Arab Institute of Business Leaders Warns of Destabilizing Effects of Recent Regulation
The Arab Institute of Business Leaders (IACE) has issued a warning about the potentially destabilizing effects of a recent regulation requiring a 20% bank guarantee on service contracts.
Key Concerns
- The organization proposes a revision of this measure, which it deems disproportionate for small and medium-sized enterprises (SMEs).
- It suggests several ways to mitigate the impact without compromising employee protection.
Alternative Solutions
According to a study by a group of experts in law, economics, and management, the IACE recommends linking the guarantee amount to the company's payroll rather than the total contract value. This mechanism would allow the measure to focus on its primary purpose: ensuring salary payments in case of employer default, while preserving the competitiveness of economic actors. The organization also suggests capping the guarantee rate at 5%, with progressivity adapted to the company's size and nature. Other recommendations include coordinating with banking institutions to facilitate access to guarantees and limiting their duration to the service contract term, thereby reducing the financial burden on providers.
Direct Compensation Mechanism
The study also advocates for a direct compensation mechanism: in the event of provider default, the client could pay the owed salaries via the guarantee and then recover the advanced amounts from the provider's accounts.
Background
This position follows the ministerial decision of September 23, 2025, stemming from Article 30 of Law No. 9 of 2025 on labor market reform. The text requires companies to provide, within three days of signing a contract, a bank guarantee equivalent to 20% of its value. The stated goal is to secure salary and social security payments.
Risks and Consequences
However, the IACE warns that this requirement, although based on a desire for social justice, risks excluding many SMEs that are unable to immobilize such a sum or obtain sufficient bank guarantees. Such a constraint could, according to the study, favor market concentration in favor of large enterprises and weaken the local economic fabric. The institute also emphasizes that the 20% rate far exceeds international standards, often below 5%, and even national practices, where the guarantee does not exceed 10% in public markets. Moreover, the measure could result in a generalized increase in service costs, as companies pass these costs on to their clients.
Call for Revision
The IACE describes the decision as experimental and calls for a concerted revision between public authorities, social partners, and economic actors to develop a more balanced approach that reconciles employee protection with support for business competitiveness.
