Productivity Ecosystems for Decent Work in Egypt: Improving productivity and strengthening working conditions in key industrial sectors

Background

The productivity in Egyptian enterprises, especially micro, small, and medium- sized enterprises (MSMEs), is crucial for inclusive growth and the creation of decent work.

MSMEs represent 98% of all Egyptian enterprises, contribute 43% of the GDP and employ over 75% of the workforce. However, they face significant productivity challenges, exacerbated by factors such as informality, poor working conditions, and limited access to resources and services.

The productivity gap between of large enterprises and MSMEs has narrowed due to a decline in large firms’ total factor productivity, but MSMEs still face external and internal constraints, including regulatory issues and competition from the informal sector.

As a result of low productivity and high levels of informality, a large proportion of jobs in Egyptian MSMEs are characterized by precariousness and decent work deficits. According to an ILO study conducted in 2019, 69.3% of Egyptian male workers and 49.1% of female workers had at least one characteristic of precarious work. The absence of a written contract and the lack of health insurance coverage are the most common characteristics of precariousness, affecting 56% of wage workers in 2017, up from 40% in 2007. Furthermore, informal employment in the non-agricultural sector reached 42% in 2017.

Workers in Egyptian MSMEs, which make up the majority of enterprises in Egypt, are often exposed to poor working conditions, low wages, inflexible working hours, and inadequate occupational safety and health procedures. The high prevalence of informality and the lack of written contracts also lead to issues related to insurance and social security. Improving working conditions remains a major challenge.

About the project

In this context, the ILO launched the “Productivity Ecosystems for Decent Work in Egypt” (PE4DW in Egypt) project. Funded by the Directorate General for Development Cooperation of the Italian Ministry of Foreign Affairs and International Cooperation, and implemented in partnership with the Egyptian Ministry of Industry, this project builds on the ILO’s Productivity Ecosystems for Decent Work approach.

The PE4DW in Egypt project aims to address productivity drivers and decent work deficits at both the sector (meso) and enterprise (micro) levels in two key industrial sectors in Egypt: the leather tanning and marble sectors. The project will work to mobilize, stimulate, and strengthen the capacities of sector-level actors and stakeholders to promote productivity and improve working conditions in these targeted sectors. At the same time, it will work at the micro level with participating enterprises in two industrial districts.

Target sectors

1. Leather tanning (in the Robbiki cluster): In 2004, the Egyptian government decided to establish a leather processing industrial zone in the Robbiki area, moving all tanning production from the centre of Cairo (Magra el Eyoun), where outdated and highly polluting techniques were used. The move to Robbiki Leather City aims to improve production linkages, trade, and increase the country’s leather exports. Through a cluster approach, the government aims to develop superior infrastructure and services to support the industry, enhance technology and knowledge transfer, and facilitate collective action while addressing existing challenges.

The Egyptian leather industry faces many challenges, including a limited supply of production inputs, equipment, and manufacturing components, complex licensing procedures, a lack of skilled managers, inadequate support services to upgrade workers' skills, and poor occupational safety and health measures. In addition, the informality of enterprises hinders economic growth and market access.

2. Marble (in Shaq Al-Thoa’ban): The Shaq Al-Tho’aban industrial cluster in East Cairo is the largest marble and granite industrial agglomeration in Egypt and the fourth largest in the world. Covering an estimated 6.5 million square metres, it houses 2,525 factories and workshops for the production and export of marble. However, the cluster poses significant environmental hazards due to the large amounts of waste generated during the processing of marble and granite.

The marble sector faces challenges such as outdated technologies that produce non-compliant products, lack of infrastructure including clean water supply, and poor working conditions.

3. Furniture: The furniture industry has significant potential but faces barriers to growth, including industry fragmentation with few large companies. Most enterprises are small, family-run workshops in Damietta and other areas, characterized by low labour productivity and informality. Other constraints include outdated processes and technology, a lack of skilled labour, and a high prevalence of low quality products, which limits export capacity.

Ultimate/Indirect beneficiaries

• Workers: Women and men in selected sectors and targeted SMEs will benefit from increased productivity, improved working conditions, wages, and social protection.
• SMEs: SMEs in the marble and leather sectors, particularly in Shaq Al-Tho’aban and Robbiki, including micro-enterprises, will benefit from strengthened stakeholder capacity to improve productivity and working conditions, with special attention to the informal economy.

Implementing partners

• Ministry of Industry (and its affiliated bodies and institutions)
• Ministry of Labour
• Ministry of Planning and International Cooperation
• Federation of Egyptian Industries
• Workers' Organizations
• Sector support organizations and service providers

About Productivity Ecosystems for Decent Work (PE4DW)

The ILO’s Productivity Ecosystems for Decent Work approach addresses the drivers of productivity and decent work deficits at the macro, meso, and micro levels and seeks to strengthen the virtuous circle of productivity growth and decent work. Starting with an initial analysis, the ILO works with key stakeholders focusing on the most relevant "slice" of the local productivity ecosystem, i.e., the sectors and the associated segment of the overall ecosystem where the potential for productivity growth and decent work creation coincides with the feasibility of intervention.

• Macro level: At the macro level, increasing and sustaining productivity requires investments in people, infrastructure, and strategic sectors to address the drivers of transformational change.
• Meso level: At the meso level, market conditions affect productivity, such as the degree of competition in a given industry, input prices, and the existence of domestic, regional, or global value chains, but also the availability of business support services to help firms access markets.
• Micro level: At the micro level, the focus is on small and medium-sized enterprises (SMEs). These enterprises are recognized as a major source of employment, and PE4DW interventions typically seek to support their enormous potential to create new jobs, innovate through technology, and become more productive and competitive through tailored support to ensure that enterprises are aware of regulations, opportunities, and obligations, can access markets, and can use of and benefit from available services.

Project objectives, outcomes, and outputs

The project aims to create a virtuous circle of sustainable productivity growth through decent work in targeted sectors and SMEs in Egypt. Workers in in he project aims to create a virtuous circle of sustainable productivity growth through decent work in targeted sectors and SMEs in Egypt. Workers in increasingly productive sectors are expected to benefit from formal and productive employment, better working conditions (including OSH) and adequate social protection, leading to increased motivation, output and ultimately sustainable productivity growth and decent work.

Internal factors affecting productivity include management practices, with evidence showing a strong positive correlation between better management and higher total factor productivity, leading to improved decent work. External factors include the business climate, which has a significant impact on sales growth, productivity and profitability. The project will address both internal (Outcome 2) and external (Outcome 1) constraints to productivity to improve decent work in the sector and in the targeted enterprises.

Impacts are expected at both enterprise and sector levels. Changes at the enterprise level may be observed within the project period, while changes at the sector level will take more time. Key indicators for measuring changes at the enterprise level include productivity gains, wage changes, percentage of temporary workers, staff resignations and accident reports.

Outcome 1: Sectoral constraints to productivity growth and decent work are addressed by stakeholders.
Output 1.1: Sector systemic analysis and intervention design are developed and endorsed by key stakeholders.
Output 1.2: Sector support organizations in the leather and marble sectors are capacitated to address sector constraints.
Output 1.3: Technical assistance strengthens the efforts of sector support organizations.

Output 2: 200 micro, small and medium-sized enterprises implement measures to improve productivity and working conditions.
Output 2.1: 100 enterprises in the leather sector have improved access to business development support services. Output 2.2: 100 enterprises in the marble sector have enhances access to business development support services.