Small scale industries and their role in solution of unemployment in Egypt

Small and medium industries in Egypt represent the key of development of the national economy, one of the main elements of social and economic development strategy, partners in the development process and the motivation for economic and social growth.

SME definition: An organization which perform an economic activity either by producing goods or providing services with a paid up capital not less than 50,000 Egyptian pounds and not more than 1 million Egyptian pounds and that the number of employees does not exceed 50 employee.

The Egyptian government is now focusing on small scale industries as a mean of economic and social development. The country’s private sector is dominated by a plethora of small businesses: farmers, furniture makers, tailors, potters, metal-workers and restaurant-owners.

In the late 1990s, the government of Egypt started asking: rather than depend on a few big firms to increase exports and create jobs, why not make a massive effort to lift thousands of tiny enterprises into growth?

The action of the government to promote small scale industries

The government established “The Social Fund for Development” (SFD) in 1991 to deal with negative consequences of economic development program and to solve the unemployment crisis by providing job opportunities.

Small scale industries problems  

1. Lack of knowledge about management and occupational safety and health.

2. Many small scale industries are very much focused on the personality of the owner.

3. The enterprises’ success and market position depend on the vision and the entrepreneurial talent of these persons.

4. The issue of nepotism indicates that the overall stable relationships small enterprises develop with their partners can turn into a weakness when they favor only relatives and friends.

5. The difficulty to convince the owners of these enterprises about the idea of sustainable development in the light of the high cost of environmental issues and the lack of information network that the industry can have access to knowledge and services for tackling environmental issues.

6. Financial problems, since small scale industries often have low investment capital and little access to loans.

7. The probability of weakness in competitiveness of some manufacturing sectors.

8. The relatively small size of small scale industries often leads to disadvantages in economies of scale.

9. The relative small size of small scale industries makes their capability to incur and cover the temporary losses very limited.

Unemployment in Egypt

The nationwide unemployment rate remained steady through the fourth quarter (Q4) of 2013, registering 13.4% of the population, the Central Agency for Public Mobilization and Statistics (CAPMAS) reported in an official statement.

According to CAPMAS, 3.6 million Egyptians are unemployed, a 0.5% increase from the previous quarter and a 57.3% increase compared to the same quarter in 2010.

CAPMAS reported that the total labor force in Egypt witnessed a minimal increase to reach 27.3m, a 0.3% increase compared to the preceding quarter. Total labor force has surged by 4.4% since Q4 2010.

The report indicated that youth constitutes 69% of the total unemployed, an around 1.8% decrease compared to Q3 2013. The majority of the unemployed youth, 39% of the total 69%, were found in the 20 to 24 year-old tranche.

Small scale industries role in reducing the unemployment

Small scale industries can play a very significant role in the national economic field especially in developing countries due to their capabilities to create a greater number of job opportunities with less investment than larger manufacturing entities. Employment generation by this sector has shown a phenomenal growth; it is a powerful tool of job creation.

Also, small scale industries can mobilize a good amount of savings and entrepreneurial skill from rural and semi-urban areas remain untouched from the clutches of large industries and put them into productive use by investing in small-scale units.

Furthermore, small scale industries can help decrease migration to large cities and achieve population stabilization due to the ease with which these businesses can expand within inter/intra-regional and rural areas.

Small scale industries are vitally important to the Egyptian economy whereby they comprise 97.7% of all business and provide approximately 64.1% of employment.

In spite of their high growth rate, in terms of both employment and numbers of establishments, small scale industries lose far more job opportunities than large- and medium-size industries.

Finally, the work of small scale industries through an industrial cluster system is more efficient than the individual work of unconnected/unlinked small scale industries.

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