A new study by the International Finance Corporation (IFC), a member of the World Bank Group, finds that much-needed jobs in developing countries can be created at a faster rate.
The study says this is possible if policymakers and development institutions make it a priority to remove the key obstacles to growth that private-sector companies face.
The study, "Assessing Private Sector Contributions to Job Creation," which was made available to the Ghana News Agency on Tuesday, concludes that four obstacles pose a particular challenge to job creation in the private sector: a weak investment climate, inadequate infrastructure, limited access to finance for micro, small, and medium enterprises; and insufficient training and skills.
It stresses that removing these obstacles can significantly increase job creation.
The study released this month is a companion report to the World Bank's World Development Report 2013 on Jobs which was released last October.
In a joint communiqué issued at the launch, 25 leading international finance institutions immediately pledged to work together to address job creation, and learn from each other’s experience.
According to the study, other key findings include: Micro, small and medium enterprises (MSMEs) generate the most jobs in developing countries but they are also less productive, pay less and do not offer as much training and development opportunities for employees.
It says access to finance is a key constraint for MSMEs—easing it can result in significant job creation.
It notes that lack of power is the most significant constraint in lower-income countries and providing companies with reliable power could boost annual job growth by at least 4.0 per cent.
It says legal barriers, lack of access to finance, and cultural norms often force women to work in jobs that pay less and are less secure.
It reiterates that young people are almost three times more likely to be unemployed and they also are more likely to work in informal jobs.
It says 45 million people enter the work force each year; yet more than a third of companies studied across the globe are unable to find employees with the skills that they needed.
The IFC report draws on an extensive literature review and the experiences of more than 45,000 businesses in over 100 countries, as well as macro and micro case studies conducted in South Asia, Africa, and the Middle East.
The study examines the constraints faced by the private sector in developing countries, focusing on the most binding constraints to job creation that can be addressed by development finance institutions oriented toward the private sector.
According to the study, about 200 million people are unemployed globally.
However, the World Bank estimates that 600 million jobs must be created by 2020, mainly in developing countries, just to keep up with population growth; the answer however, lies with the private sector, which provides nine out of every 10 jobs.
The IFC is the largest global development institution focused exclusively on the private sector.