/2008 (Ministry of State for Economic Development, 2009a).

In general, young people usually suffer more from economic downturns than older workers do.

They are the first to be kicked out and the last to get into jobs in the process of recovery.

Furthermore, with every additional period a young person spends without a job, the chances of

eventually finding a good job decrease. This is why a special focus on young people during the

crisis is needed.

Each of the problems identified in the paragraphs II.1.1. to II.1.3. will be enforced during the

economic crisis: On the demand side, young people will even find fewer opportunities to work.

Experience shows that the informal sector often acts as a last resort in times of an economic

crisis. The fact that often unemployment does not increase too much in such periods is due to

the fact that people start creating their own little businesses as a means to survive the crisis.

Unfortunately, these crisis jobs are often of even lower quality than jobs in the informal sector

in general. For young people - due to their lack of experience and network even finding such a

job in the informal economy is very hard.

On the supply side, the fact that TEVT is not adequate will again limit young peoples chances

to find a job as they lack the experience that would make up for their lack of good training. In

addition, the general constraints for MSME development in Egypt and especially for young

people will further limit young peoples chance to build up their own enterprise to survive the

economic crisis.

Finally, well working labor market policies and programs are essential for young peoples

perspectives. The limitations identified in labor market policies above will become especially


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constraining in times of economic crisis when people need to quickly find alternatives because

they lost their jobs. Public Work Programs need to play a major role to soften the impact of the

crisis on young people; labor market information needs to be available to understand better the

challenges for young people and to be better prepared to react. The lack of social security for

young people will make their situation even worse.

II.2. Policy Priorities

The government is actually trying to help the youth, in terms of designing macroeconomic

policies that would foster economic growth, create an enabling business environment, encourage

foreign direct investment, promote international trade, achieve political stability and increase

safety nets coverage. Moreover, the government puts in place the necessary laws and regulations,

to improve business environment and promote economic growth, in order to reduce youth

unemployment. The government also has taken immediate action when it became clear that the

economic crisis spread out to Egypt. Even though the measures taken did not specifically focus

on young people, the measures taken should also help them. However, more is required in

general as well as under the current circumstances - to improve the employability of the young

people, to raise their standards of living and provide equal opportunities for all of them. In order

to achieve these objectives, several policy priorities can be designed. Following are the three

main policy areas, ranked in a descending order of priority.

II.2.1. Technical education and vocational training (TEVT)

Facing the supply side challenges could be done by promoting a demand-driven technical

educational system. This could be achieved through encouraging the involvement of private

sector firms in the design and delivery of curricula, and the provision of training for young

graduates. Moreover, promoting vocational training and encouraging firms to provide training

to their employees could be done through government incentives such as sharing the costs of

training, or providing tax holidays for firms involved in such activities. It should also be noted

the importance of awareness campaigns of the benefits of training in improving efficiency and

cutting costs, especially overseas training.

In order to ensure the efficiency of TEVT programs, coordination between different providers

of training services must be established. In addition, completing the national skills standards

program (NSSP) to meet international standards for all trades would play an important role in


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promoting training and ensuring that those trainees will find suitable jobs. Public-private

partnership in the field of building up-to-date vocational training schools or in modernizing

existing centers would help in promoting modern vocational training programs that could meet

market demand.

TEVT programs must be extended to cover the informal sector. This could increase the chance

of informal workers to find a formal and more decent job. In addition, adopting life-long

learning approach is of crucial importance for acquiring skills and for continuously preparing

young people to the changes in the labor market requirement.

It should be noted that the government is adopting a new demand-driven approach for

vocational training. Training is provided upon demand from private sector firms, which

determine their needs of trained workers first, before providing them with the adequate training.

In order to ensure the success of these training programs, it should be clarified to trainees that

the role of the government is to provide financial support to the training programs, while

programs design and services providers are from the private sector. More importantly, it should

be made clear to the trainees that these training programs will raise their skills and productivity,

hence their employability in the private sector and not in the government. The government

could also encourage the participation of NGOs, local and international development agencies

and donors to participate in improving the TEVT system to meet market demand for skills,

within the country and abroad. In this respect, determining the skills needed in Egypt and in

other countries, especially Arab and European, based on skills-need assessment plays an

important role in designing training programs.

II.2.2. Enterprise development

MSMEs suffer from several problems and face a number of challenges that could be clustered

in three main groups: 1.) problems related to poor and expensive infrastructure, 2.) institutional

problems including inadequate technical and vocational education, slow and costly legal

procedures, and 3.) economic problems related to meager local demand and high cost of

finance. These problems are more difficult and complicated for young entrepreneurs. A recent

survey that covered around 5000 micro and small enterprises showed that less than 1 percent of

these firms were owned by entrepreneurs in the age group 18 years or less, while 20.8 percent

of these firms are owned by youth in the age group (18-29 years), 28.2 percent between 30 and


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39 years, the remaining 50.2 percent of the firms are owned by entrepreneurs at the age of 40 or

more. This suggests that establishing these enterprises is more problematic for young people,

due to the extensive prerequisites of firms setup that include knowledge, experience, finance

and technology. These factors usually accumulate over a long time span and are not available

for young entrepreneurs (El-Mahdi, 2006). Problems will become even more hindering for

young people during the current economic crisis.

The Egyptian government attempted at promoting MSMEs in several ways. In addition, several

donors and NGOs sponsored the development of MSMEs through providing financial and

technical support. In 2004 the government issued the Small Development Enterprise Law no.

141/2004, and the Ministry of Finance adopted a strategy and an Action plan to support the

competitiveness of MSMEs in Egypt. In 2005, the SFD adopted the national strategy for micro

credit. In 2008, the SFD, the Ministry of Finance and the Canadian International Development

Agency (CIDA) prepared a national strategy for micro and small enterprise development for the

period 2008-2012.

Despite all these efforts, more rigorous reform measures must be undertaken to promote

MSMEs development, as a means of providing job opportunities for a large share of

unemployed and job seekers. This could be achieved by providing a more enabling environment

for these firms, easing the start-up and exit regulations, providing more innovative financial

tools, and promoting linkages between MSMEs and large firms through clustering and

networking.

Other support mechanisms for MSMEs could be provided through government procurement

regulations. In general MSMEs do not have access to government bidding7; they could be

offered this opportunity either directly or through sub-contracting by larger firms. Business

development centers and technology centers could play a major role in developing MSMEs.

Both the Industrial Modernization Center (IMC) and the SFD have a large network of business

development centers in different governorates. These centers must be encouraged to provide

comprehensive technical support for MSMEs. Moreover, technology centers, affiliated to

Ministries, could be upgraded through twining with the most advanced technology centers in

7 According to the Law no. 141 for 2004, the government must allocate 10 percent of its procurement orders to MSMEs. However, this law is not activated.


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developed countries, in order to provide technical support to MSMEs and ensure technology

transfers to these firms.

These firms lack expertise and could benefit a great deal from capacity building programs and

from establishing close links with exporters and large firms, to overcome weak demand and the

need for marketing plans. Moreover, a large number of NGOs is providing technical and

financial support to MSMEs, therefore raising the capacity of these NGOs could reflect

positively on MSMEs.

The MSMEs development assistance programs or the self-employment programs must not

include financial support only. They must be supported by technical services such as training

and counseling. However, one must be aware of the shortcomings of these programs to avoid

them. In many cases, as was previously mentioned, young workers do not see self-employment

as a possibility, and prefer to queue for a public or government sectors job. In addition, the high

death rate of MSMEs, whether they received assistance or not, might discourage these young

graduates from establishing their own business. These problems could be overcome by raising

the youth awareness of the importance of entrepreneurship, through media campaigns and by

introducing entrepreneurship programs in high schools. But more importantly, reducing the

death rate of these firms and easing the procedures of exiting the market would have a stronger

impact on promoting the spirit of entrepreneurship. The number of procedures that a firm must

undertake to exit the market and the cost that it must endure should be greatly reduced. One of

the most important factors that affect the exit from the market relates to labor regulations,

namely reducing or dismissing workers: According to the labor law, the procedures of workers

dismissal are very lengthy, complicated and subjective. These regulations must be revised to

ensure that firms, especially MSMEs can exit the market, for economic reasons, very easily.

It should also be noted that providing an enabling environment for MSMEs to start, work and

grow, while reducing the cost of retreating from the market, would encourage the formalization

of a large portion of informal firms without forcing them to do so (Kamel Rizk, 2007). Despite

the important role of MSMEs in creating jobs for youth, this should not be considered as an

alternative to large and mega projects, which could absorb a large share of employment and

provide them with decent job opportunities. Although large and mega project are supposed to

provide more job opportunities since their size allows that, this type of projects requires large


Page21

investments that are not always available, especially in times of crisis. Therefore, MSMEs,

which do not require large investments compared to large and mega projects play an important

role in creating jobs especially for the youth. Moreover, MSMEs will be crucial to bridge the

gap in employment creation during the economic crisis. This is why a focus on them is really

needed.

II.2.3. Labor market policies and programs

The impact of labor market policies differs for younger workers compared to older ones. In

general, governments provide education services for youth, set the broad macroeconomic and

employment policies that affect markets were youth live and work. With regards to labor market

policies, youth are more affected by education, training and entrepreneurship policies. Usually,

they lack the required information and expertise that would reduce the risks that they face when

they select their education path, or as they enter the labor market as employees or entrepreneurs

for the first time. The government could play a crucial role in providing them with the adequate

education and training necessary for meeting skills demand. This is important at any point in

time, but especially during the current crisis. Given that during this economic downturn many

young people are forced not to work, the time could be used to give them some type of training

to increase their employability.

In addition, the government could provide them with enough incentives and the appropriate

business environment to start a business and with minimum wage and social insurance policies

and labor laws and regulations that secure decent work opportunities for them (World Bank,

2007). The most relevant labor market policies and institutions related to youth employment

include minimum wage policies and employment offices.

Minimum wage. Minimum wage is often considered as one of the obstacles facing youth

employment and its reduction might be a way of providing them with jobs. However, empirical

evidence does not support this hypothesis much. Minimum wage should be looked as an

incentive to invest in human capital; in addition it stimulates aggregate demand (ILO, 2004 and

Auer et al., 2005). However, minimum wage in Egypt is still very low, not related to any

economic target and more importantly is not enforced especially in the private sector. Labor

market regulations in general and those related to minimum wage in particular should be

enforced to ensure compliance by private sector firms. In this regard, the National Council for


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Wages8 might adopt a new strategy for minimum wages, with particular emphasis on youth.

The main objective of this strategy is to streamline minimum wages with other economic

developments such as the inflation rate, productivity, or GDP per capita. The strategy should

establish a benchmark for minimum wages with other similar countries, and for public and

private sector firms. Minimum wages must be reviewed, maximum, every three years to ensure

its consistency with macroeconomic developments. More importantly, enforcement of

minimum wages must be ensured, in both public and private sector firms (Helmy, 2006a).

Employment offices. Employment offices must be reformed in the context of a decentralized

strategy for public employment services. Employment offices must be able to provide training

for jobseekers in job search skills and assist them in writing and updating resumes, preparing

applications, and organizing for interviews. In addition, employment offices play an important

role in providing information and advice for job seekers. Upgrading employment offices and

raising their technical capacities will help bridge the gap between labor market demand and the

supply of skills. It can also enable them to give better assistance to young people in times of

economic crisis. Encouraging the establishment of private recruitment agencies will have an

important role, especially in those governorates or districts where public employment offices do

not exist.

Improving youth knowledge about labor market opportunities, wages and working conditions

helps them to find jobs. In addition, using skilled guidance and counseling helps restoring the

mismatch between labor demand and supply (Betcherman et al., 2004). Once again, given the

lack of opportunities for young people to work during the crisis, this time should be used to

prepare them so that they have better chances once the economy recovers.

II.2.4. Policies undertaken to face the economic crisis

In order to lessen the negative impact of the crisis on the Egyptian economy, the government

launched a six-month stimulus package worth LE 15 billion (US$ 2.71 billion).The majority of 8 The National Council for Wages was established in 2003, according to the Labor Law no. 12 for 2003 and the Prime Minister Decree no. 983 for 2003. The main objectives of the Council include determining the minimum wages at the national level in light of the cost of living and taking into consideration to strike a balance wages and prices; and reviewing the minimum wages every three years. The Council is headed by the Minister of Planning (currently Minister of State for Economic Development) and its members include the Ministry of Local Development, Finance, Trade and Industry, Manpower and Migration, the National Council for Women, businessmen associations and members of the General Labor Union. Despite being established for more than five years, the Council has not been active so far.


Page23

the spending in the plan would go to infrastructure project. The main objectives of the stimulus

package include stimulating domestic demand, creating jobs, and conserving Egyptian exports.

At the trade and industry level a package worth LE 7 billion (US$ 1.3 billion) was allocated to

support trade and industry. The main objectives of the trade and industry stimulus package

include reducing the cost of industrial production in Egypt, increasing the competitiveness of

Egyptian exports, stimulating investment in the domestic market. The government might double

its economic stimulus plan to LE 30 billion (US$ 5.4 billion). In addition, the government is

working on restructuring public finance to support fiscal consolidation, increasing the

government and companies ability to respond to economic shocks and supporting domestic

demand in the midst of difficult international circumstances (Ministry of Economic

Development, 2009b).

These measures are a move in the right direction and although these measures are not targeting

youth employment, they are aiming at protecting the level of employment and even increasing it

as the impact of the crisis starts to fade out.


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PART III NATIONAL ACTION PLAN (NAP)

III.1. The Goal of the Youth Employment National Action Plan

The goal of the youth employment NAP is to increase youth employment and provide

decent and productive jobs for young people, who join the labor market every year

This goal is closely related to the main objectives of Egypts Sixth Five-Year Economic and

Social Development Plan (2007/20082011/2012). Although the Seventh five-year plan was not

yet prepared, the NAP should be linked to the Seventh Plan (2012/2013-2016/2017), since the

implementation of the NAP covers part of the Sixth and part of the Seventh Plans.

The Sixth Plan aimed mainly at achieving the highest economic growth rate that could

accomplish an appropriate level of employment by the end of the plan and realizing a decent

living standard to the poor (Ministry of State for Economic Development, 2006). The main

reason for relating the youth employment NAP to the Sixth Five-Year Plan stems from the fact

that the Plan took into consideration the major economic and social goals that the country is

targeting. The Plan is based on three main pillars: the Presidential program that the government

is adopting for the period 2005-2011; the new Social Contract for Social Participation, and the

Millennium Development Goals (MDGs).

Taking into consideration the average annual growth rate of labor force in the age group 15-30

years, during the period 2002-20079, which amounted at 5 percent, the labor force was

estimated for the period 2010-2015 to calculate the jobs needed for the new labour market

entrants. If one adds to this the number of jobs required annually during the time span of the

NAP; which aims at reducing unemployment rate for the youth from around 23 percent

according to the 2006 Census to 15 percent by the end of the NAP, the total number of jobs that

should be created during the 5 years of the NAP amounted to 3.1 million jobs with an average

of 620 thousand jobs annually to absorb the annual increase in youth labor force and part of the

stock of unemployed, which reached 1.9 million unemployed in the age group 15-30 years

according to the 2006 Census.

9 Selection of period was based on data availability (Calculated used data from the Labor Force Sample Survey (LFSS) issued by CAPMAS, several issues).


Page25

This goal is very much in line with the stimulus plan adopted by the government to reduce the

negative implications of the global financial crisis on the Egyptian economy. This plan is

mainly targeting at stimulating domestic demand to compensate for the decline in foreign

demand for Egyptian exports and in foreign exchange revenues (Suez Canal, tourism, workers

remittances, etc.) and foreign direct investment (FDI) and at protecting employment. The

2009/2010 budget that is currently being discussed at the Parliament reflects the expansionary

fiscal policy that the government is adopting, as the fiscal deficit increased from 6.4 percent of

GDP in 2008/09 to 8 percent of GDP in the new proposed budget. The government is also

aiming at compensating the decline in private investment and FDI through government

investments and by encouraging public private partnership. The investments will mainly

concentrate on infrastructure projects, supporting MSMEs and reducing the cost of production

for the private sector. All these efforts are aiming at creating jobs and protecting employment

from the repercussions of the crisis.

Accordingly, the goal of the NAP is aligned with government policies and plans which target

the creation of jobs to absorb the new entrants to the labor market and to at least return to the

employment levels that took place before the crisis, and even increase it through the outcomes it

aims at achieving.

It should be noted that the time framework of the NAP coincides with the second part of the

sixth five year plan and the first part of the seventh plan. This is why a mid-term evaluation of

the NAP is foreseen for 2011 to make sure that it reflects the objectives of the next 5-year plan.

III.2. Objectives of the Youth Employment National Action Plan

The specific objectives of the NAP include raising youth employability, providing more job

opportunities in key economic sectors, and resolving the mismatch between labor demand and

supply by improving labor market policies and programs in order to support the creation of the 3

million jobs. It is not possible to precisely identify the amount of jobs created by each measure

taken, but the combination of activities is designed to help reach the total number. It should also

be noted that the NAP acknowledges that raising youth employment rate depends mainly on the

level of growth that the economy achieves and its employment intensity. It also realizes that a

combination of sound macroeconomic and labor market policies are required to raise youth

employment and resolve other labor market mismatches. However, dealing with macroeconomic


Page26

policies is outside the realm and beyond the scope of the NAP. Consequently, the NAP will

concentrate on labor market policies and programs, with special emphasis on human resources,

enterprises development, and labor market regulations.

Though the NAP cannot interfere in details into macroeconomic policies, it still needs to be seen

as an important contribution to soften the impact of the current economic crisis on labor markets

in Egypt. The objectives set in the NAP are preconditions for young people to better react to the

crisis and to be well prepared for times of an economic recovery.

It is highly recommended that the NAP is included in Egypts current and next Social and

Economic Development Plan, so that youth employment targets are integrated with other

macroeconomic targets. In addition, integrating the NAP within Egypts Development Plan will

ensure securing part of the resources required for financing it. Following is a brief description of

the NAP objectives and the main tools used to achieve them.

III.2.1. Increasing youth employability

In order to prepare the newly graduates to the labor market and increase their chances to find

decent, well-paid, carrier oriented jobs the NAP is proposing two main programs:

Developing the technical education and vocational training system; Improving the basic skills and knowledge of the secondary, technical and university

graduates concerning languages and new technology.

These tools could increase the employability of young graduates from technical and vocational

education. Tough not directly creating jobs, these measures contribute to decrease the

unemployment rate by enabling young people to find a job. A reduction of the unemployment

rate among those graduates through the means of the NAP by 25 per cent is targeted..This

would help 1 million more young people to find a job.

III.2.2. Providing more job opportunities

Achieving this objective entails raising the capacity of the economy to provide more

sustainable, productive and decent job opportunities for the youth. This could be done by:


Page27

Encouraging entrepreneurship by eliminating obstacles especially those related to start-up, and exit procedures.

Promoting micro, small and medium enterprises (MSMEs), by providing technical and marketing support to these firms, strengthening linkages with large firms and introduce

innovative and low risk financial systems.

These objectives are supposed to create 1 million jobs (or one third of the jobs that were

calculated as being needed to absorb new entrants and reduce the unemployment rate) by the

end of the plan.

III.2.3. Develop labor market policies and programs

In order to bridge the existing gap between demand and supply of labor, a number of labor market

policies and programs are suggested:

Develop public employment offices and their services and encourage the establishment of private recruitment agencies.

Develop the labor market information and employment unit at MoMM. Review labor market regulations, with special emphasis on giving incentives for enterprises

to hire young people, such as support for enterprises to be able to pay minimum wages and

social insurance.

These measures will help to decrease the unemployment rate for young people towards 15

percent even if not creating employment directly.. The target is to help 1 million young

people to find a job.

III.3. Main Outcomes of the Youth Employment National Action Plan

Besides creating jobs, the NAP aims mainly at ensuring that the youth are employable,

immediately after they graduate or once they enter the labor market for the first time and over

time.


In order to achieve this objective the mismatch between skills demand and supply must be

restored. The availability of highly qualified and multi-skilled workers is one of the first

requirements for firms competitiveness, in domestic and international markets. It will be

essential to ensure that companies stay competitive during the economic crisis and are well


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prepared for the recovery process. Moreover, labor market requirements change rapidly;

consequently, for workers to remain in their jobs, they must constantly update and maintain

their skills, to meet these requirements. Skills improvement helps in preventing labor supply

bottlenecks and in reducing unemployment. In order to prepare the newly graduates to the labor

market requirements and ensure a smoother transition to stable, decent, well-paid, and career-

oriented jobs; the NAP is aiming at achieving two main outcomes:

Outcome A1. Improving the technical education and vocational training system.

In order to reduce youth unemployment to 15 per cent by the end of the NAP, the technical

education and vocational training system should be made more demand driven to strengthen the

link between education and work. In this case, Egypt can benefit from the experiences of a

number of OECD countries, which adopted a dual education system, and succeeded in reducing

unemployment and speeding-up the process of integrating newly graduates in the labor market.

This system combines school-based education with training at the workplace. It should be noted

that this is not a new program; it is based on Egypts experience with the Mubarak-Kohl

initiative (MKI), adopted in 1994. However, this initiative suffered from a number of

shortcomings, including lack of adequate finance, insufficient support from businessmen, and

escape of graduates to university education. However, this does not undermine the importance

role that this initiative played in raising the level of technical education and vocational training

system in Egypt.10

In this respect, the NAP aims at establishing a system of dual vocational education that

emphasizes both theoretical and practical learning. The proposed system would overcome the

different limitations of the MKI. It will be based on a mix of regular education and on-the-job

training system.

Accordingly, students registered within the technical education and vocational training system

would sign a contract with the firms which will provide them with applied training. The

payment will be lower than that of regular workers, but will increase with the rise in skills

acquired. After the successful completion of the theoretical education and the on-the job-

10 It should be noted that the Egyptian government announced in October 2007 the expansion of the MKI and accordingly 100 schools will be transformed to this system by the end of 2011/2012.


Page29

training, the trainee will receive a certified diploma that allows her/him to be hired as a regular

worker.

In order to guarantee the success of this program, restrictions should be put in place to minimize

the chances of the students that graduate from this program from joining universities. Such

restrictions could include re-paying the cost of the program or the stipends that students

received before enrolling in universities. At the same time, students of the dual system must

receive incentives to encourage them to join this system of education, remain enrolled and

benefit from the job opportunities that it offers.

Another important factor for the success of the dual system relates to the commitment of the

different stakeholders. The involvement of the private sector firms in the design and

implementation phases is a prerequisite for creating a demand-driven education system. The

main contribution of these firms relates to designing curricula, providing training places,

materials, and job opportunities for graduates, as well as continuously upgrading the skills of

those workers according to both domestic and international market needs, through extensive on-

the-job training.

Outcome A2. Improving the basic skills and knowledge

Improving the basic skills and knowledge would ensure that the youth possess the skills and

knowledge necessary to function at work and in society at large, and also to enable them to

expand their knowledge even further. The targeted groups are mainly the secondary, technical

and university graduates, who need to acquire or upgrade their skills, including information and

communication technology (ICT), and languages skills, thus facilitating their access to the labor

market and reducing skills gaps. Other skills in demand include more productive and softer

skills such as creativity and team-work. It should be noted that upgrading these skills could

even start from the primary schools; however; this might take longer time that exceeds the time

span of the NAP. Nevertheless, upgrading the skills of all school students starting from primary

level should be considered as part of the governments plan to develop the education system in

Egypt.

Updating the youth skills is important for preparing the youth to cope with economic and

social changes to improve their employability, adaptability and their participation in the

knowledge-based society. This requires cooperation between the various ministries, the private


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business sector, labor market organizations and NGOs. The role of the government and

different ministries is to ensure a good operating environment to allow private sector firms to

take responsibility for keeping the skills of their staff up to date and for improving them.

Moreover, NGOs will play a major role in providing programs to upgrade skills for the youth.

Good examples of these NGOs would be the Future Generation Foundation (FGF), and the

Alexandria Business Association (ABA); which provide training services for newly graduates

to acquire basic skills in languages, ICT and management. Raising the capacity of the NGOs

working mainly in the area of skills development, in light of the experience of the FGF and the

ABA is a very important element for reaching this outcome.

The KPI for this outcome would be to provide training courses for 1 million of the secondary,

technical and university graduates.

III.3.2. Providing more job opportunities

Achieving this objective entails raising the capacity of the economy to provide more

sustainable, productive and decent job opportunities for the youth. This could be realized by

encouraging entrepreneurship and promoting MSMEs. Following is a description of these

outcomes:

Outcome B1. Encouraging entrepreneurship.

The success of this outcome depends on eliminating obstacles to entrepreneurship, especially

start-up, and exit procedures. The following measures could be undertaken to promote

entrepreneurship:

Improving initial conditions for youth entrepreneurship: The SFD will play a crucial role in

supporting business start-up for the youth. SFD will establish a one-stop-shop in each

governorate, while giving the priority to the governorates with the highest youth

unemployment. The main role of these one-stop-shops is to facilitate business start-ups and

assist young entrepreneurs to understand the procedures of establishing a firm, the documents

needed and the fees that should be paid. Other basic business related information, will be

provided by the one-stop-shop, including information about the labor law, taxes, safety

regulations, inspections, subsidies, etc. The one-stop-shops could also be used as a tool to

promote on-the-job training by offering MSMEs incentives for engaging in such training

schemes.


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SFD will establish a special fund to provide financial support for MSMEs in the form of leasing

schemes to finance equipment and inputs, given that the funds of these leasing schemes are

provided in-kind. In this case, the SFD might purchase these inputs and machinery on behalf of

young entrepreneurs, provide them with the necessary technical assistance and training and pay

them regular visits to evaluate the progress of their projects and their sustainability. It is

important to emphasize the role of SFD in providing technical assistance, training and follow-

up for these projects and not just financial support. Priority should be given to remote and

deprived governorates.

Two KPI are suggested; (1) the establishment of 17 one-stop-shops; one in each governorate,

starting with Upper Egypt; (2) creating 1 million jobs that benefit from SFD leasing schemes.

- Undertaking entrepreneurial activity supported by counselling and schooling opportunities for young entrepreneurs: In addition to providing counselling services to MSMEs, through

the SFD, NGOs and other institutions, a program will be introduced at the level of

secondary school, to teach entrepreneurship and management. According to this program,

students will be trained on how to set-up a business, develop a business plan, and produce

goods or services. Students will also prepare marketing plans, and annual accounts. Students

will be awarded prizes for setting-up, running and developing their projects. The KPI would

be to introduce the program in 100 secondary schools.

Outcome B2. Promoting micro, small and medium enterprises (MSMEs).

MSMEs suffer from major constraints regarding access to finance, inputs availability, new

technology and production techniques, as well as marketing opportunities. Establishing close

linkages between MSMEs, in general, and those run by young entrepreneurs, in particular,

and large firms through subcontracting could have positive impact on the development of

MSMEs. Large firms could provide MSMEs with material inputs, machinery and equipment,

finance, training and technical advice. More importantly, large firms will purchase the inputs

and semi-final goods produced by MSMEs owned and run by the youth. In addition, these

linkages could help young entrepreneurs in overcoming problems such as marketing and lack

of suitable and quick means of transportation between production sites and markets.

Moreover, the availability of labor might be improved by supporting networking among

MSMEs and improving the capacities of subcontractors. Companies in different sectors


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should be trained to act as systems suppliers to larger firms in the Egyptian and international

markets.

However, these links are not established automatically. In light of countries experiences,

such as Korea and Philippines, government support is required for the success of these

linkages. This support could be provided by giving priorities in government procurement and

bids, to large firms, which subcontract MSMEs, owned and run by young entrepreneurs. Tax

relief and credit incentives could also be offered to these firms as a means of encouraging

them to support young entrepreneurs. Moreover, a fund should be established to provide

government incentives for large firms, which subcontract MSMEs, owned and run by young

entrepreneurs. This fund is similar to the export promotion fund; where firms receive

financial subsidies proportional to the value of their exports. Moreover, the MSMEs support

fund will be limited for a specific time period, and will be tied to performance and to

achieving specific youth employment targets. A pilot project could be implemented starting

with two main manufacturing sub sectors, the textiles and clothing sectors and the food

processing sectors. These two sectors possess large potential for strengthening linkages

between MSMEs and large firms (El-Megharbel, 2007)

The success of this initiative would be measured by the number of MSMEs that benefit from

this fund through their linkages with large firms. In this case, the target would be to provide

support to 500 MSMEs through this fund.

Two more initiatives would help MSMEs development. The first includes establishing a

number of technology centres, business incubators, and business development centres that

provide technical support to young entrepreneurs and facilitate their work. These technology

centres will also play a major role in technology transfers. Business development incubators

will also provide infrastructure facilities; including showrooms, and equipment to support

young entrepreneurs, especially females, who cannot, for a number of economic and social

reasons, have access to these facilities. While, business development centres will provide

other technical support services related mainly to management and marketing of MSMEs.

The geographic distribution of business development services for MSMEs must take into

consideration deprived governorates; especially those with high youth unemployment rates.

The second initiative relates to encouraging young entrepreneurs to establish a portal to


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market their products and be able to join international networks and supply chains. This

portal will also provide access to information on all policies, legislation, and programs

relevant to MSMEs. Policies related to intellectual property rights, environment, labor and

safety regulations will be posted on the portal to help young entrepreneurship development.

Two KPIs are suggested (1) establish 5 technology centres and 5 business incubators, mainly

in Upper Egypt; (2) launch one portal for MSMEs owned and run by young entrepreneurs.

III.3.3. Develop labor market policies and programs

In order to close the existing gap between demand and supply of labor, a number of labor

market policies are suggested. Some of these outcomes are already underway, such as

developing public employment offices and their services, and encouraging the establishment

of private recruitment agencies. Further developing a labor market information unit and

reviewing labor market regulations are new outcomes proposed by the NAP:

Outcome C1. Develop public employment offices and their services and encourage the

establishment of private recruitment agencies.

This could be done by offering firms tailor-made services to meet their specific needs; and help

jobseekers in the preparation of their plans and developing skills mapping to support the

recruitment process. Moreover, public employment offices and private recruitment agencies

will provide training for job seekers in job search and assist them in writing and updating

resumes, preparing applications, and preparing them for interviews. Public employment offices

and private recruitment agencies will also provide information about temporary or permanent

jobs available in different firms and institutions, and about skills and specializations required in

the labor market. These offices and agencies will play a major role in predicting labor market

requirements based on new developments in the economy. Moreover, they will organize job

fairs which bring together prospective employers and young potential employees. An internet

based job-seeking services that could be accessed by young job seekers will be established.

The KPI for this outcome is to establish a public employment office in each governorate. If an

employment office already exists, it should be renewed to provide more up-to-date services. In

this case a number of 28 offices should be established or at least renewed. Currently, MoMM is

implementing a plan that includes the development of 23 employment offices, which could be

the minimum KPI for this outcome. Moreover, at least one recruitment agency must be


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established in each governorate. Geographic distribution of public employment offices and

private recruitment agencies must be observed, such that they are established in different

districts to better serve more youth job seekers. It should be noted that in the second half of

2008, MoMM took substantial measures towards the establishment of a national employment

agency that achieves the outcomes related to training as implied by the NAP.

Outcome C2. Develop the labor market information and employment unit at MoMM. One of the major obstacles faced by young job seekers relates to the lack of basic labor market

information on which to base guidance and counseling, and which is necessary for job

matching. In order to overcome this problem, the labor market information and employment

unit, at MoMM will be developed. The main role of this unit is to gather, analyze and

disseminate information about the labor market and employment opportunities. The unit will

play a major role in identifying the most targeted groups that are in need for intervention and

assistance. The unit will also monitor the implementation of the NAP. The unit will ensure

that the outcomes reach the designated target group. It will also give early signals about the

need of any corrective action that must be adopted.

The KPI is the development of the labor market information and employment unit and that its

objectives are achieved.

Outcome C3. Review labor market regulations.

This outcome concentrates on reviewing labor market regulations with special emphasis on

minimum wages and social insurance, to provide incentives for hiring the youth. Following are

the proposed outcomes regarding minimum wages and social insurance.

- Minimum wages. Youth are more likely to be affected by minimum wage policies, because they are less experienced than older workers. In countries where minimum wages are high,

and where minimum wages regulations are enforced, income inequality is lower and wage

differentials are minimal. But in a country like Egypt, where minimum wages are low and

are poorly enforced, youth are subject to low pay, which in many cases discourage them

from engaging in a formal job. Therefore, the minimum wages policies and regulations must

be revised, to ensure the following:


Page35

Raising the levels of minimum wages to more realistic levels. It should be noted that the current policy of minimum wages is not reasonable and does not reflect the real

cost of living;

Establishing a close link between these levels and inflation rates and review them regularly;

Enforcing the application of the minimum wages policy, especially by the private sector firms;

The main KPI would be to reach a minimum wage that reflects the cost of living or that is

related to inflation and that is revised at least twice during the NAP span.

- Social insurance. Designing new social security schemes based on reducing the contribution base for self-employed youth. A large number of young people working in the private sector

are not covered by any social insurance scheme. While the formal private sector was not able

to provide attractive work conditions for them, a large proportion of these workers,

especially the poor, uneducated and unskilled, find jobs in the informal sector. In order to

encourage youth participation in the labor market and secure decent jobs for them, more

flexible social security schemes should be introduced. These schemes reduce the contribution

of youth especially those working in the formal sector with temporary contracts, and the self-

employed.

The main KPI would be the number of new workers with official contract and social insurance

coverage. This is related to the reduction in unemployment rate target. Hence at least three

million new social insurance subscriptions are expected by the end of the NAP.

Outcome C4. Establishment of an early warning system

The current economic crisis is likely to have large impact on labor markets in Egypt. This

impact will be especially hard for young people. Those amongst the youth who will not be able

to find a job will find it very hard to integrate into economic activities after the crisis. Young

people have neither the resources nor the knowledge nor the network to help themselves during

this crisis. All priorities and outcomes in the NAP are even more valid during times of crisis.

However, learning from this crisis to be better prepared in future crises can help young people.

This is why a detailed analysis of the impact of the crisis on young people and their integration

after the crisis is needed to be prepared to develop special measures for young people in the


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future. Interviews with enterprises and young people could help to identify the reasons why

young people suffer harder in times of crisis. The establishment of an early warning system

could also help to be better prepared. The activities with regard to reaching this outcome will

be:

Analyzing the specific challenges for young people during the crisis and during the economic recovery process

Develop an early warning system The KPI would be a study answering the question of what are the special challenges for young

people during the time of economic crisis and an early warning system be put in place.

III.4. Resources for the Youth Employment National Action Plan

This section presents an idea about the cost of the NAP required for achieving its goals and

objectives. For each program of the NAP, the resources needed for its accomplishment will be

identified.


In order to increase youth employability, the NAP proposed two sets of programs; improving

the technical education and vocational training system and improving the basic skills and

knowledge of the secondary, technical and university graduates. Following is a description of

the resources needed for these two outcomes:

Outcome A1. Improving the technical education and vocational training system. According to

the NAP; the MKI will be expanded and all shortcomings will be overcome as much as

possible. The cost of this outcome is approximately LE 120 million during the 5-years period of

the NAP.11 This cost could be covered through a cost share between the government by

allocating 50 percent of this amount in the annual budget, and by asking the national and

international donors for the other 50 percent. Moreover, private sector firms will provide

training places and materials. They will also pay the salaries of the trainees according to the

11 It should be noted that the estimated cost was based on the initial cost of the MKI, after assuming an 11.7 percent inflation rate. However, a recent development plan for the technical education and vocational training was adopted by the Ministry of Agriculture, Agriculture Education Unit, with a total budget amounting at LE 3.4 billion for 4 years. This plan is also based on promoting MKI. This would suggest an increase in the cost of the proposed outcome, however the NAP is providing a conservative cost based on available information.


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salary scale of each firm, bearing in mind that trainees will be lower paid compared to regular

workers and that their salary will increase as they advance in their training.

Outcome A2. Improving the basic skills and knowledge.

The cost of this outcome is LE 4,378 million. It will be covered from the government budget

allocated to train and rehabil

Egypt Youth Employment NAP 2010-15

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Transcript of Egypt Youth Employment NAP 2010-15