This chapter offers a guiding framework in the design of pro-productivity policies in Egypt. Understanding the factors shaping productivity growth and the policy instruments to influence them is a key priority for policy makers interested in boosting productivity growth. The chapter classifies the most recent Egyptian pro-productivity policies according to such a framework. It discusses the importance of policy monitoring and evaluation, as well as the Egyptian initiatives that exist in this regard. It provides recommendations to improve the design and evaluation of productivity policies in Egypt. It also offers example of pro-productivity institutions in OECD countries that effectively co‑ordinate productivity research and advise policy makers in pursuing productivity growth.
Productivity Review of Egypt
Abstract
This chapter provides a comprehensive framework to help policy makers design policies aimed at boosting productivity growth (productivity-enhancing policy framework) and offers recommendations to enhance the design, monitoring and evaluation of Egyptian productivity-enhancing strategies.
In recent years, several pro-productivity policies have been implemented or planned in Egypt, especially targeting the manufacturing sector. The 2021 National Structural Reform Programme (NSRP) contains a large set of initiatives aimed at influencing both external (e.g. improving the business environment and competition) and internal (e.g. developing human capital) factors to the firms, which can positively influence productivity. The Ministry of Industry (MoIND) has had a key role in defining industrial and trade policies. More recently, it is planning to launch a new industrial development strategy that sets targets and identifies priority sectors for 2026-30. Several other agencies are also involved in defining productivity polices, including the Central Bank of Egypt (CBE), the Ministry of Communications and Information Technology (MCIT), the Ministry of Investment and Foreign Trade, and the Micro, Small and Medium Enterprises Development Agency (MSMEDA).
However, more policies could be monitored and evaluated to enhance the supply of evidence that can support policy making. While some initiatives already exist, such as the Egypt Information and Decision Support Center (IDSC) and the Ministry of Planning and Economic Development (MPED)’s Egypt Impact Lab, more efforts are required to strengthen the evaluation of policies. Currently, Egypt does not have a co‑ordinating institution to conduct or steer productivity analysis and to advise policy makers in pursuing productivity growth. Several OECD countries have established pro-productivity institutions to co‑ordinate efforts on productivity research for such purposes.
In this chapter, the first section discusses the productivity-enhancing policy framework, which builds on previous works on productivity drivers (Pilat, 2023[1]; Albrizio and Nicoletti, 2016[2]) and industrial policies (Criscuolo et al., 2022[3]), adapting these approaches to the Egyptian context with a focus on productivity-related topics. The second section categorises Egypt’s productivity policies within the proposed framework. The third examines the state of monitoring and evaluation of existing policies in Egypt. It also provides examples of pro-productivity institutions across OECD countries, highlighting their role in co‑ordinating productivity research to support evidence-based policy making and evaluation, drawing on the work of Cavassini et al. (2022[4]). Finally, the last section concludes by providing recommendations to enhance the design and evaluation of productivity-enhancing policies in Egypt based on the proposed framework.
Figure 1.1 highlights the key points of the framework that can help policy makers in designing productivity-enhancing strategies. First, the government needs to perform a comprehensive assessment of the factors that shape aggregate productivity growth (productivity drivers). To facilitate the discussion, the framework classifies factors based on whether they are internal (i.e. human capital, innovation…) or external (i.e. competition, quality of institutions…) to firms. Second, policy makers can use a combination of policy instruments to influence the factors shaping aggregate productivity. The framework classifies these instruments based on: i) the target of intervention (horizontal or targeted instruments); and ii) the channel through which they affect productivity (within-firm or between-firm instruments). Third, a productivity-enhancing policy strategy consists of a combination of articulated and consistent policy instruments designed to improve productivity (by enhancing firms’ productivity, redirecting resources to the most productive firms or increasing diffusion of innovation throughout the economy). The framework distinguishes the type of strategies based on strategic priority: sectoral, mission-oriented, technology-focused or place-based. Fourth, good governance, as well as monitoring and evaluation of policies, are key for effective productivity-enhancing policies. The subsequent subsections discuss each topic of the framework presented in Figure 1.1 in depth.
Source: Based on the framework in Criscuolo et al. (2022[3]), “An industrial policy framework for OECD countries: Old debates, new perspectives”, https://doi.org/10.1787/0002217c-en.
Main factors driving productivity growth
Productivity is not only the main source of growth and living standards, it also explains the large variation in welfare across countries (Hsieh and Klenow, 2010[5]). Consequently, understanding which factors determine productivity and which policy instruments are available to policy makers to boost productivity are crucial questions for each strategy aimed at increasing productivity, and more generally welfare.
Figure 1.2 shows a hierarchy of factors that affect aggregate productivity growth.1 Aggregate productivity growth results from a combination of three factors, namely: i) the extent to which firms increase their productivity (within-firm enhancement); ii) the speed of diffusion of innovation from the top most productive firms (frontiers) to the rest of the economy (laggards); and iii) the extent to which resources are reallocated from the least to the most productive firms (between-firms enhancement).
Diffusion has important implications for productivity growth. An extensive OECD workstream finds that global frontier innovation leads to the discovery of new technologies, which does not immediately translate to all firms (Andrews, Criscuolo and Gal, 2015[6]). Innovation primarily becomes accessible to national frontier firms (i.e. the most productive firms in the economy) and only later does it diffuse to the whole economy. The speed at which innovation diffuses to all firms is influenced by policy and structural factors. For example, the existing level of skills, research and development (R&D) in the country and the market environment tend to favour the most productive firms.
Within- and between-firm enhancements are influenced by factors internal and external to firms. These are also called drivers of productivity growth.
Productivity drivers internal to firms are the main production factors driving economic growth. These factors are internal to the firm and have been intensively studied in the literature, primarily identified as human capital and skills, investments and capital formation, innovation, digitalisation and entrepreneurship. Especially for developing economies, informality also represents a significant fraction in explaining productivity differences across firms (Seleem and Zaki, 2021[7]; Taymaz, 2009[8]; Amin, Obnsorge and Okou, 2019[9]).
Productivity drivers external to firms are factors that affect productivity indirectly by influencing market dynamics and incentives, e.g. globalisation (trade openness and global value chain or GVC participation), the business environment, competition, access to finance, regulations and quality of institutions.2 As highlighted by Albrizio and Nicoletti (2016[2]), the business environment plays a particularly important role in shaping aggregate productivity in emerging and less developed economies. Moreover, institutions promoting productivity-enhancing policies can contribute to improving the business environment. The macro-economic environment (e.g. inflation) may also affect firms’ productivity and investment decisions.
Within the abovementioned framework, policy makers have several policy instruments to consider in boosting aggregate productivity growth. Understanding the role of these instruments and the extent to which they may translate to productivity-enhancing mechanisms is crucial. Such policy instruments are addressed in depth in the next section on productivity-enhancing policy instruments.
The subsequent subsections explore more in detail productivity drivers internal and external to firms, comparing evidence across developed and developing economies.
Source: Based on Pilat, D. (2023[1]), “The rise of pro-productivity institutions: A review of analysis and policy recommendations”, International Productivity Monitor, Vol. 44, pp. 3-33; Albrizio, S. and G. Nicoletti (2016[2]), “Boosting productivity: A framework for analysis and a checklist for policy”, https://www.oecd.org/global-forum-productivity/events/Boosting%20Productivity.pdf.
Productivity drivers internal to firms
Human capital and skills. Human capital plays a crucial role in directly influencing firms’ productivity. Improvements in skills raise labour productivity by increasing human capital and may also raise total factor productivity (TFP). Human capital enters as an input in the production function as shown in the seminal work of Mankiw, Romer and Weil (1992[10]) and plausibly explains the absence of substantial net capital movements from rich to poor countries in the post-Second World War period (Lucas, 1990[11]). Evidence from developing economies shows that human capital and skills are likely to have a different impact on productivity, depending on the initial level of human capital in the country. Indeed, improvements in human capital are positively associated with TFP in Middle East and North Africa (MENA) countries when they already have a high level of human capital (Raggl, 2015[12]). Different levels of education may also have varying impacts on a country’s ability to catch up with the global frontier: primary and secondary education matters more for a country’s ability to imitate the technology frontier, while tertiary education is crucial for a country’s ability to innovate (Aghion and Howitt, 2009[13]). Criscuolo et al. (Criscuolo et al., 2021[14]) find that almost one‑third of the productivity gaps between frontier and median firms in OECD countries can be explained by the skills and diversity of the workforce as well as managerial quality. As a result, the concentration of high-skilled workers in top performing firms has increased over time. Moreover, skills are complementary to digital technology adoption in realising productivity improvements. Calvino et al (2022[15]) show that, in Italy, firms with more high-skilled workers are more likely to adopt digital technologies and achieve higher levels of productivity. The same is true for firms with skilled top executives and skilled middle managers, especially for micro and small firms.
Investment in tangible and intangible capital. Investments and capital formation are key drivers of labour productivity, which may have spillovers effects on TFP. Tangible investments, such as machinery and equipment, buildings and infrastructure, directly contribute to productivity by increasing the efficiency and capacity of the production process. Meanwhile, intangible investments like intellectual property (IP, namely patents, trademarks, designs, copyrights), R&D, organisational capital,3 and software and databases have become increasingly important in the knowledge-based economy, serving as crucial complements to the digital transformation. Intangible capital plays a key role in boosting productivity through the link between innovation and reallocation (Andrews and Criscuolo, 2013[16]). However, these investments are difficult to finance through loans (due to its low pledgeability) and they usually entail high fixed costs and high scalability, leading to a greater gain for better managed, larger and more productive firms (Haske and Westlake, 2018[17]).
Digitalisation. Digitalisation is positively related to productivity, with supporting evidence from both developed and developing economies (Dutz, Almeida and Packard, 2018[18]; Gal et al., 2019[19]). Yet, several studies have shown how returns to digital technology adoption are not homogeneous across firms. Indeed, the effective use of digital technologies requires absorptive capacity, i.e. the ability of firms to recognise the value of new information and technologies, assimilate and exploit them commercially (Cohen and Levinthal, 1990[20]). Moreover, digitalisation requires increasingly sophisticated complementary investments in knowledge and intangible assets.4 Calvino et al. (2022[15]) develop a conceptual framework to analyse the factors that affect digital adoption, including factors internal to firms (such as their capabilities and characteristics) and external to firms (such as the availability of fast broadband, infrastructure technology spillovers arising at the sectoral or geographical level, access to finance, the quality of the education system and its ability to supply digital skills, and public policies aimed at fostering firm digital investments). Several studies have pointed out that larger and more productive firms with better management and digital capabilities are more likely to adopt digital technologies, and that already digitalised firms were better able to deal with the Coronavirus disease 2019 (COVID-19) shock (Calvino et al., 2022[15]; Calvino and Fontanelli, 2023[21]). In fact, digital technology adoption has been proven to be a key element for resilience of businesses during the COVID-19 pandemic, both in developed and developing economies (El-Haddad and Zaki, 2024[22]; Jaumotte et al., 2023[23]; Oliveira-Cunha, Riom and Valero, 2021[24]). Evidence from the Middle East and Central Asia shows that, while the COVID-19 pandemic brought a negative impact on firms’ performance, companies that invested in digital technologies pre-crisis were significantly less affected (Abidi, El Herradi and Sakha, 2023,[25]). Similarly in Egypt, adoption of digital technology before the COVID-19 crisis increased a firm’s likelihood of fully functioning during the pandemic (El-Haddad and Zaki, 2022[26]).
Innovation. The effects of innovation on productivity are widely documented in both economic theories and empirics. In the long run, growth relies mainly on innovation (Romer, 1990[27]). Firms embark on innovative activities by introducing novel products and refining existing goods and services, thereby generating productivity gains. The role of R&D activity in emerging markets and developing economies (EMDEs) varies compared to economies already at the technological frontier. On the one hand, for countries near the technology frontier, R&D can facilitate innovation. On the other, for countries that are far from the technology frontier, R&D can increase the absorptive capacity (Cohen and Levinthal, 1990[20]). While countries with highly educated and skilled workforces tend to witness a closer association between new patents – a tangible outcome of R&D – and productivity growth, in regions where human capital is less developed, incremental improvements in productivity can be realised, albeit at a slower pace (World Bank, 2022[28]). EMDEs are paying increased attention to fostering innovation in order to continue their catch-up with more advanced economies.
Entrepreneurship. Business dynamics and entrepreneurship are important drivers of productivity growth, as higher entry and exit are likely to improve TFP by driving out poorly performing firms and allowing a more efficient reallocation of factors (Javanovic, 1982[29]). Additionally, young businesses play a critical role in employment creation (Criscuolo, Gal and Menon, 2014[30]). Cross-country evidence shows that even though start-ups are heterogenous in their outcomes with most start-ups exiting within five years, those that survive grow very fast on average and contribute more than proportionally to employment and productivity growth, showing an “up or out” dynamic. In growing sectors and regions, start-ups play an even more important role. However, the full impact of entrepreneurship on employment and productivity growth might take a while to unravel. Apart from the positive direct effect of entrants on employment and productivity (i.e. forcing out poorly performing incumbents and driving surviving incumbents to be more productive), there are also indirect positive effects on incumbents brought by upward competitive pressures with the entrance of new firms.
Informality. Informality appears to be a key factor in hindering productivity growth in developing and emerging economies. The relationship between informality and productivity has been analysed both at the country and firm levels. At the country level, evidence for Latin America and the Caribbean (LAC) countries shows that a 1 percentage point decrease in the informality rate is associated with about a 0.5 percentage point decline in the gap between TFP in LAC versus the United States (IDB, 2013[31]). At the firm level, formal firms are found to be generally more productivity than informal ones (Seleem and Zaki, 2021[7]; Taymaz, 2009[8]; Amin, Obnsorge and Okou, 2019[9]).5 This productivity gap between formal and informal firms may be attributable to the bottlenecks of informal firms in terms of limited access to public goods and services, the lack of access to formal credit channels and the pressures exerted on them to stay small in order to avoid detection and paying taxes, which ultimately prevents them from the benefits associated with economies of scale (Taymaz, 2009[8]). Using data from Brazil, Ulyssea (2019[32]) shows evidence that there is a weaker selection mechanism in the informal sector compared to the formal sector. This implies that the mechanism wherein less productive firms exit the market while more productive ones survive is less evident in the informal sector than in the formal one (see Box 2.2 for the characteristics of informal firms).
Productivity drivers external to firms
Competition. Competition plays a crucial role in driving productivity growth, as it incentivises firms to innovate, improve efficiency and deliver better products or services to consumers. In an economy with higher barriers to competition, investment levels are lower as firms experience weaker competitive pressures and thus have less incentive to invest.6 Concurrently, excessive regulation can impede productivity growth by creating unnecessary barriers, increasing compliance costs and stifling innovation and competition. Anticompetitive practices persist and are particularly harmful in developing economies because an effective enforcement of competition rules is often lacking (Youssef and Zaki, 2024[33]). Finally, industry concentration – a widely established proxy for competition – is linked to productivity. Increasing number of studies have highlighted how industry concentration has increased over time in several OECD countries, coupled with rising mark-ups (Bajgar et al., 2019[34]; Bajgar, Criscuolo and Timmis, 2021[35]; Calligaris, Criscuolo and Marcolin, 2018[36]), and how industry concentration is positively correlated to TFP dispersion (Calligaris et al., 2024[37]). An increase in productivity dispersion may lead to slower diffusion of innovation, thus, affecting aggregate productivity growth.
Access to finance. Easier access to finance enables firms to invest, potentially driving higher productivity gains. However, access to finance remains a common challenge in developing countries, particularly for small and medium-sized enterprises (SMEs) and young firms (El-Said, Al-Siad and Zaki, 2013[38]). Financing constraints also play an important role in limiting firm entry and restricting the initial size of firms (Guiso, Sapienza and Zingales, 2004[39]; Bertrand, Schoar and Thesmar, 2007[40]). Moreover, limited funding can hinder firms’ ability to acquire and adopt new digital technologies, which, as discussed, are key to achieve efficiency improvements (Calvino et al., 2022[15]).
International trade. Trade, foreign direct investment (FDI) and GVCs are considered key drivers of productivity for their link with economies of scale and specialisation, as well as their impact on competition. Trade openness fosters productivity growth by encouraging competition in product markets. This competition prompts firms to innovate and improve efficiency to remain competitive, leading to the reallocation of resources towards more productive firms (Melitz, 2003[41]; Melitz and Trefler, 2012[42]). Trade and FDI enable the transfer of knowledge through interactions with international customers, suppliers and competitors. Multinational corporations play a key role in this process by transferring technology and management practices across borders, and fostering innovation and productivity growth (Crespi, Criscuolo and Haskel, 2008[43]). Trade can expand the market for domestically produced goods and services while enabling the acquisition of crucial imports, thus, stimulating national production. However, increased imports may also lead to a decline in consumption and production of less competitive domestic goods, potentially impacting growth and industrial development.
Quality of economic institutions. The quality of economic institutions – including high bureaucracy, red tape, corruption, crime and low infrastructure quality – significantly shapes the business environment, and thus indirectly influences firms’ productivity. For instance, lengthy contract-enforcement times as well as high tax burdens and high lending rates all tend to have a negative impact on TFP in MENA economies (Seleem and Zaki, 2021[7]).
Macro-economic environment. The macro-economic condition of a country indirectly affects productivity, brought by monetary and fiscal policies. Using a sample of 62 economies, Loko and Diouf (2009[44]) show that macro-economic stability (including low inflation and low government size measured by public expenditure), trade openness and strong institutions are associated with higher productivity.
Productivity-enhancing policy instruments
A combination of policy instruments is available to policy makers to influence factors that shape aggregate productivity. This sub-section first provides some examples of policy instruments available to policy makers to improve productivity. It then proposes a framework to classify productivity-enhancing policy instruments, drawing intensively from the work of Criscuolo et al., (2022[45]), who proposed a taxonomy for industrial policy instruments. The framework is adapted to productivity-related topics in the context of Egypt. Policy instruments are classified by the target of intervention (horizontal and targeted instruments) and by the channel through which they operate (between-firm and within-firm instruments).
Examples of pro-productivity policy instruments for policy makers
Table 1.1 provides some examples of policy instruments that can be used to influence key drivers of productivity growth. Each of the productivity factors are further explained in succeeding sections.
Note: The table presents some examples of instruments, and is not meant to be exhaustive.
For enhancing human capital and skills, policy makers can embrace a comprehensive policy mix to increase the quality of initial education, foster the use of lifelong learning and apprenticeship, support training for managers and promote labour mobility (Criscuolo et al., 2021[14]). In the MENA region, effective VET can encourage necessary work skills, especially for skilled blue-collar workers (Aboushady and Zaki, 2021[46]). Skilled workers can enable firms to upgrade, innovate, use sophisticated technology and enter new segments with high value added in the international market. This bottleneck calls for serious steps towards enhancing the quality of the VET in the region (Aboushady and Zaki, 2021[46]).
For promoting innovation, policy makers can, for example, incentivise firms’ R&D expenditures, which can be effective in increasing innovation and productivity growth. Evidence for OECD countries has shown that the appropriate policy mix to foster innovation can include: tax incentives for investment in R&D; direct public support through grants and innovation competitions; policies to facilitate co-operation and networking; indirect incentives through public procurement; and other so-called demand-side policies. Incentivising collaborative R&D projects between industry, academia and research institutions can be effective in leveraging expertise and resources for innovation (OECD, 2015[47]). Improvements in the innovation framework, such as incentivising competition, as well as highly operational products and financial markets, can make policies targeted at stimulating innovation activities more effective, especially for developing economies.
Investments can provide adequate infrastructures (e.g. transport, telecommunications, access to electricity). They can also facilitate business developments and provide firms with the necessary tools to obtain within-firm productivity enhancements, particularly in developing and emerging economies.
To foster digitalisation, effective policy instruments consist in investing in the improvement of the quality of information and communication technology (ICT) infrastructure (high-speed broadband networks) and the provision of lifelong learning programmes in digital skills. Both are found to be enabling tools to allow an inclusive adoption of digital technologies in both developed and developing economies (Kamel, 2021[48]; Calvino and Criscuolo, 2022[49]). Evidence from Italy showed that the supply of high-speed broadband infrastructure positively affected firms’ adoption of enabling technologies (e.g. broadband connectivity and fourth/fifth generation of cellular network technology [4/5G] mobile connection) and raised advanced technology adoption among more skilled firms (Calvino et al., 2022[15]).
Increasing the benefits of firm formalisation (e.g. by providing better access to credit and the financial markets) and reducing the cost of remaining formal (e.g. by providing tax exemptions after firms registration) have positive effects in incentivising business registration in developing countries (Abeberese and Chaurey, 2017[50]; Rocha, Ulyssea and Rachter, 2018[51]; OECD, 2026[52]). On the contrary, reducing the cost of registration has limited effect on its own (La Porta and Shleifer, 2014[53]), as evidence suggests that the cost of formalisation might be much higher than the initial cost of registration that firms need to pay (Ulyssea, 2020[54])7 (see Box 2.2 for further discussion on the policy levers that can incentivise formalisation).
Competition policy is an important component of a productivity-enhancing strategy, favouring an efficient allocation of production factors between firms and thereby contributing to aggregate productivity and structural change (Criscuolo et al., 2022[45]). Competition policies can help allocate resources to the most productive firms and induce exit of the least efficient ones (Sulistiawan and Rudiawarni, 2019[55]). Despite the advantage of such policies, anticompetitive practices persist, especially in developing economies where enforcement of competition law is often inadequate (Youssef and Zaki, 2024[33]). This represents a significant obstacle to SME development and growth. Several bottlenecks may impede competition, including informality, barriers to entry, lack of competition culture, state monopoly in key sectors, corruption and challenging political economy context (UNCTAD, 2010[56]). Therefore, a compelling competition policy is crucial to strengthen the role of the private sector and to enforce the principle of competitive neutrality among all market actors (Youssef and Zaki, 2024[33]). Interventions aimed at strengthening the judicial system, upholding the rule of law and improving IP policies are pivotal in combating corruption and reducing informality in developing economies. Establishing a robust legal framework and enforcing it effectively can create an environment where businesses can operate with greater certainty, favouring resource reallocation to most productive firms (between-firm instruments). Moreover, reducing red tape and complex administrative procedures can help integrate GVCs and can contribute indirectly to reducing informality (Ernst and Leung, 2023[57]).
Both developing and developed economies can implement a set of trade-related policies to boost export development. The literature has largely studied the link between export and productivity, through the lens of the “learning-by-exporting” theory behind export efficiency improvements (De Loecker, 2007[58]).8 Evidence supporting the theory of learning by exporting has been shown by Atkin et al. (2017[59]) using an experiment conducted on small rug producers in Egypt, studying the effect of foreign demand shocks. Additionally, research by Garcia-Marin and Voigtlander (2019[60]) suggests that entering export activities can stimulate within-firm efficiency, which is passed on to consumers through lower prices. Trade‑related policies aim to not only bring direct benefits by increasing the demand addressed to domestic firms, but also indirect benefits as exporting is associated with improved productivity. Most empirical studies have found export policies to have a positive effect on export development. However, while the impact on the intensive margin (i.e. in boosting export for firms that were already engaged in exporting activities) is largely observed, the positive impact of export policies on the extensive margin (i.e. in increasing the number of new exporters or the number of new products and destination markets for firms already exporting) is less apparent (see Box 1.1). Finally, export promotion agencies have proven to be effective in increasing exports in both less and more developed countries (Lederman, Olarreaga and Payton, 2010[61]; Olarreaga, Sperlich and Trachsel, 2020[62]). Similarly, evidence on bundles of export promotion policies have not only been proven to be effective, but have also been proven to be better than a single promotion activity (Comi and Resmini, 2019[63]).
Productivity technical services can also be an effective instrument to help firms improve efficiency, innovate, adopt new technologies and remain competitive. These services usually offer specialised advisory and support programmes and help firms comply with international requirements and quality standards. They can therefore affect multiple drivers of productivity, including human capital, managerial capabilities, digitalisation and innovation.
Shroj, Vitezic and Wagner (2023[64]) review the literature on short-term export support, where they underline that export promotion agencies, grants for commercialisation and export production activities are often found to have positive effects in augmenting firms’ export performance.
The authors identify export-boosting policies such as export promotion policies, export-oriented public grants, public export guarantee schemes and subsidised export loans. Most of the instruments evaluated in the literature focus on supply-side instruments, wherein the goal is to improve production by reducing costs. All papers identified by Shroj, Vitezic and Wagner (2023[64]) found positive effect on firms’ performance, with generally larger gains for small firms, as smaller firms face higher information asymmetry.
Several economies have export promotion agencies, whose role is to support firms in overcoming the difficulties of exporting, for instance, by providing information on foreign markets (access-to-input instruments) and export promotion programmes, which include financial instruments such as export guarantees or grants (investment incentive instruments). Both less and more developed countries benefit from export promotion agencies, as they support overcoming foreign trade barriers and solving asymmetric information problems (Lederman, Olarreaga and Payton, 2010[61]; Olarreaga, Sperlich and Trachsel, 2020[62]).
Most of the studies found export policies to have a positive effect on both intensive and extensive margin. However, while the impact on the intensive margin is largely observed, the positive impact on the extensive margin is less clear. Novel evidence from Tunisia outlined that a new export development project (TASDIR+) induced an intensive margin effect (the programme increased export) but not a higher diversification of products and destinations (Ali et al., 2025[65]). A recent grant programme implemented by the Italian government to hire a managerial consultant to boost the export capabilities of SMEs (so-called Temporary Export Manager) has been effective in increasing firms‘ exports outside Europe, but not at the extensive margin (i.e. no increase in the number of products, the number of trading partner countries and the firms’ exporter status) (Manaresi et al., 2022[66]).
Finally, the question arises as to whether support should be targeted at foreign multinational enterprises (MNEs), particularly to attract FDI (Criscuolo et al., 2022[45]). Some governments offer better treatment to foreign companies than domestic ones. The rationale for these policies is often linked to the positive externalities generated by FDI through productivity spillovers to domestic firms. Javorcik (2004[67]) shows positive spillovers from FDI through backward linkages, with the productivity of domestic firms being positively associated with the extent of potential contracts with multinational customers. Furthermore, evidence from Costa Rica showed that first-time suppliers to MNEs experience an increase in their size (in terms of employment, sales and assets) and in TFP, where two-thirds of this improvement comes from acquiring new buyers (Alfaro-Ureña, Manelici and Vasquez, 2022[68]). Similarly, manufacturing firms in Estonia that started to trade with multinationals increased their labour productivity through scale effects or effects on capital intensity, but with no significant initial effects on TFP (Masso and Vahter, 2021[69]). However, MNEs are not necessarily more likely than other firms to transfer knowledge to the local economy, casting doubt on the innovation benefits of targeting support specifically at subsidiaries of foreign MNEs (Veugelers and Cassiman, 2004[70]). Other evidence suggests that MNEs might be more likely to exit the market following a negative domestic shock (Ferragina, Pittiglio and Reganati, 2014[71]; Van Beveren, 2007[72]). Therefore, the effectiveness of targeting subsidies at MNEs could be limited, especially as these policies may increase volatility and reduce the resilience of the domestic economy (Criscuolo et al., 2022[45]).
Sources: Srhoj, S., V. Vitezić and J. Wagner (2023[64]), “Export boosting policies and firm performance: Review of empirical evidence around the world”, https://doi.org/10.1515/jbnst-2022-0019; Lederman, D., M. Olarreaga and L. Payton (2010[61]), “Export promotion agencies: Do they work?”, https://doi.org/10.1016/j.jdeveco.2009.09.003; Olarreaga, M., S. Sperlich and V. Trachsel (2020[62]), “Exploring the heterogeneous effects of export promotion”, https://hdl.handle.net/10986/36713; Ali, N. et al. (2025[65]), “What do market-access subsidies do? Experimental evidence from Tunisia”, https://doi.org/10.3386/w33985; Manaresi, F. et al. (2022[66]), “Managerial input and firm performance. Evidence from a policy experiment”, https://cep.lse.ac.uk/pubs/download/dp1871.pdf; Javorcik, B. (2004[67]), “Does foreign direct investment increase the productivity of domestic firms? In search of spillovers through backward linkages”, https://doi.org/10.1257/0002828041464605; Alfaro‑Ureña, A., I. Manelici and J. Vasquez (2022[68]), “The effects of joining multinational supply chains: New evidence from firm-to-firm linkages”, The Quarterly Journal of Economics, Vol. 137/3, pp. 1495-1552, https://doi.org/10.1093/qje/qjac006; Masso, J. and P. Vahter (2021[69]), “Joining and exiting the value chain of multinationals and the performance of suppliers: Evidence from inter-firm transaction data”, https://doi.org/10.2139/ssrn.3989069; Veugelers, R. and B. Cassiman (2004[70]), “Foreign subsidiaries as a channel of international technology diffusion: Some direct firm-level evidence from Belgium”, European Economic Review, Vol. 48/2, pp. 455-476, https://doi.org/10.1016/s0014-2921(02)00327-6; Ferragina, A., R. Pittiglio and F. Reganati (2014[71]), “Does multinational ownership affect firm survival in Italy?”, https://doi.org/10.3846/16111699.2012.707622; Van Beveren, I. (2007[72]), “Footloose multinationals in Belgium?”, https://doi.org/10.1007/s10290-007-0118-8; Criscuolo, C. et al. (2022[45]), “Are industrial policy instruments effective? A review of the evidence in OECD countries”, https://doi.org/10.1787/57b3dae2-en.
Horizontal and targeted instruments
Policy instruments can either be horizontal or targeted. Horizontal instruments are policies that are intended for all firms, irrespective of their location, size, etc. Targeted policies are instead those benefitting a specific subsample of firms based on their location, technology and so on. Importantly, even if originally defined as horizontal, some policies may benefit certain types of firms. For example, even if R&D policies are usually horizontal, they tend to favour large firms and those firms in innovation-intensive sectors.
Targeted policies should be competitive neutral (Criscuolo et al., 2022[45]). Policies that promote technology adoption, innovation and entrepreneurship can improve competition and support business dynamism. However, they may specifically favour certain firms, thereby posing challenges to the competitive neutrality principle. When targeted policies are designed to fix market failures or address externalities, they may not necessarily reduce competition. Instead, they may allow even more firms to enter the market and further drive competition up. When competitive neutrality is not feasible in achieving desired objectives, interventions should be limited, temporary and closely monitored (OECD, 2020[73]). Meanwhile, in this vein, horizontal policies have less detrimental effect on competition.
The comparison between the effectiveness of horizontal and targeted instruments is relatively limited in the literature (Criscuolo et al., 2022[45]). Some results for Japan (Lechevalier, Ikeda and Nishimura, 2010[74]) suggest that targeted policies should not be too narrow, but instead should consider the whole industrial ecosystem, notably upstream and downstream sectors. Box 1.2 presents practices in the use of horizontal and targeted policies from both developed and developing countries, based on a United Nations Conference on Trade and Development (UNCTAD) survey (UNCTAD, 2018[75]).
Horizontal instruments include policies to develop skills, foster competitiveness and entrepreneurship and encourage digital and green development. Sectoral- and industry-specific policies are the oldest and most widely used targeted industrial policies. In this regard, targeted instruments can be a key complement to horizontal policies in achieving a chosen objective. However, the effectiveness of targeted industrial policies remains largely understudied (Criscuolo et al., 2022[45]).
The UNCTAD conducted a survey of industrial policies and industrial development strategies in both developed and developing countries to better understand practices of industrial policies (UNCTAD, 2018[75]).9 The survey covers policies implemented since 2008, including 30 strategies formulated by developed economies and 84 by developing and transition economies, including the 5 BRICS countries (Brazil, India, People’s Republic of China, Russian Federation, South Africa) and 24 least developed countries.
The survey revealed that most of the strategies contain horizontal policies for industrial development, industrial capacity building, technology upgrading and skill building (UNCTAD, 2018[75]). Around 40% of sampled strategies also combined targeted polices to promote specific industrial sectors (e.g. processing of natural-resource-based industries, light manufacturing). Meanwhile, a quarter of the surveyed strategies – mostly in developed countries – focus on advanced manufacturing industrial development through the application of digital and other advanced technologies in conventional industry (e.g. smart manufacturing, Industry 4.0, Manufacturing Innovation 3.0).
Sources: Criscuolo, C. et al. (2022[45]), “Are industrial policy instruments effective? A review of the evidence in OECD countries https://doi.org/10.1787/57b3dae2-en; UNCTAD (2018[75]), “Investment and new industrial policies”, https://unctad.org/system/files/official-document/wir2018_en.pdf.
Within-firm and between-firm instruments
Depending on the channel through which policy instruments affect firm productivity, they can be further classified as “within-firm” or “between-firm” instruments, based on the categorisation of Criscuolo et al. (2022[3]). These instruments operate on the supply side by directly affecting production decisions (Figure 1.3).10
Within-firm instruments affect firm performance by: i) providing incentives for business investment through sharing either the costs or the risks with the public sector (e.g. tax expenditures, grants, subsidies, financial instruments); or ii) providing efficiency-improving inputs (e.g. skills, public R&D, infrastructure). These instruments do not only affect innovation at the frontier, but also promote technology diffusion by improving the absorptive capacities of firms, for example by supporting related investments, improving firms’ management practices or by addressing skill shortages and skills mismatch (Calvino and Criscuolo, 2022[49]; Calvino et al., 2022[15]).
Between-firm instruments affect industry dynamics through framework instruments or complementary policy areas (e.g. financial services and capital market, entrepreneurship policies, tax system, labour mobility, IP policy). On the one hand, framework instruments affect the reallocation of production factors (capital and labour) towards the most productive uses, allow efficient entry of new ventures or provide a framework to balance the benefits of innovation diffusion with the incentive to innovate through IP and standardisation policies. On the other, complementary policy areas aim to ensure fair competition between firms, particularly for incumbents and challengers, or domestic and foreign firms. Product market regulation (PMR) such as barriers to entrepreneurship play a significant role with respect to factor allocation, as they condition firm entry, exit, scale up and scale down. Indeed, more stringent PMR was found to decrease net job contribution in OECD countries (Calvino, Criscuolo and Menon, 2016[76]). Pro-competitive PMR enables innovative firms to bring new products to the market, expand and promote technology diffusion from frontier to laggards. Liberalising product markets can facilitate firm monitoring and encourage state-owned firms to improve efficiency. Its impact may be sizeable in some emerging and developing economies given the large state-owned sectors, which create implicit barriers to entry (IMF, 2016[77]).
The distinction (i.e. between-firm and within-firm) explicitly accounts for the fact that productivity growth partly arises from better innovative capacity or creative destruction, particularly the reallocation of production factors from less to more productive firms with a superior technology (Aghion and Howitt, 1992[78]).11 Furthermore, it sheds light on resilience. Sectoral resilience can be attained through increasing firm-level resilience, as well as improving the ability to quickly mobilise and (re)allocate resources across firms.
Within-firm instruments primarily affect productivity drivers internal to firms (such as human capital and innovation activity), while between-firm instruments primarily affect external drivers (such as competition, international trade…). However, the link is not necessarily one-to-one. Some between-firm policy instruments may also affect internal factors to the firms, while within-firm instruments may also affect external drivers of productivity growth. For example, enhancing the quality of infrastructure affects firms’ performance (within-firm instruments) and also directly contributes to heightened competition (external factor to the firms).
Note: Examples are based on the main channel through which pro-productivity policy instruments work in the Egyptian context.
Source: OECD iteration based on Criscuolo, C. et al. (2022[3]), “An industrial policy framework for OECD countries: Old debates, new perspectives”, https://doi.org/10.1787/0002217c-en.
It is important to note that different pro-productivity policies may have different impacts on firms’ and countries’ productivity depending on two points:
The initial level of country development. The impact of different policy reforms depends on the distance of the country to the technology frontier (IMF, 2016[77]). Lower income countries benefit most from reforms that alleviate constraints on trade and foreign investment, as well as removal of agricultural price controls and subsidies, while emerging market economies experience relatively larger productivity gains from enhancing the efficiency of the banking systems, capital market development and improving the business environment (IMF, 2016[77]).12 However, the impact of such policies on productivity can take time to materialise.
The initial level of firms’ productivity (leaders versus laggards). Albrizio and Nicoletti (2016[2]) identified the extent to which policies are relevant in OECD countries for laggards, national frontiers and global frontiers. The authors show that policies that incentivise knowledge creation are more relevant for boosting productivity among global and national frontier firms, while policies incentivising knowledge diffusion and efficient resource reallocation (e.g. by IP rights protection policies, R&D fiscal incentives, other public support for innovation) can be effective for improving the productivity of both national frontiers and laggard firms.
Finally, effective governance is a key facilitator of successful policy interventions (OECD, 2025[79]). The co‑ordination of stakeholders in the business sector, the public sector and research institutions is crucial to fostering an environment that supports research and evaluation in the context of pro-productivity policies. Good governance and transparency promote the success and inclusiveness of policies through effective design, implementation and evaluation processes (Criscuolo et al., 2022[3]). Such governance rests on three pillars: design, implementation and evaluation of the polices. Recently, many OECD countries have established institutions to provide policy advice on productivity growth in the form of policy-oriented productivity commissions or productivity boards (Pilat, 2023[1]). The next section of this chapter discusses in depth the role of such institutions, the importance of policy evaluations and the enabling factors that prompt sound economic advice.
The design of productivity-enhancing policy strategies
Following Criscuolo et al. (2022[3]), a strategy is defined as a combination of articulated and consistent policy instruments designed to reach a specific goal. In this setting, productivity strategies are considered strategies aimed at improving productivity by enhancing firm productivity, by redirecting resources to the most productive firms or by increasing diffusion of innovation throughout the economy.
This sub-section first details the importance of setting quantitative objectives in pro-productivity strategies. It then describes the different type of strategies available to policy makers, distinguishing them based on their strategic priority: sectoral, mission-oriented, technology-focused and place-based.
Objectives of the strategy
For effective design, monitoring and implementation of pro-productivity strategies, specific goals need to be set when detailing the strategy. Having quantitative indicators in a strategy can also be key to initiating a data and evaluation culture which can be used throughout the policy cycle (see section on policy monitoring and evaluation in Egypt).
This can be achieved by setting quantitative objectives in the strategy. Objectives should be specific, measurable, ambitious, realistic and time-bound (SMART) (see OECD (2025[79])). Even though the strategy itself can have a broad scope, objectives should be specific and main indicators and sub-indicators should be measurable. Ambitious objectives could promote the government’s work and inspire stakeholders to co‑operate to achieve them. However, objectives should also be realistic: if too ambitious and never achieved, they could be discouraging. Finally, while the strategy may be aiming for a long-term vision, it can be useful to include short-term objectives (time-bound).
A reduction in the number of objectives in each strategy could, for example, allow to focus on the objectives that could be more realistically achieved in the timeframe of the strategy by following the SMART approach. Quantitative objectives should be detailed in the public documents of government strategies to enhance transparency.
Macro-economic circumstances, geopolitical issues and other factors could impact the realisation of the goals of the strategy. OECD (2025[79]) surveyed Austria, Estonia, Ireland, Slovenia and the United Kingdom to identify the governance of their industrial strategies, and found out that one important design feature is the inclusion of a provision to redesign policies, or reduce their budget, when they fail to meet their goal. In Ireland and Slovenia for example, there is an internal monitoring process every two years (every year in Estonia) that offers the possibility of using the latest information available on instruments and the circumstances to adapt as necessary.
Type of strategy
Based on their strategic priority, productivity strategies can be categorised as sectoral, mission-oriented, technology-focused or place-based (Criscuolo et al., 2022[3]).
Sectoral strategies target firms in specific sectors or groups of interlinked sub-sectors. These strategies primarily aim at boosting innovation and productivity growth. While the rationale for sectoral strategies has been discussed for decades, new arguments are emerging in recent literature focusing on their spillovers: i) learning-by-doing theory suggests that sectoral productivity increases with experience and thus productivity increases with the cumulated output of an industry; ii) external economies of scale imply that firm productivity rises with the sector size, hence, subsidising sectors to increase their size can improve economic efficiency; iii) first entrants may reduce the uncertainty for subsequent investors by revealing sector-specific information, thus inducing informational externalities; iv) in industries with barriers to entry, sectoral strategies that support entering firms can help stimulate competition; v) government support may be justified, as upstream sector productivity can impact downstream performance in value chains; and vi) co‑ordination failures arising from projects requiring several simultaneous investments may necessitate government intervention to facilitate investments and to foster collaboration among stakeholders.13 Overall, while sectoral strategies can enhance productivity and resilience, determining the optimal level of public support remains a challenge, especially when considering the potential for moral hazard among firms (Criscuolo et al., 2022[3]).14
Mission-oriented strategies entail a co‑ordinated approach to research, innovation policy and regulatory measures tailored to address well-defined societal challenges within a specific timeframe. These strategies encompass a wide range of objectives, from addressing climate change to tackling public health issues, and typically involve concrete and measurable targets. They are increasingly popular for addressing challenges like the green transition and United Nations Sustainable Development Goals in OECD countries (OECD, 2021[80]), contributing to industry resilience as well as fostering innovation and technology diffusion. Unlike other strategies, mission-oriented policies are transformation-oriented, focusing on the direction of innovation rather than its level. They require co‑ordination across policy domains and stakeholders and may involve various demand-side and governance instruments. Moreover, while these strategies may not directly target productivity growth, they may address specific challenges that limit productivity and growth. These policies are justified by several rationales, including their ability to generate social benefits linked to the targeted issue, address co‑ordination failures across industries, improve the acceptability of public investment and reduce regulatory uncertainty (Criscuolo et al., 2022[3]). Overall, mission-oriented strategies offer a proactive approach in fostering sustainable development and innovation, with potential benefits for long-term societal well-being and economic growth.
Place-based strategies primarily aim to influence the regional distribution of economic activity, addressing objectives related to inclusiveness, fairness and equality. These strategies may also seek to enhance productivity and economic growth by supporting regional specialisation in sectors and technologies where regions have a comparative advantage, such as through innovation cluster policies. The localisation hypothesis states that externalities occur from the geographic clustering of firms from related industries (Marshall, 1920[81]), thereby creating several channels for economies of scale and a basis for knowledge spillovers (Badr, Rizk and Zaki, 2019[82]). Moreover, clustering of firms enhances the exchange of ideas, information and access to capital. As a result, policies aimed at facilitating clusters seek to bring together research institutions, large firms, start-ups and SMEs to capitalise on localised knowledge spillovers and achieve the critical size necessary for global connectivity. Most OECD countries have adopted some form of cluster or sector-based approaches to support industrial strategies (OECD, 2015[47]). A primary concern when evaluating any place-based policy should be the potential mobility response it triggers and the resulting consequences of that mobility (OECD et al., 2021[83]). Economists have long warned that the benefits generated by place-based policies at the local level should be considered against losses elsewhere. The evaluation of place-based programmes is challenging, and the literature remains scarce. In examining the impact of the regional development programme by the Tennessee Valley Authority, Moretti (2014[84]) demonstrated that the direct investments resulted in a noteworthy rise in national manufacturing productivity, surpassing the costs of the programme. However, its aggregate effects were found to be limited: while there were gains in agglomeration within the region, these were counterbalanced by aggregate output losses in other parts of the country. Criscuolo at al. (2019[85]) exploit the change in the areas of eligibility criteria for a place-based policy in the United Kingdom and show that eligible areas increased jobs and reduced employment, mainly through incumbents expanding (intensive margin effect) rather than more entry/less exit (extensive margin). They show that the effect was solely for small firms, while large ones get the subsidy without increasing activity. Nevertheless, they do not find a positive effect on TFP, even for small firms.
Technology-focused strategies primarily aim to promote innovation, diffusion and, ultimately, productivity. These strategies often focus on general-purpose technology (GPT), which has applications across various sectors and is now attracting special attention from many countries. Similar to mission-oriented policies, technology-focused strategies are inherently multi-sectoral but may also include targeted interventions in sectors producing goods or services embodying GPT. Two main arguments guide the design of these policies. First, external learning by doing or informational externalities are particularly significant for new technologies with broad applications, including follow-on innovations. For instance, the nascent S-curve concept highlights the large first-mover disadvantage in emerging fields or technologies with uncertainty. Second, upstream sectors, referring to sectors producing goods or services incorporating GPT, are also important in the implementation of technology-focused strategies (Criscuolo et al., 2022[3]).
The different types of strategies may overlap. For example, infrastructure (e.g. in telecommunications, transport, electricity) may be seen as both mission-oriented strategies and place-based if such infrastructure is located in specific areas of a country. Moreover, sectoral strategies can also be technology-focused, such as policies aimed at developing the hydrogen supply chain. It is important to bear in mind the limitation of the classification, which nevertheless remains useful to explicit the underlying rationale of strategies.
In recent years, Egypt has introduced and planned several pro-productivity policies. The 2021 National Structural Reform Programme (Box 1.3) includes initiatives to improve both external (e.g. business environment and competition) and internal (e.g. human capital development) factors to boost productivity.
Since 2016, the Egyptian authorities launched an ambitious reform programme aimed at achieving rapid, sustainable and inclusive growth, the NPESR, which is composed of two phases.
The first phase focused on improving macro-economic conditions
The first phase of the programme, developed in co‑operation with the International Monetary Fund, focused on monetary and financial policies. Thanks to this programme, public investment in both the total economy and the manufacturing sector rose after 2016 (see Annex Figure C.1). The first phase of the programme focused on implementing policy instruments to address factors external to firms (particularly macro-economic policies), wherein their stabilisation helped raise productivity. Although Egypt strengthened its macro-economic fundamentals, reaching an annual gross domestic product (GDP) growth of 4.4%. – which was the fastest among economies in the MENA region in the 2015‑19 period (OECD et al., 2021[83]) – the improvements came with detrimental effects to the private sector, including high inflation and the associated tightening of monetary policy thereafter.15 Indeed, the large currency depreciation following the liberalisation of exchange rates increased the inflation rate, which caused a rise in the cost of living, significantly limiting firms’ activity (ECES, 2022[86]; 2023[87]).16 Moreover, high public borrowing crowded out the private sector (EBRD, 2017[88]; Morsy and Levy, 2020[89]).17
The second phase focuses on enhancing private sector
To address the challenges in the private sector, in April 2021, the Egyptian government launched the National Structural Reform Programme (NSRP) under the auspices of MPED and as the second phase of the NPESR. The objective of the second phase is to enhance economic resilience, promote employment and employability and raise the productive capacity and competitiveness of the economy, particularly export-oriented industries.18 The programme aims to diversify the production of the Egyptian economy by focusing on three leading sectors (manufacturing, agriculture and ICT), which represent the main pillar of the structural reform programme. Besides this, the second package contains a large set of initiatives aimed at influencing both external factors to firms (e.g. improving business environment, enhancing financial inclusion) as well as internal factors, including developing human capital (such as training, empowering women, raising the efficiency of the labour market and developing the system of technical education and vocational training). Finally, the programme is aimed at raising the efficiency of public institutions through digital transformation and governance.
In fiscal year 2021/22, the 3 priority sectors (manufacturing, agriculture and ICT) represented 30% of Egypt’s GDP, achieving the lower bound of the targeted range of 30% to 35%.19 Among the 3 priority sectors, ICT reached the highest growth rate for 4 fiscal years: 16.3%, 16.5%, 16.1%, and 15.3% in fiscal years 2022/23, 2021/22, 2020/21 and 2019/20 respectively (MPED, 2024[90]).20 Furthermore, non-oil merchandise exports exceeded expectations, with an annual growth rate of 20%, 5 percentage points higher than the initial target. The electronics and engineering industry registered an annual growth rate of 27%, 7 percentage points higher than the government’s target.
Nevertheless, the Egyptian government is working diligently to achieve comprehensive and sustainable development through integrated strategic plans (MPED, 2024[90]).
The new national strategy for industry and foreign trade development
The MoIND is finalising the Industrial Development Strategy 2026-2030. The strategy aims to position Egypt as a regional hub for sustainable and flexible manufacturing and international trade. It focuses on the efficient use of resources, innovation and industrial technological transformation. MoIND identified priority sectors for deepening local manufacturing: leather, agriculture, printing and packaging, food, textile, medical, chemical, furniture and engineering. By 2030, the strategy targets USD 145 billion in non-petroleum exports of goods and services, a 20% contribution of value added to GDP, 7 million direct and indirect jobs in the industrial sector and a 5% contribution of green industries to GDP.
Sources: MoIND, “National Strategy for Industry and Foreign Trade Development (2026-2030)”; MPED (2022[91]), “The Ministry of Planning and Economic Development and the United Nations in Egypt signed a Declaration of Intent to strengthen the implementation of Egypt’s National Structural Reform Programme 2021-2024”, https://mped.gov.eg/singlenews?id=1164&lang=en; MPED (2024[90]), “Macroeconomic Stability, Structural Reforms & Economic Diplomacy to Advance Sustainable Economic Development”, https://mmd-moic.s3.eu-west-1.amazonaws.com/files/English%202024%20Pages.pdf; OECD (2021[83]), Production Transformation Policy Review of Egypt: Embracing Change, Achieving Prosperity, https://doi.org/10.1787/302fec4b-en; ECES (2022[86]), Business Barometer: October-December 2022, https://eces.org.eg/wp-content/uploads/2023/04/BB65-finallll-E.pdf; ECES (2023[87]), Business Barometer: October-December 2023, https://eces.org.eg/wp-content/uploads/2023/09/Business-Barometer-Issue-67.pdf; EBRD (2017[88]), Private Sector Diagnostic Egypt, European Bank for Reconstruction and Development; Morsy, A. and A. Levy (2020[89]), “Growing without changing: A tale of Egypt’s weak productivity growth”, https://doi.org/10.1111/1467-8268.12438; MPED (2024[90]), Gross Domestic Product, https://mped.gov.eg/GrossDomestic?lang=en.
MoIND plays a key role in shaping industrial and trade policies to diversify the economy through high‑potential manufacturing sectors (see discussion in Chapters 2 and 3). Aside from MoIND, other key stakeholders include the CBE, MCIT, Ministry of Foreign Trade and Investment and MSMEDA.
Egypt designed several productivity-enhancing strategies in the recent period
Table 1.2 gives an overview of the main productivity policies implemented or planned in Egypt since 2015, categorising policies by type of strategy (sectoral, mission-oriented, technology-focused and place-based), as discussed in previous sections. Within each strategy, the table further distinguishes three policy areas that a strategy can address, reflecting some main drivers of productivity, both internal and external to firms, discussed above.
This double categorisation reflects the fact that a strategy can cover different policy themes. If a strategy can be classified in different categories, Table 1.2 retains the primary selection criteria. Additionally, standalone policies are included for classifying policies that do not exactly fall into the above strategies. Some of these policies have already been discussed in individual chapters. Policies related to the business environment and SME growth are discussed in Chapter 2 of this report,21 those related to industrial development and trade are reviewed in Chapter 3 and policies related to innovation and technology are examined in Chapter 4.22
Pro-productivity sectoral strategies in Egypt mostly focus on promoting industrial development and trade (e.g. MoIND strategy, Table 1.2, Column 2) and innovation and technology (e.g. Egypt Makes Electronics, Table 1.2, Column 3).23 The main goal of the MoIND strategy is to enhance industrial growth, export growth and the contribution of micro, small and medium firms (MSMEs) to GDP (see Chapter 2 for more details).
Mission-oriented strategies in Egypt mostly relate to improving the business environment and SME growth. Examples include the CBE Financial Inclusion Strategy and the Ministry of Local Development Mashroak Program (Table 1.2, Column 1).24 The Decent Life programme is also classified as a mission-oriented strategy, as it aims to improve the living conditions of Egyptians, including various aspects of health, social and living conditions. In this pro-productivity policy setting, Table 1.2 classifies the programme in technology and innovation due to its target of improving Internet infrastructure in rural areas (which has been implemented under the MCIT).
Technology-focused strategies are mostly led by the MCIT. Examples of relevant initiatives include the ICT 2030 Strategy, the National Artificial Intelligence Strategy and Digital Egypt. As part of technology-focused strategies under Digital Egypt, government agencies are digitalising their services. The MCIT is co‑operating with all sectors of the state to achieve digital transformation through the provision of services to citizens and the improvement of government performance.
Place-based strategies in Egypt focus on targeting certain areas and sectors in addressing regional disparity of economic activity. They are mainly based on the creation of economic zones benefitting from tax and custom duties exemptions, thus, relating to industrial development and trade policies (Table 1.2, Column 2). Examples include the creation (and modification) of investment zones, private free zones and technological zones, as well as the special economic zone laws.
Finally, standalone policies are relevant in helping to boost the productivity growth of the Egyptian manufacturing sector. The first column shows that policies enhance business environment and encourage SME growth through initiatives like the State Ownership Policy (see Chapter 2) to promote competition and reduce the role of state-owned enterprises. Several initiatives like Decent Life, as well as existing financial and non-financial services by the MSMEDA specifically target MSME growth. The second column shows industrial and trade development initiatives. The NSRP contributes to this direction through policies that give easier access to industrial land. Several trade agreements also facilitate and boost trade development (see Box 3.4). Meanwhile, the third column shows technology and innovation initiatives, such as the National Strategy for Intellectual Property (2022-27) (see Chapter 4) and improvements in the Productivity and Vocational Training Department (see Chapter 2 and 4).
Note: This table contains pro-productivity policies that are related to the themes (i.e. policy areas) discussed in this report. Specific policies to cushion the impact of the COVID-19 crisis are not included in this table. The table uses “strategy” and “programmes” interchangeably. Further note that this table is not exhaustive, as it is intended to serve as an illustration on how various initiatives can be classified within the context of Egypt.
Policy monitoring and evaluation in Egypt remain concentrated in few initiatives
Policy monitoring and evaluation is crucial to determine the effectiveness of policies and reflect timely adjustments. As massive public investments are made in development programmes in Egypt, there is an urgent need to evaluate the effectiveness of such programmes. Some dedicated agencies in Egypt are responsible for conducting policy evaluations and support decision making.
The Egypt Information and Decision Support Center (IDSC) regularly performs decision support studies for the Egyptian prime minister. The IDSC issues periodicals, studies, reports and policy papers, as well as advanced technologies, applications and interactive platforms. The agency also has a dedicated department for monitoring and evaluating public policies, where it provides policy evaluations and conducts industry-focused workshops.
Moreover, in 2022, the MPED launched an initiative called the Egypt Impact Lab to conduct policy evaluations and advance the use of evidence in the decision-making process (see Box 1.4 for more details).25 The lab operates in close collaboration with key strategic governmental partners, including the Ministry of Social Solidarity, the National Council for Women, the MSMEDA, the Ministry of Education and Technical Education and MPED’s National Institute for Governance and Sustainable Development.
The evaluation of public policies can be performed ex ante, ex post and in itinere depending on the time at which evaluation is conducted relative to the policy cycle. Ex ante evaluations are performed before the start of a public intervention to help shape its design, determine its relevance and predict its impact. In itinere evaluations are performed when the programme is ongoing, wherein the goal is to collect evidence on its impact and effect, potentially to adjust the policy under implementation if needed. Ex post evaluations are conducted at the end of the public intervention to give a more complete picture of the policy impact on beneficiaries by addressing relevant research and policy questions. The distinction between in itinere and ex post evaluation is not always straightforward, for example, for interventions that do not have a real “end-date” and have been modified over time without being terminated (OECD, 2023[92]). To assess the causal impact of a policy in itinere or ex post evaluations, the beneficiaries’ economic outcome is compared with the outcome of a control group that presented similar characteristics ex ante, by using several impact methodologies, including difference-in-differences, instrumental variables and regression discontinuity design methods (see OECD (2023[92]) for more details).
Only research questions that have relevant data collected can be examined in an impact evaluation. Indeed, the collection, integration and effective use of data are crucial prerequisites to produce high-quality productivity analysis. For this reason, it is crucial to have a data infrastructure that is as comprehensive as possible. Egypt should thus invest to improve the quality of its data infrastructure for policy analysis (see discussion in Chapter 6).
In this front, Egypt currently does not have a co‑ordinating institution that conducts or steers productivity analysis and can advise policy makers to pursue productivity growth. Having an established dedicated pro‑productivity institution is a common practice across several OECD countries. The next sub-section describes the role of pro-productivity institutions and provides examples of existing institutions, which may serve as examples for Egypt.
The Egypt Impact Lab, established in 2022, is a strategic initiative of the Abdul Latif Jameel Poverty Action Lab Middle East and North Africa (J-PAL MENA) at the American University in Cairo and MPED.
The project is built around three pillars:
Pillar I – generating evidence (identify policy priorities and evaluate policies).
Pillar II – building government capacity to use evidence (workshops).
Pillar III – strengthening local knowledge ecosystems to enable policy influence (dashboard and visualisation tools).
The focus of these three pillars is channelled into four thematic areas which follow governmental priorities: i) social protection and poverty alleviation; ii) family development and women’s empowerment; iii) education, employment and MSME development; and iv) environment, energy and climate change. The lab is also expanding its coverage to include energy and climate change issues with the goal of improving clean air and water access (Hub of Advanced Policy Innovation for the Environment).
The Egypt Impact Lab has conducted already several studies, examples of ones related to businesses are:
Impact of loans and grants on micro enterprise growth in Egypt (Crépon, El Komi and Osman, 2023[93]). This study tests the impact of loans, cash grants and in-kind grants on business and household outcomes (e.g. microentrepreneurs’ business decisions, business outcomes and overall welfare). Results show positive impact of all three support mechanisms, with sounder impact on women compared to men.
Graduating micro enterprises to larger loans in Egypt (Bryan, Gharad and Osman, 2023[94]). The study evaluated the impact of providing large loans on the revenues, profits, wage bills, productivity and household expenditures of small businesses owners. These loans were up to four times larger than previous loans the firm owners had received. Findings showed that large loans led to substantial improvements in key business and household outcomes but only for the best performers. On the other hand, profits halved for low performers.
Improving youth employment through job training and capital in Egypt (Elsayed, Hempel and Osman, 2018[95]). The study examines the impact of active labour market programmes, finding positive effects on labour market outcomes (employment status and income) and non-labour market outcomes (female empowerment) among youth.
Sources: Crépon, B., M. El Komi and A. Osman (2023[93]), “Is it who you are or what you get? Comparing the impacts of loans and grants for microenterprise development”, https://www.povertyactionlab.org/sites/default/files/research-paper/wp_3230_What-You-Are-or-What-You-Get_Egypt_Feb2023.pdf; Bryan, G., D. Gharad and A. Osman (2023[94]), “Big loans to small businesses: Predicting winners and losers in an entrepreneurial lending experiment”, https://www.adam-osman.com/wp-content/uploads/2023/03/Big_Loans_to_Small_Businesses_Oct2023.pdf; Elsayed, A., K. Hempel and A. Osman (2018[95]), “Overcoming youth unemployment in Egypt: Randomized evaluations showcase the promise of active labor market programs”, https://prospera-consulting.com/wp-content/uploads/2018/10/Impact-Evaluation-Youth-Employability-EEIP-Egypt-2018.pdf; J-PAL (n.d.[96]), Egypt Impact Lab: An embedded lab in the National Institute for Governance and Sustainable Development, https://www.povertyactionlab.org/egypt-impact-lab.
Pro-productivity institutions across OECD countries provide co‑ordinated evidence on productivity to support policy making
A common practice across several OECD countries has been the establishment of pro-productivity institutions to co‑ordinate productivity research among a wide range of stakeholders. Such institutions act as a single entity in consolidating inputs and evidence from various government agencies to formulate cohesive policy recommendations. The first pro-productivity institution was created in Australia in 1988 and such experience has been followed by several other OECD countries: New Zealand (in 2010), Denmark (2012), Mexico (2013), Norway (2014) and Chile (2015). Following a recommendation of the European Council in September 2016, a growing number of European Union (EU) countries also started to establish productivity boards (Pilat, 2023[1]). 26 Indeed, over the past years, the importance and perceived usefulness of pro-productivity institutions have significantly expanded (Renda and Dougherty, 2016[97]).
The general role of pro-productivity institutions in OECD countries is to monitor trends, evaluate policies and promote improvements related to productivity and competitiveness (see Cavassini et al. (2022[4]) and Pilat (2023[1])). Whilst most institutions focus on examining productivity at the economy-wide level, some institutions also provide sectoral and regional analyses.
Based on the work of Cavassini et al. (2022[4]), Figure 1.4 elaborates on the key features of pro-productivity institutions across OECD countries. A distinct characteristic of pro-productivity institutions is their institutional setup designed to ensure an independent analysis. This independence would guarantee that analyses provided by the institution are objective and are not influenced by government agencies or political cycles. Such a context would also facilitate the promotion of long-term productivity policies, as opposed to short-term ones. Additionally, pro-productivity institutions need to have stable and sufficient resources to attract high-quality staff and leadership. The institution’s capacity to conduct independent research and provide policy recommendations is influenced by various factors, including the institution’s mandate, legal status, criteria for selecting board members and management, the composition of the board and its interactions with other governmental bodies (Cavassini et al., 2022[4]) (see Box 1.5 for a discussion on the type of legal status of pro-productivity institutions across OECD countries).
Source: Cavassini, F. et al. (2022[4]), “Pro-Productivity institutions at work: Country practices and new insights on their set-up and functioning”, https://doi.org/10.1787/f5a3a2df-en.
Most productivity institutions across OECD countries do not collect their own data. They rely mostly on national banks, national statistical offices and other public bodies to supply data, including international sources. Pro-productivity institutions frequently exchange data with other national and international institutions, where they require a co‑operative relationship with other relevant government agencies. Having access to granular, up-to-date data (including firm-level data) is key in producing robust technical analysis to inform policy makers. In some cases, for example, in Belgium, a law establishing the institution’s mandate can also legally grant access to relevant data from government institutions. Moreover, some institutions have built partnerships with business associations to collect regional and sector-specific data to tackle sector-specific issues. Building on robust methodologies is also a crucial step for the effective operation of productivity institutions. Data analysis, including the development of modelling scenarios, allows to forecast productivity trends and to provide ex ante analysis of potential policy recommendations (Cavassini et al., 2022[4]).
Finally, a wide range of communication tools should be leveraged to raise public awareness on the work of the institution and ensure that reliable evidence and data are used for designing pro-productivity policies. Evidence needs to be communicated to policy makers and the public at large in a comprehensive, timely and accessible way. Usually, pro-productivity institutions disseminate their results in the form of annual reports and policy bulletins and may also offer ad-hoc thematic studies. Some institutions also make use of visualisation tools, such as the Austrian Productivity Board monitoring dashboard.27
Across OECD countries, pro-productivity institutions can have several legal forms:
Government advisory councils: They often have a secretariat based within a ministry or the prime minister’s office, although some may operate independently with their own budgets and separate staff resources (Banks, 2015[98]). The boards often receive technical and secretarial support from a government department or from experts. In certain instances, the responsibility for enhancing productivity may be delegated to entities such as research institutes (e.g. as evident in the Netherlands and Slovenia).
Standing inquiry bodies: They have the core function of conducting public inquiries at the request of the government on key policy or regulatory issues, such as in Australia and Chile.
Ad hoc taskforces: They are often set up to provide specialist expertise or offer an independent perspective. The remit of these bodies varies and they tend to be temporary in nature.
Standing inquiry bodies seem to demonstrate a higher degree of independence compared to advisory councils that are situated within government ministries. However, institutions with closer ties to government (e.g. as is the case in Portugal, the Slovak Republic) often have greater opportunities to significantly influence the policy process and foster evidence-based policy making internally. A common and fundamental aspect for the effectiveness of pro-productivity institutions is their autonomy to determine the content and scope of their work, as well as the freedom to act independently (Cavassini et al., 2022[4]).
Most institutions are comprised of a diverse array of members drawn from academia, business associations, the private sector, unions, government departments and/or other public sector entities, reflecting a high degree of heterogeneity across OECD countries. Mainly, these institutions hire experts in trade, macroeconomics and public policy, in addition to microeconomic experts focusing on productivity. External advisors and consultants are often brought in to complement in-house expertise. Finally, incompatibility criteria can help avoid conflicts of interest. For instance, in Germany, members of the institution are prohibited from being affiliated to any employee association or trade union and cannot hold permanent contracts with such organisations (GCEE, 2019[99]).
In most international examples, pro-productivity institution chairs are seasoned economists or academic experts. However, in some cases, such as in Hungary and the Slovak Republic, the head of the institution may be a political figure, such as a minister. Although this may signal a strong interest by policy makers in productivity-related issues, robust safeguards must be in place to ensure the analytical independence of the institution’s work.
To facilitate the integration of research into policy making, pro-productivity institutions often leverage and attract expertise from academia and the research community. This entails publishing calls for interest or actively seeking suitable candidates who meet specific eligibility criteria. It is essential to establish clear expectations upfront to ensure that individuals are aware of the time and commitment required to contribute effectively to the institution.
Sources: Cavassini, F. et al. (2022[4]), “Pro-Productivity institutions at work: Country practices and new insights on their set-up and functioning”, https://doi.org/10.1787/f5a3a2df-en; Banks, G. (2015[98]), “Institutions to Promote Pro-Productivity Policies: Logic and Lessons”, https://doi.org/10.1787/5jrql2tsvh41-en; GCEE (2019[99]), Objectives and Tasks, German Council of Economic Experts, https://www.sachverstaendigenrat-wirtschaft.de/en/about-us/objectives.html.
Pro-productivity policies in Egypt can benefit from following a more comprehensive approach, stronger co‑ordination among institutions, enhanced policy clarity, monitoring, evaluation and transparency.
Co‑ordinate productivity research in a dedicated institution
A dedicated institution can monitor productivity trends and examine productivity drivers, providing evidence-based policy advice to policy makers, following practices from OECD countries discussed in this report.
MoIND could assess existing institutions and discuss with relevant stakeholders where to co‑ordinate productivity efforts. Egypt could first assess existing initiatives that could be suitable for such purposes and determine whether there would be a need to create a new one.
Similar to OECD countries, such an institution could regularly examine productivity trends, productivity drivers and bottlenecks to productivity growth, with the goal of formulating effective policies. The aim would be to track total economy trends, in addition to manufacturing industry, sectoral and regional breakdowns. These co‑ordination efforts would require close collaboration with key stakeholders to access relevant macrodata and microdata (such as the Central Agency for Public Mobilization and Statistics, the CBE, the General Organization for Export and Import Control (GOEIC) and the MSMEDA).
Additionally, the institution can collaborate with academics and economic experts to conduct analytical work. Importantly, the effectiveness of the institution requires high-level government commitment.
Improve the design of productivity-enhancing strategies
Adopt a framework to help design productivity-enhancing strategies
Based on the framework discussed in this chapter and on the work of Criscuolo et al. (2022[45]), the OECD recommends adopting a productivity-enhancing policy framework. Such a plan can support policy makers in identifying the main factors affecting productivity growth and selecting appropriate policy instruments to influence them. Adopting such a framework also provides a more coherent and comprehensive view on the factors that can improve productivity.
Use clear and measurable indicators when designing productivity strategies
The Egyptian institutions working on providing pro-productivity policies could strengthen their use of quantitative objectives in pro-productivity strategies by following the SMART approach discussed in this chapter. In particular, Egyptian institutions could benefit from setting more measurable and time-bound objectives, which can be monitored through quantitative indicators.
The use of quantitative indicators could serve two purposes. First, to identify the key areas of interventions based on performance indicators (strategy preparation). This would allow, for example, to identify the industries and locations on which the strategy should focus more. Indicators could also benchmark Egypt against OECD and peer economies to identify areas of intervention. Second, quantitative indicators could also be used to track strategy achievements in terms of selected objectives and thus enhance transparency on the strategy progress (strategy monitoring, see below).
Specifically, MoIND could better define and use a set of clear indicators to identify and monitor its strategy’s objectives. Indicators may include, among others, productivity indicators (i.e. labour productivity growth), export/import growth, GVC participation, job creation, revealed comparative advantage, innovation activities (e.g. R&D, patents, trademarks, designs) and green indicators (e.g. greenhouse gas emissions). Moreover, the ministry could consider reducing the number of objectives to prioritise the more pressing ones and those that could be more realistically achieved within the timeframe of its strategy.
Strengthen the monitoring and evaluation of policies
Policy evaluation concentrates on a few initiatives and Egypt could strengthen its monitoring and evaluation of policies across a broader range of institutions. A crucial precondition for effective policy evaluation is investment in improvements in data capacity, particularly in the quality of firm-level data (see Chapter 6), information technology infrastructure and skills (e.g. ICT, statistics, economics, econometrics). Egypt could also leverage technical skills from external resources by collaborating with academia, research centres and think tanks to achieve high-quality analysis and impartial evaluations that can support evidence-based policy making.
Regularly track the progress of strategy indicators
MoIND and other stakeholders could regularly publish key performance indicators that track the progress of productivity-enhancing strategies and monitor achievements of defined goals. This could take the form of regular reports, or other syntheses of key indicators. Progress track could also take the form of client response satisfaction with regard to programmes and support continuous improvement to these programmes.
Ensure the evaluation of existing business incentives
Egyptian institutions should strengthen the evaluation of their available business incentives. This could be done by leveraging existing initiatives, for example the Egypt Impact Lab, and/or by developing internal capacity to evaluate policies. For trade-specific policies, Egypt can leverage the United Nations Industrial Development Organization (UNIDO) Policy Support Unit.28 Furthermore, Egypt could opt to build in-house capacity to conduct evaluations or leverage existing external skills from academia and research centres.
Among others, Egypt may want to focus its evaluation efforts specifically on incentives that facilitate business formalisation, improve access to finance, support export promotion and alleviate firms’ tax burden through tax and non-tax measures. Institutions that should make greater use of policy evaluation could include the CBE, the MCIT, the Ministry of Finance, MoIND and the MSMEDA.
Raise awareness of available incentives and related technical services
While several pro-productivity policies exist in Egypt (see Table 5.2), raising awareness among firms about the available incentives could extend the reach and enhance their impact. Therefore, awareness promotion campaigns can help firms navigate the wide array of incentives and better benefit from them.
Several countries have exerted effort in strengthening their awareness promotions. In Canada for example, several agencies provide workshops and webinars to promote programmes and their benefits. Innovation, Science and Economic Development Canada provides an online tool to help firms identify programmes and grow their business.29 The Italian government has also created an online platform to help individuals navigate incentives and categorise them by type (e.g. digitalisation, innovation) and firms (e.g. start-ups).30
MoIND and other Egyptian institutions can thus invest in raising awareness of current available incentives and related technical assistance services to firms. This could be done in the form of webinars, workshops or in the form of online tools. For instance, the new Digital Industrial Platform developed by MoIND could incorporate information on the list of available incentives to industrial firms.31 In addition, the Industrial Modernisation Centre (IMC), through its “Productivity Enhancement Program” can continuously offer specialised technical services that help industrial enterprises increase their productivity and comply with international requirements and quality standards.32
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← 1. The general framework applies to aggregate productivity growth in the total economy, but the same considerations are valid at more disaggregated levels such as the manufacturing sector.
← 2. The business environment significantly influences firm productivity. It creates the necessary conditions for businesses to thrive, invest, innovate and compete effectively. Indeed, improvements in the business environment and favourable regulatory practices – fair competition and greater entrepreneurial freedom – support growth in total factor productivity (TFP) and labour productivity (World Bank, 2022[28]).
← 3. Organisational capital is the accumulated stock of organisational know-how, a collection of knowledge, processes and systems that firms rely upon to organise their activities. Such capital represents a firm‑specific strategic asset that correlates positively with a wide array of firm performance and productivity-related indicators (OECD, 2015[105]).
← 4. As previously mentioned, intangibles may reinforce the position of leading and most productive firms, which would likely lead to winner-takes-most dynamics (Berlingieri et al., 2020[109]; Andrews, Criscuolo and Gal, 2016[107]).
← 5. From a theoretical point of view, informality has been modelled as the outcome of firms self-selecting into the formal and informal sectors based on their productivity and relative payoffs (Rauch, 1991[114]; Arias et al., 2010[108]), meaning that low productive firms self-select into informal sector; it is not informality that causes firms’ low productivity.
← 6. However, the role of competition in within-firm innovation crucially depends on the context and the ex ante development of competition in the country. In this regard, Aghion et al. (2005[106]) show that the relationship between innovation and competition has an inverted-U shape, where at low levels of competition, an increase in competition has a positive effect on innovation, while at high levels, innovation may be reduced with increased competition as too many firms are trying similar ideas.
← 7. Informal firms are usually defined as firms that do not comply with laws and regulations. At the extensive margin, these are firms that are not registered with relevant authorities. At the intensive margin, even if formally registered, these firms hire workers without formal contracts (Ulyssea, 2020[54]). Given that informal firms are not officially registered, measuring the informal sector is challenging.
← 8. “Learning by exporting” relates to the fact that firms engaging in export activities tend to learn and improve their processes via knowledge-transfer from foreign buyers. Exporting to developed markets can thus improve the quality of products and contribute to the transfer of technology to less developed countries.
← 9. The survey does not include issue-specific strategies (e.g. SME, entrepreneurship, digital development strategies), single-industry-specific strategies or strategies focusing on broad infrastructure services only. Instead, the focus is on overarching industrial policies. Based on these criteria, 114 formal policies are included from 101 economies (UNCTAD, 2018[75]).
← 10. In contrast, demand-side instruments directly affect the demand for products through either their price, availability or public demand. Since most demand-oriented instruments are not primarily targeting a firm’s productivity and innovation –they rather focus on consumer safety (e.g. product standards) or follow behavioural objectives – they are not widely discussed in this setting, although they may represent an important complement to supply-side instruments.
← 11. Research has confirmed that the reallocation of production factors from less to more productive firms with a superior technology or better innovation capacity between firms is a substantial growth channel (Gal et al., 2019[19]; Haltiwanger, Jarmin and Miranda, 2013[111]; OECD, 2019[103]).
← 12. The authors used a sample of 108 countries for the period 1970-2011. They group countries into income quartiles according to their distance to the global technology frontier, as approximated by a country’s real per capita GDP gap with the United States. Low-income countries mostly comprise the first quartile, while emerging market fall into the second (e.g. People’s Republic of China, India) or third quartiles (e.g. Chile, Poland).
← 13. If co‑ordination fails, governments should step in through exchanges of information and co‑operation between the stakeholders through industry boards, standardisation initiatives or improvements of the intellectual property system (Criscuolo et al., 2022[3]).
← 14. For instance, firms can have little incentives to invest in resilience against some types of shocks such as crises that will always require public support (Criscuolo et al., 2022[3]).
← 15. Favourable growth rates were mainly driven by improvements in the exports balance (due, however, to a reduction in oil and non-oil imports and not from improvements in exports per se), public investments and fiscal consolidation. Exports did not grow as expected due to significant trade barriers, poor connectivity and infrastructure, as well as a cumbersome customs clearance process and limited domestic competition (IFC, 2020[100]).
← 16. Interest rates then increased over the 2017-19 period, which stifled investment and led to high costs for starting or expanding a business (UNDP, 2021[101]).
← 17. Crowding-out happens through two channels: on the one hand, government borrowing increases interest rates, and thus the cost for the private sector; and on the other, banks prefer government loans and bonds over riskier private loans (Shetta and Kamaly, 2014[113]; El-Said, Al-Siad and Zaki, 2013[38]). Betz, Ravasan and Weiss (2019[110]) find that Egyptian firms experienced a particularly severe crowding-out effect compared to other countries in the MENA region. This is mainly attributable to the fact that firms in Egypt are more credit constrained in areas where the local banks invest more in government debt (Betz, Ravasan and Weiss, 2019[110]). In February 2023, 66% of total domestic credit was claimed by the government, with the private business (22%), household (10%) and public business (2%) sectors receiving a significantly lower share (OECD, 2024[104]).
← 18. The NSRP is aligned with Egypt Vision 2030 sustainable development strategy, as well as the African Union Commission Agenda 2063: The Africa We Want. The Ministry of Planning and Economic Development (MPED) launched Egypt Vision 2030 in February 2016. It reflects the country’s long-term strategic plan to achieve principles and goals of sustainable development in all fields. The strategy includes three dimensions: economic, social and environmental. Agenda 2063: The Africa We Want is the continent’s strategic framework, which contains a 50-year development trajectory aiming for inclusive and sustainable development.
← 19. Similarly, the actual real GDP growth rate, unemployment rate and inflation rate for the period were within the target range of the programme.
← 20. The COVID-19 pandemic led the decrease in the ICT GDP growth rate in fiscal year 2019/20 (Mansour, 2022[112]).
← 21. Policies related to business dynamics include the development of Investor Service Centers that serve as one-stop shops to register businesses at the General Authority for Investments and Free Zones (GAFI), a law that simplifies industrial licence procedures (No. 15 for 2017) and a series of revised bankruptcy laws. See OECD Business Dynamics Review of Egypt (2026[52]) for a more comprehensive discussion on business environment in Egypt.
← 22. Not all strategies or policies indicated in Table 5.2 are discussed in depth in the concerned book chapters. This is mainly attributable to the fact that not all strategies have clear indicators and/or working frameworks established by the concerned Egyptian government agency for each strategy. Additionally, information on implementation and results are scarce or not publicly available.
← 23. Egypt Makes Electronics is a presidential initiative, led by the MCIT, to position the electronic industry as one of the key drivers of economic growth (see Box 4.1).
← 24. The Mashroak Program is Ministry of Local Development’s National Project for Community, Human and Local Development, which provides loans to micro and small enterprises through Egyptian banks. The programme intends to support youth entrepreneurs and provide them with easy loans to start their own businesses.
← 26. For more information on EU countries establishing a productivity board, see https://economy-finance.ec.europa.eu/economic-and-fiscal-governance/national-productivity-boards_en.
← 27. For information related to the Austrian monitoring dashboard, see https://oenb.shinyapps.io/PROD-Dashboard/.
← 28. The UNIDO Trade, Industry, Growth, and Rapid Market Access (TIGARA), a project funded by the European Union, is currently in the process of establishing a policy support unit. The project is carried out in co‑operation with MPED and the Ministry of Industry and Transport (UNIDO, 2024[102]). For more information on the TIGARA project, see https://open.unido.org/projects/EG/projects/210122.
← 29. For more information, see https://innovation.ised-isde.canada.ca/innovation/s/?language=en_CA.
← 30. For more information, see https://www.incentivi.gov.it/it.
← 31. For more information on the new industrial platform, see https://www.sis.gov.eg/Story/194679/FIE-Egypt%27s-digital-industrial-platform-contributes-to-upping-exports?lang=en-us.