Congo Republic

• Economic growth, 5.3% of gross domestic product (GDP) in 2011, should reach 5.7% in 2012 and 4.7% in 2013.

• Economic and structural reforms backed by the International Monetary Fund (IMF) have re-established macroeconomic stability and helped economic recovery.

• Growth has not created enough jobs – overall unemployment is 16% with 25% for the 15 to 29 age group.

The Congo Republic’s economic prospects look good even if Europe’s debt crisis is a threat. Gross domestic product (GDP) growth of 5.7% for 2012 and 4.7% for 2013 is predicted – after a 5.3% increase in 2011. The increases are dependent on at least half of the 16 factories being built at the Brazzaville industrial zone coming into full production and on new investment by the state which envisages a real increase of 55% in capital spending in 2012. A slowdown in developed countries will hit growth, however. The crisis in Europe has highlighted the fragility of Congo’s economic situation and the need to promote the private sector.

Major changes have been carried out as part of the  Heavily Indebted Poor Countries (HIPC) initiative. The country’s main challenge now is to maintain the pace of reform after reaching the programme’s completion point in January 2010. Oversight of natural resource industries has been improved and a new public procurement code adopted. Moves to reduce the complexity of the tax system were started in 2010 and an action plan to improve the business climate was adopted by the government in February 2011. Despite these steps, Congo must overcome its dependency on oil which makes it vulnerable to outside shocks and accounts for the weak impact of growth on job creation.

Faster implementation of reforms is needed to improve the business environment and develop the private sector, which is key to achieving economic diversification and generating employment. In the World Bank’s Doing Business 2012 report, Congo ranked 181^st out of 183 countries. Areas in urgent need of reform are setting up new businesses, taxation-related issues, cross-border trade and contract law. Policy makers must also consolidate public procurement reforms, rationalise public spending to better manage the budget and strengthen institutions.

Despite a relatively satisfactory economic performance in recent years, unemployment remains high, especially for the young. According to a 2009 study of employment in the informal sector (Etude sur l’emploi et le secteur informel (EESIC), the national unemployment level is 16%. But 25% of the 15-29 aged group have no work and this number jumps to 42% if discouraged job seekers are included. The high level of youth unemployment results from several factors. On the supply side, the poor quality of education and training is a major obstacle, a high degree of job security in the public sector discourages young people from gaining the skills required by the private sector and there is an overall lack of an entrepreneurial culture. On the demand side, there is insufficient job creation in the formal sector because the lack of diversification in the economy, along with an unsympathetic environment for private sector development and, to a lesser degree, employment laws.

In spite of a volatile and unpredictable global economy, Congo’s recovery, which began in 2009, continued through 2011. Though 2011 GDP growth was lower than in 2010, it reached 5.3%. There was a strong performance in the non-oil and gas sectors with equivalent GDP growth of 6.5% supported by construction activity, telecommunications and forestry. Growth in the oil and natural gas sector was under 1% because of technical problems with certain oil fields. There was also a positive impact on general growth from higher domestic demand. Public investment in energy and transport progressed by 65% in 2011 over 2010. These targets were achieved while inflation was controlled. Through a prudent monetary policy by the Bank of Central African States (BCAS) and careful fiscal policies, inflation was limited to 2.5% (compared to a regional average of 3%) even though world food and energy prices rose.

Because of continuing high international oil prices and debt cancellation under the HIPC initiative, the domestic budget and foreign trade figures were good. Increased oil production and prices, and the recovery of exports boosted the current account surplus on the balance of payments from 4.7% in 2010 to 13.3% of GDP in 2011. Debt relief reduced foreign debt to 19.9% of GDP in 2011 from 198.7% in 2004. The total budget surplus (excluding grants) grew to 22% of GDP in 2011 against 16.3% in 2010. This reflects a marked rise in revenues, especially from oil, while public spending rose more moderately.

Congo’s encouraging results are due to the reforms launched under the HIPC initiative. Greater discipline in carrying out economic policies and the implementation of major reforms in recent years have restored macroeconomic stability and sustained economic revival. Governance in resource extraction has been improved, particularly as international firms audited the books of the Société Nationale des Pétroles du Congo (SNPC), the national oil company, and Congolaise de Raffinage (CORAF), the state refining entity. Both sets of results were published on the finance ministry website and oil reserves have also been certified. The board of the Extractive Industries Transparency Initiative (EITI) declared in May 2011 that Congo had made significant progress complying with its regulations and it should soon be declared in compliance with the initiative. Furthermore, a new law on public procurement was brought into action and the proportion of public contracts put out to tender jumped to more than 90%.

Congo’s economic outlook remains favourable. GDP growth should reach 5.7% in 2012 and 4.7% in 2013. The positive macroeconomic outlook is supported by increased industrial production -- with factories in the new Brazzaville industrial zone reaching full production -- and continuing state investment to modernise economic infrastructure. However, if the global economic slowdown hits global demand, in particular for commodities, growth would slow. Other factors that could affect the economic outlook are linked to a slowdown in the implementation of reforms after achieving the HIPC completion point and political factors in the sub-region.

The main challenge for the authorities is to maintain the rhythm of reforms aiming to diversify the economy, to boost employment and to improve the effectiveness of public spending. Even though recent economic growth seems to be more balanced, it has not been accompanied by major structural changes to the economy which remains dependent on the oil sector. Despite diversification efforts, the oil sector still accounts for 67% of GDP and 89% of exports. Dependence on oil makes the economy vulnerable to external shocks and could become an obstacle to sustainable growth and job creation. It also explains the low impact of growth on unemployment and poverty, and slow progress in meeting the Millennium Development Goals (MDGs). To boost non-oil sectors infrastructure will have to be improved, notably in energy and transport. Poor infrastructure is a brake on social and economic development as well as the advancement of the private sector. The rapid adoption of measures to improve the business climate will also be crucial. The creation of a one shop system for business creation and reduced taxation pressure will be priorities for the government.

Fiscal policy aims to meet objectives set out in a Poverty Reduction Strategy paper (DSRP) by improving the supply of public goods, maintaining macroeconomic stability and making debt sustainable. The government has carried on with an ambitious investment programme to improve infrastructure to help the national strategy of diversifying the economy. Up to 70% of the investment comes from national resources and the figure rose by 65% in 2011 to reach 12.9% of GDP. However, the provision of public services has been held back by the weak rate of implementation of budgeted spending, which for investment between 2008 and 2011 was only 75%. There has also been a lack of monitoring of pro-poor spending.

The government recognises the need to take maximum advantage of the economy's potential and has taken steps since 2010 to simplify the tax system, strengthen fiscal administration and increase receipts, particularly from outside the oil sector. Taxation rates are being harmonised and the overall system simplified. Some tax exemptions are being eliminated and a new national single register of taxpayers is being set up. Authorities have reorganised the administration to deal with contributors by category.

The 2012 budget aims to continue steps started in 2008 to achieve a balanced budget and restore sustainability. The draft 2012 budget envisions a budget surplus equivalent to 20% of GDP. In keeping with the need to reduce poverty, much of the spending has been allocated to social sectors and infrastructure. There are two main obstacles that could thwart the budget aims. The first is a slowdown of the global economy that could hit oil revenues. The second is the country’s low absorption capacity. However, part of the reserves at the regional central bank could be used if an oil price fall hits the budget plans. Ambitious reforms will be necessary to end the existing tax exemptions and to combat fraud and tax evasion – these are the main reasons for the low level of tax revenues from non-oil sectors. These revenues represent less than 9% of GDP although they have great potential growth. Strengthening the capacity of ministries to prepare, target and execute projects will also be crucial to more effective public investment.

 

Monetary and exchange policies intended to ensure price stability and demand side management continued in 2011 to keep the main balances stable. The BCAS sets regional monetary policy and continues to be prudent in setting the exchange rate of the CFA franc BAEC  (XAF) and the euro (EUR). This prudence, positive supply indicators, notably in agriculture, and stable domestic fuel prices have helped keep inflation in check. It was kept to about 2.5% in 2011 compared to 5% in 2010 in spite of outside inflationary pressures. The rise in food prices was kept to 4% through improved transport conditions that made it easier to get local produce to market.

The regional bank has maintained its main interest rate (the tender rate) unchanged at 4%. Policies managing demand also contributed to improved balances in 2011. Moderate budget policies in 2011 contributed to price stability without crowding out the private sector. Tighter control of public spending led to increased public deposits in the banking system. This led to an 18% increase in the volume of credit to the private sector. Small and medium-sized enterprises (SMEs) still have trouble getting loans, however.

In the medium term, the BCAS’s monetary policy will continue to aim for price stability. Conservative central bank policies and the moderate government budget should keep inflation at 4.9% in 2012 and 3.1% in 2013.

Congo is a member of the Central African Economic and Monetary Community (CEMAC) and its trade policy is largely determined by its membership of the regional customs union. Congo applies CEMAC’s customs rules as well as its common external (TEC) and general preferential tariffs (TGP), which were introduced in 1993. The community has four tariff levels ranging from 5% to 30%. The average tariff for most-favoured nations (MFN) is 18.7%. The protective tariff for agricultural products, as defined by the World Trade Organization (WTO), is 23%. The system is relatively transparent and predictable and there are no non-tariff barriers although the import of certain products requires a licence.  

Major reforms have been started at national level to modernise and improve trade and customs procedures. Most customs procedures for imports are now computerised. Since 2001, Congo has applied WTO agreements on customs valuations. Some XAF 570 billion will be invested over 25 years to improve the competitiveness of the port of Pointe Noire. But weaknesses remain that cause significant cost and delays. A 2010 World Bank study on trade logistics ranked Congo 116th out of 155 countries [1]. The review was particularly critical of Congo on infrastructure (151^st) and customs performance (137^th). 

Economic competitiveness remains low because of high factor costs and a slight increase in the effective exchange rate. There was a 26.4% rise in foreign direct investment (FDI) in 2011 over 2010. This finance continues to be concentrated in the oil sector which accounts for 91% of FDI. Total investment from abroad should reach USD 2.8 billion in 2012-13. Development aid from abroad remains low (less than 4% of GDP) but has increased considerably in the past two years with greater finance from non-traditional donors such as China and India.

 

Debt relief after reaching the HIPC completion point in January 2010 significantly helped the country's economy and made debt levels more sustainable. Foreign debt was reduced from 198.7% of GDP in 2004 to 19.9% in 2011. A 2011 International Monetary Fund (IMF) and World Bank study said that the risk of excessive debt in Congo has been reduced from “moderate” to “low”, thanks to prudent budget and debt management. The study showed that risks linked to future debt levels are low because of large reserves that would limit borrowing needs in case of unfavourable economic developments. In 2011, domestic public debt represented 2.6% of GDP and 11.5% of total public debt. It is made up of debt owed to the private sector and arrears in salaries and pensions from restructured public enterprises taken over by the state.

Debt management is the responsibility of the Caisse Congolaise d’Amortissement (CCA), a department of the ministry of finance. Progress has been made in recent years in obtaining fuller statistics on the debt and its management. The CCA collects data on outstanding domestic debt and its components using a computerised debt management system. Data on external debt and forecasts about its servicing are published quarterly on the finance ministry website. However, the CCA's analytical capacity needs to be improved along with staffing.

Efforts have been made to improve the business climate but it remains far from attractive . An action plan was adopted by the cabinet in February 2011 and substantial progress has been made in its implementation. A forum for public-private sector dialogue, the Haut Conseil du dialogue public-privé (HCPP),was set up under the authority of the head of state. A one-stop shop to register companies has been created. Arbitration manuals have been written and increased training in business law given to judges and lawyers nationwide. Work has started on an organisation to promote small and medium-sized enterprises (SMEs) and help businesses find financing. But even so the business climate still offers disincentives in the form of formalities that add to high administrative costs. In the World Bank’s Doing Business 2012 study, Congo ranked 181st out of 183 countries. Starting a business, paying taxes, cross-border trade and business law all need to be changed. About 160 days are needed to create a company and the associated cost is estimated at 85.2% of per capita income against an average in sub-Saharan Africa of 81.2%. Congo ranked 182nd in procedures and costs linked to tax-paying. Implementation of contracts needs 44 procedures that take 560 days and represent an estimated cost of 53.2% of their total value.

Tight factor market regulations also hinder businesses. Hiring and lay-off costs are fairly high, as are non-wage employment charges. There are few restrictions on land ownership but registering and transferring property is long and costly, which represents a major constraint on financing for economic operators. Congo was ranked 156^th in property transfer in the Doing Business 2012 study, with waiting times of 55 days, at a cost estimated at 20.6% of the property value, to establish real estate ownership.

Obtaining construction permits has become easier, but is still time and money consuming. In 2011 Congo moved up two spots to 133^rd in the Doing Business 2012 ranking on delivery of construction permits. The cost of a construction permit has been brought down to 157.7% of per capita revenue from 232.4%. The regional average is 823.7%. An average of seven days is needed to obtain an operating permit compared to 23.9 days in other sub-Saharan countries.

The financial system is relatively solid and secure from medium-term shocks. The Central African Banking Commission (COBAC) has said most financial indicators are healthy. The solvency ratio is 16.2% on average compared to an allowable minimum of 8%. The liquidity ratio was 203.5% in 2010 for a minimum standard of 100%. The stability of the financial system is partly explained by improved monitoring by COBAC which regularly audits Congo’s financial institutions. National authorities have sought to strengthen the insurance sector with the help of the Inter-African Conference on Insurance Markets (Conférence interafricaine des marchés d’assurances ) CIMA. The regulatory and legal environment for financial services is largely defined by regional institutions and is adequate; however, measures need to be taken to ensure better enforcement. Supervision of microfinance institutions also has to be improved.

The number of banks jumped to eight in 2011, from six in 2007. Financial intermediation is low with a liquidity ratio (M2/GDP) of 22.4% in 2011. Access to financial services is improving but remains indifferent. Congo’s ranking in the access to credit section of the Doing Business report leapt 41 places from 139^th in 2010 to 98^th in 2011. However only 5% of the population have a bank account and access to credit for SMEs remains difficult. Only 17% of such businesses have loans or open credit lines with a bank. Potential credit resources are high given the economy’s large resource pool, but the proportion of credit to the private sector compared to GDP is only 5.3%. Central Africa’s two main regional financial centres, Libreville and Douala, still only deal in limited financial transaction volumes. Micro-finance activity has not taken off. There are 63 micro-finance institutions that had total credit lines of about XOF 27 billion at the end of 2009. The main player is a network created by Mutuelles Congolaise d’Epargne et de Credit, a credit and savings co-operative, which has 35 deposit locations, more than 230 000 clients and a total transaction volume of XOF 93 billion – about 87% of total micro-finance volume in the country. Compared to other countries belonging to CIMA, Congo’s insurance sector is still limited, with just five companies.

The Congolese authorities are continuing to implement reforms to improve the management of public finances. The government started an action plan, Programme d’action gouvernementale de gestion des investissements publics de seconde génération, known as PAAGIP II, to manage public investment from 2011-13. It is based on the conclusions of a similar programme completed in 2010, PAAGIP I. It also follows a government action plan defined in 2008 to monitor public finances, Programme d’action gouvernementale de gestion des finances publiques known as PAGGFP. After a difficult start, a law on public procurement passed in 2009 is now fully operational and limits unauthorised actions. Government reforms are now concentrating on selecting and prioritising investment projects and their implementation. In the public sector, the government has launched a reform to create, amongst other things, a new salary grid based on merit.

Mechanisms reinforcing the need for transparency in the reporting of public finances have been strengthened, but the scant resources given to the monitoring service have limited auditing of government action. Basic budget and national accounts data are posted on government Internet websites, but with some delays. Data on oil production and revenues are also published regularly on the finance ministry website. Audit report conclusions and auditors’ questions for the sector are released quarterly on the site.

The ranking attributed to Congo on the Mo Ibrahim Index for African Governance section on accountability rose by 2 points between 2010 and 2011. The rating awarded for public management gave the country its highest assessment, 14th out of 53 countries on the continent. However, Transparency International gave Congo a 2.2 mark for perceived corruption in 2011, giving it a ranking of 154th out of 178 countries.

Congo has passed comprehensive legislation on the forest environment. The foundation for government policy is formed by the Forestry Code and other texts on the protection of the environment, land ownership, fauna and other protected zones.  Environmental protection legislation is being reviewed to incorporate guarantees on the economic, ecological and social sustainability of natural resources and take account of new environmental problems. Congo subscribes to a treaty on protecting the natural ecosystems in Central African forests, which was set up  by the Central African Forests Commission (COMIFAC). In May 2010, Congo signed a voluntary partnership agreement with the European Union on applying forestry regulations, governance and trade, and certifying the legality of wood exports. The independent forestry sector observatory (IFO) is now operational, overseeing the application of forestry laws. The government has prepared new regulations on measuring environmental impact. Congo is a partner country in the UN programme on Reducing Emissions from Deforestation and Forest Degradation (REDD+), which aims for sustainable management of forests and strengthening of forest carbon stocks. In spite of these efforts, more must be done to strengthen the institutional frameworks, adopt environmental protection measures and improve their implementation. The application of new legislation is complicated by the limited capacity of institutions, in particular the ministry in charge of the environment and forestry administration.

Denis Sassou-Nguesso, president of Congo since 1997 and previously between 1979 and 1992, was re-elected in 2009 for a further seven year term. Twelve years after the end of the civil war and 20 years after the country was opened to a multi-party system, Congo is taking small steps towards democracy. The opposition has problems organising itself and a number of small parties have finally combined in a Rally for the presidential majority (Rassemblement pour la majorité présidentielle) in the hope of winning a small share of power. In December 2011 two independent newspapers were shut down for between three and six months for having criticised the government. Elections to the senate on 9 October 2011, to renew half its seats, saw the ruling Congolese Workers' Party (Parti congolais du travail) win 29 of the 36 seats being contested. Five went to independent candidates and two to the opposition. Unlike parliamentary elections which are contested under universal suffrage, those for the senate are decided by a college of grand electors. Legislative elections are due to take place before July 2012 and the opposition is calling for a national census of voters and the establishment of an independent electoral authority. The authorities have begun updating the electoral roll for the legislative poll but are refusing to replace the national commission for the organisation of elections, which comes under the supervision of the interior ministry, with an independent electoral commission. The last legislative elections, in 2007, were marked by fraud and dysfunctions. The opposition won 12 of the 137 seats.

In March 20102 an explosion at an armed forces munitions depot in the centre of Brazzaville left more than 300 people dead and 1 500 injured. Windows were blown out as far away as Kinshasa, capital of the neighbouring Democratic Republic of Congo, 10 km from Brazzaville. By the end of 2012 military installations should be relocated more than 15 km from the centre of the capital.

Even with Congo’s economic progress, in social terms results have been mixed. With major funding resources from the government, as part of the poverty reduction strategy, the education sector has been strengthened by the recruitment and in-service training of teachers, delivery of teaching guides and renovation of school infrastructure. This has enabled education performance indicators to improve. The gross enrolment ratio went from 114% in 2008 to 116.7% in 2010. The proportion of children who finish primary school rose from 73% in 2009 to 83% in 2010. These indicators show that Congo is closing in on the Millennium Development Goal (MDG) on universal primary education. However, while there has been greater equality in access to education in recent years, particularly in terms of improvement of parity in the primary sector, large inequalities still exist at the level of higher education.

The overall unsatisfactory performance of the health care system reflects insufficient human resources, inadequate infrastructure and poor quality treatment. Vaccination against measles has been improved with the coverage rating rising from 66.8% to 77.8% between 2008 and 2010. In addition, the proportion of births attended by trained staff rose above 86% in 2011. However, infant mortality increased from 103 deaths per 1 000 live births in 1990 to 126 in 2007. Furthermore, with a childbirth mortality rate for women of 624 deaths per 100 000 live births, Congo has one of the highest mortality rates in Africa. To achieve MDG health targets, significant improvements in the effectiveness and financing will be needed in public health services.

Nonetheless, substantial progress has been made in preventing and treating AIDS, tuberculosis and malaria. The proportion of AIDS sufferers undergoing retroviral treatment increased by 55% between 2008 and 2011. Some 118 clinics now have voluntary HIV detection facilities, 20 more than in 2008. The number of women admitted to a programme to prevent the spread of HIV from pregnant women to their children has also increased. This has contained the incidence of HIV, which now affects about 3.2% of the population. In addition, malaria treatment for children under the age of 15 and pregnant women is free, as is the distribution of mosquito nets. Congo could reach the MDG target of stopping the spread of HIV by 2015 and reversing the present trend.

As part of the poverty reduction strategy the government devoted a large part of the 2011 budget to pro-poor programmes. Spending rose from 6.4% of GDP in 2008 to 7.9% in 2011. Targeted disadvantaged and vulnerable groups receive certain free services (such as AIDS and malaria treatment and Caesarean-section operations) and do not pay for schooling. Congo’s generally progressive tax system means that most poor people in rural areas or working in the informal sector do not pay tax. However, the effectiveness of anti-poverty spending has been limited because of low implementation rates and poor monitoring of poverty reduction spending. The national income poverty rate remains high at 50.7% of the population, with large disparities between urban and rural areas.

The government has put in place for some years social safety net initiatives and mechanisms to counter the high poverty level and large numbers of people without social security. They includes labour-intensive projects, occasional financial and material aid, and exemptions from school and public hospital fees. But the scope and level of resources are still not adequate, however, to protect the most vulnerable, especially the young and destitute. For example, less than 1% of the government budget goes to the ministry of social affairs, humanitarian action and solidarity. Projects also need to be better targeted and monitored.

The national social protection system is limited to the Caisse de Retraite des Fonctionnaires, the pension fund for public sector workers, and the Caisse Nationale de Sécurite Sociale (CNSS), the social security fund. They cover only 15% of the population and exclude most Congolese who work in the informal sector or on small farms. Fewer than 25% of the active population contribute to the system and their contributions are so small that coverage is very limited. The pension system is not economically or financially viable. The CNSS has had management problems and deficits for a number of years and its payments are very irregular. Problems with the distribution of benefits means that a growing number of the elderly rely on alternative support, such as family and traditional co-operative arrangements or tontines. The government, with the help of the United Nations, is preparing a new national social protection policy.

Congo’s labour code gives quite good protection to workers but only the 23% of the active population in the formal sector are covered. Professional training for workers exists but is limited.

Congo scored 0.74 on the 2010 UN Development Programme (UNDP) gender equality index, ranking 121st out of 169 countries. As schooling is free, the boy/girl ratio for primary education went from 0.9 in 2008 to 0.92 in 2010, and from 0.69 to 0.78 for secondary education. However, there is still a 33 point gap between men and women in higher education. Solving gender inequalities in education will be one of the toughest MDGs to reach for Congo. The country has ratified the UN Convention on the Elimination of all forms of Discrimination Against Women (CEDAW), but there are still few women in decision-making roles. The proportion of women in parliament dropped from 12% in 2005 to 6% in 2011. As of early 2012, the government had five women out of 37 ministers.

Major differences persist between men and women in access to economic resources, even though legislation demands equality in this area. This discrimination can be clearly seen in the labour market and pay levels and in access to land ownership and commercial property. According to the latest World Bank gender figures (GenderStats), the participation rate for women in the active population is 62.8% against 83.5% for men. A 2009 study by the International Finance Corporation (IFC) found that only 31.8% of businesses have female employees, and only 25% have full time permanent female staff. The 2009 EESIC study on the informal sector reported that the overall unemployment rate for women is 18.8%, compared to 13.9% for men.

Despite the fairly satisfactory economic growth of recent years, unemployment has remained high in Congo. According to the 2009 EESIC study, the national unemployment rate is 16% and is especially high among young people. Under the International Labour Organization (ILO) definition, 25% of the 15-29 age group have no job and the number jumps to 42% if discouraged job seekers who have dropped out of the statistics are included. The unemployment rate amongst Congo young people is three times higher than that for the 30-49 age group and 4.6 times higher than for the over 50s. The UN forecasts that the number of people in the working age group will rise to 4.6 million by 2050 and 37% of those will be in the 15-29 age group, against 29% in 2011. This rise in the active population will increase the existing heavy pressure to improve job prospects for Congo’s young people.

The high youth unemployment level results from several factors. On the supply side, the poor quality of education and training are major obstacles. The high level of job security in the public sector discourages young people from gaining the skills required by the private sector and there is an overall lack of an entrepreneurial culture. The education system is more geared toward attaining a broad knowledge base than giving technical and vocational training, which is poorly served. It does not provide courses and programmes that cater to the economy’s needs, and in particular those sectors necessary for the diversification of the economy. Technical and vocational education programmes attract fewer than 10% of  school students, and fewer than 20% of public and private university students study technical subjects. The gap between the education system and Congo’s business needs was identified as one of the ten major obstacles to improving the country's business climate identified by enterprises in the 2009 IFC study. To illustrate the mismatch between education and employment, figures from the national employment and labour force office, the Office national de l'emploi et de la main d'œuvre (Onemo), reveal that nearly 30% of job vacancies provided by  private companies in the last five years have not been filled, despite the high unemployment rate. Because of the way the education system is oriented and interventionist policies of the state in the past that left little room for the private sector, there is an absence of entrepreneurial culture. Public sector jobs represent close to 70% of formal employment.

On the demand side, the high youth unemployment rate is due to insufficient job creation in the formal sector, because of the low degree of diversification, a regulatory and institutional environment unsympathetic to private sector development, and therefore job creation, and, to a lesser degree, the country’s employment laws. There was overall average economic growth of 4.9% each year between 2000 and 2010, but the number of jobs created only progressed by 3% a year during that period. This highlights the need to promote sectors outside the oil industry to better balance growth and job creation. Labour laws are not seen as the main obstacle to job creation, but the procedures for hiring and dismissing employees are long, complicated and costly, especially for laying staff off and redundancies. This exacerbates the problem as firms are wary of hiring and the labour market needs urgent reform.  The first step would be to review and evaluate employment policies and existing labour market regulations and procedures to identify the biggest constraints on employers and the necessary measures to remove them.

To tackle unemployment, the authorities prepared a national employment policy (Politique nationale de l'emploi), PNE, in 2009 with the involvement of all stakeholders. The policy, devised in accordance with the government’s anti-poverty strategy, has five major objectives : (i) to lower unemployment in urban areas, protect existing jobs and modernise the informal sector to enhance its productivity; (ii) to create local work opportunities in rural areas to stop the  migration toward urban areas; (iii) to reduce skill deficiencies by promoting technical and vocational training; (iv) to increase the employability of the labour force and the quality of work; and (v) to develop human resources to satisfy the economy’s needs. The PNE was reviewed by the cabinet in 2010, yet related legislation proposals and decrees have still to be adopted. It is essential it be rapidly implemented.

Other reforms are also necessary to improve the quality of the jobs available. Relevant and practical educational programmes are needed that place emphasis on acquiring the basic knowledge and main skills that businesses look for and that introduce work experience programmes to reduce the gap between the education system and the business world. The development of an entrepreneurial culture also has an important role to play in helping create jobs for the young. But that will require a better regulatory framework, easier access to credit for entrepreneurs, and the availability of a range of services such as training in management and business development. Courses focused on business will also be essential in promoting entrepreneurial activity.

While waiting for the national employment policy to be implemented, the authorities have introduced specific initiatives aimed at boosting youth employment. But these have had mixed results. One programme, which places graduates in companies for 12 months to give professional experience, found places for 650 interns in 2009. However, in 2010, only 98 students out of  1 546 were able find a placement. An “e-work’’ programme, devised with the UNDP and the Commission for Atomic Energy and Alternative Energies (CEA), to help graduates gain experience in businesses using information technology and telecommunications placed 70 young people in 2010. A support programme for rural employment provides technical, material and financial assistance to projects in the countryside. In 2010 250 projects were selected, after 2 998 in 2009. A lack of adequate financing, a shortage of trained personnel at the national employment office and the absence of a clear legislative and administrative structure are the main reasons for the disappointing results of these programmes.