This relative efficiency of some MENA countries, however, is not sufficient to understand the capacity of these countries to promote industrial and export activities. Remuneration of labor is an important factor which should be in line with productivity. By combining information on Productivity of Labor ( _LP_ ) and the cost of labor, the relative Unit Labor Cost gives an idea of the competitiveness. Table 3 presents some information on the subject. It is worth noticing that the Unit Labor Cost in MENA is one of the highest of our sample of countries. This is particularly true in _Algeria_ and _Egypt_ – countries where firm-level Productivity of Labor ( _LP_ ) is among the lowest – but also in _Morocco_ and to some extend _Lebanon_ . In MENA, the Unit Labor Cost is of the same magnitude than in the most performing countries of the sample, sometimes even higher (see the case of _Brazil_ ), and by far much superior than in the majority of Asian economies ( _India_ , _China_ , _Sri Lanka_ , _Bangladesh_ and _Thailand_ ). In _China_ and _India,_ salaries (around 100 US dollars per month for unskilled workers) are far lower than in _Morocco_ (more than the double). In the labor intensive sectors of _Textile_ and _Garments_ , cost of labor is 2 to 2 and a half time higher in _Egypt_ and _Morocco_ than in _India_ . This situation should be seriously addressed, if MENA wants to compete in the world market. If not, MENA will continue to suffer from the faster technological innovation in Asia, where wages remain low.

**Table 1. Firm-Level Labor Productivity** _<u>(Country average, in % of the country with the most productive firms)</u>_

|**Country***|**Textile**|**Leather**|**Garment**|**Agro**<br>**Processing**|**Metal &**<br>**Machinery**<br>**Products**|**Chemic**<br>**& Pharm**<br>**Products**|**Wood**<br>**&**<br>**Furniture**|**Non Metal**<br>**& Plastic**<br>**Materials**|
|---|---|---|---|---|---|---|---|---|
|**South Africa (**2003)|52||**100**|**100**|94|97|87|**100**|
|**Brazil(**2003)|**100**|**100**|50|50|66|**100**|38||
|**_Morocco (_**_2004)_|_54_|_80_|_54_|_79_|**_100_**|_91 _||_66_|
|**_Morocco (_**_2000)_|_56_|_94 _|_55_|_85_|_48_|_63_||_57_|
|**_Saudi Arabia (_**_2005)_||||_77_|_92 _||**_100_**||
|**Ecuador (**2003)|58|91|80|48|50|54|42|66|
|**ElSalvador (**2003)|71|59|55|35|28|51||46|
|**China (**2002)|52|69|45||31||||
|**Thailand (**2004)|62||62|45|40||31|43|
|**Guatemala (**2003)|43||64|31|26|36|33|48|
|**India (**2002)|35|66|53|21|22|17|||
|**Honduras (**2003)|56||50|29|23|39|21|26|
|**India (**2000)|39||48||28|24|||
|**Pakistan (**2002)|40|35|49|22||17|||
|**Tanzania (**2003)||||35|||20||
|**Philippines (**2003)|32||32|14|||||
|**_Algeria (_**_2002)_|_27_|||_21_|_19_|_19_||_31_|
|**Bangladesh (**2002)|18|53|16|9||11|||
|**Nicaragua **2003|13|38|26|17|13|17|16|21|
|**Sri Lanka (**2004)|13||27|9|17|||28|
|**Zambia (**2002)|16|||13|24|18|||
|**Ethiopia (**2002)|11|20|20|10|||10||
|**_Egypt (_**_2006)_|_14_|_15_|_14_|_12_|_16_|_11_|_10_|_13_|
|**_Egypt (_**_2004)_|_15_|_20_|_14_|_9_|_11_|_11_|_11_|_11_|
|**_Lebanon (_**_2006)_|_11_||_17_|_8_|||_7_||

_Note_ : * Ranking of countries goes from the ones with the most productive firms to the ones with the least productive firms. _Source_ . Authors’ calculations 9