To ensure its economic development and improve overall productivity, a country must commit to a strategy that reallocates resources linked, or not, to an industrial policy. A study by Femise analyses the scope of these structural changes in four countries, namely Morocco, Tunisia, Egypt and Turkey
The latest study by Femise was undertaken with financial support from the European Investment Bank and the European Commission. It focuses on the outcomes of resource reallocation strategies in Morocco, Tunisia, Egypt and Turkey. All countries have experienced structural changes, making the shift from an agricultural-based economy to one geared towards services and industrial sectors.
The structural changes within the process have been happening at very different rates. Agriculture accounted for 50% of GDP in Turkey in the 1960’s whereas today, services represent more than 60% of its GDP. The pace of change has been slower in Morocco with industrialisation by small increments (25-30% additional jobs in industry over the last twenty years).
Significant differences in productivity remain due to a transformation process that is still insufficient. Turkey stands out for it strong growth in overall productivity whereas structural change is struggling to have any effect on the Egyptian and Tunisian economies.
The Supply and Demand are inadequate
The report identifies a major cause for this shortcoming. The process of structural change to ensure the shift towards a service-based economy manifested itself in Turkey by a reallocation towards high-productivity sectors like finance and insurance. At the same time, in Egypt, this transfer involved low-productivity service industries. Between the two, Tunisia benefited from two levers for development, i.e. tourism and finance.
Despite considerable efforts made in education, the Femise report also highlights a mismatch between supply and demand. The report points out that, “The labour market has not anticipated suitable job options for the educated population”. This shows the slow pace of structural change and the difficulty in making the shift to an industry generating high value-added products.
Since the start of the century, these four countries have turned towards targeted industrial policies, including support for R&D, environmental protection and incentives for SMEs, especially through tax exemption schemes. The latter has been used as a lever for development at a regional level and also to restore balance between various regions. Egypt has favoured tax benefits for companies setting up in new industrial zones or urban communities and disadvantaged areas while Turkey is targeting its poorest provinces by granting investment incentives to businesses that extend right up to a complete income tax exemption.
* This thematic report was prepared in collaboration with Economic Research Forum under the title: “Structural transformation and industrial policy: A comparative analysis of Egypt, Morocco, Tunisia and Turkey”. To download the rapport (pdf, p.268, 7.2MB)
Article by Frédéric Dubessy, Econostrum. www.econostrum.info.
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