Scaling-up the private sector participation in North Africa

In North Africa, the long-standing issue of high youth unemployment persists and is projected to remain the region’s key economic and social challenge over the medium term (Fig 1). Private sector small and medium enterprises (SMEs) could play an instrumental role in tackling this challenge, given their potential to create jobs, support growth and foster innovation. However, large state-owned enterprises (SOEs) continue to be a prominent feature of North African economies. While in some cases major SOEs support development, in others inefficient SOEs crowd out private sector innovation and pose fiscal risks to the country. In addition, public sector wage premium in, for example, Morocco and Tunisia hamper their private sectors and contribute to youth unemployment by incentivizing youth to queue for public sector jobs.