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 revising 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.
Recommendations
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.
- Capping the guarantee rate at 5%, with progressivity adapted to the company's size and nature.
- Coordinating with banking institutions to facilitate access to guarantees.
- Limiting the guarantee duration to the service contract term to alleviate the financial burden on providers.
- Implementing a direct compensation mechanism: in case of provider default, the client could pay salaries via the guarantee and recover the advanced amounts from the provider's accounts.
Background
This position follows the ministerial decision of September 23, 2025, based on Article 30 of Law No. 9 of 2025 on labor market reform. The text requires companies to provide a bank guarantee equivalent to 20% of the contract value within three days of signing. The stated goal is to secure salary and social security payments.
Potential Consequences
However, the IACE warns that this requirement, although based on a desire for social justice, may exclude many SMEs that cannot immobilize such a sum or obtain sufficient bank guarantees. This constraint could:
- Favor market concentration in favor of large enterprises.
- Weaken the local economic fabric.
- Lead to a generalized increase in service costs, as companies pass on these costs to their clients.
International Comparison
The institute notes 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.
Call to Action
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.
