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How is the ASP different?

The ASP is different because it will focus directly on job creation through critical private or public-private infrastructure investments. It is complementary to the economic framework developed by the  G8 / Deauville Partnership that is aimed at providing loans and technical support channeled through international institutions such  as the World Bank and the International Monetary Fund. The ASP will potentially include investment by the GCC countries in partnership with the private sector.

ASP Funds will be invested directly in infrastructure projects and will not pass through the government. This will allow for flexible, high-impact, country and sector investment options.

ASP differentiators:
  • The ASP is an Arab-led initiative based on mutual interests, with larger flows than any equivalent plan.
  • The ASP will provide fast-tracked project-based finance with high rates of return.
  • The ASP will target employment not fiscal stabilization or loan-based structural adjustment.
  • The ASP is a multi-investor plan and fund aimed at multi-state financing.
  • The ASP is a needed counterpart to Deauville investments in fiscal stabilization and technical assistance.

Jobs crisis in the Arab World

The unemployment rate in the MENA region is twice the rate of the global average and is increasing, according to a recent report by the International Labour Organisation (ILO).According to the ILO Global Employment Trends for Youth Report 2013, the rates in the Middle East and North Africa, 28.3% and 23.7% respectively, are rising and are expected to reach 30% in the Middle East and 24% in North Africa by 2018.
The report also showed that youth and women continue to bear the brunt of joblessness. 42.6% of women in the Middle East are unemployed. This rate is high despite the fact that the women’s labor participation rate is the lowest in the world, at only 13.2% in 2012.
Furthermore, the youth unemployment rate in the Middle East was more than four times that for adults, the largest youth-to-adult unemployment ratio in the world.

Implementation of ASP

The ASP would likely have a diversified financing base including possibly sovereign wealth funds, governments, private investors as well as partnering on a project level with International Financial Institutions. It would be led by a Governing Board, including investor and target countries at Finance Minister level, with ultimate authority over policies, direction and funding. An Investment Committee and team of Technical Experts would administer the ASP, manage the Trust Fund and provide due diligence on project proposals.

At a country level, National Project Development Teams would identifying high-potential projects and lead their country’s contribution to and vision of ASP. Coordination between the ASP, the Deauville Partnership and other initiatives could be ensured through Regional Policy Forum – to deepen dialogue on mutual strategies.

Target Countries

The ASP will focus on meeting the needs of Arab countries whose economies suffer most from high youth unemployment and will benefit from support within such a framework, including those in North Africa and the Levant and those defined by the Deauville Partnership.

All target countries should express a clear willingness to participate in the Plan, act to foster private sector employment and meet criteria for minimum political and security risks.

  1. Willingness to participate and benefit
  2. Private sector employment potential
  3. Country and sectors meeting minimum political and security risks

What is ASP?

The Arab Stabilization Plan or ASP is a direct policy response to the job crisis facing the Arab World. The population of the Arab world is about 355 million of which there are approximately 17 million people unemployed. This unemployment in the Middle East and North Africa has been a central driver of recent instability. The population of the Arab World is increasing and is estimated to reach 500 million by 2025 and an estimated 85 million jobs are required in the next ten years. The jobs crisis is at a tipping point and needs to be addressed urgently. Direct investment into infrastructure-related projects could provide millions of jobs while providing critical services to the population. The World….Read More

Time to break the cycle of unemployment

majid-jafar
Just over three years ago, Arab youth took to the streets protesting and demanding a better life, a better job and a future that includes dignity and respect. Unfortunately, given the continued regional political instability and fiscal constraints, the situation in most of the Arab transition countries is worse today, with lower economic growth and youth unemployment levels increasing rather than falling. In essence, the consequences of the transitions have actually made the causes worse. Indeed the IMF estimates there were 1.5 million more young people unemployed last year than when the transitions began three years ago, with a further 1.5 million forecast to be added to their number by 2018 on current trends.

Most transition governments in the region have focused on shorter-term populist measures such as higher salaries for government workers and additional subsidies to provide temporary relief for the population. However, given high budget deficits across the region there is little scope for continued fiscal stimulus. Consistent and clear regulatory and economic reform needs to be undertaken so that these economies can support long-term sustainable economic growth that underpins new job creation. It is estimated the region needs upwards of 6-7 percent economic growth just to achieve an 8 percent unemployment rate — far higher than the IMF’s actual estimate for the region of just 3.7 percent in 2014.

Attaining adequate rates of economic growth will require much higher investment levels in the core sectors of the region’s economies, in particular major infrastructure projects including power, telecoms, and transportation. This can both generate employment and enhance long-term competitiveness. The recent admirable capital commitments by the UAE and other GCC countries to Egypt are a case in point, with the focus now shifting to long-term investments in new projects, rather than just short-term aid in the form of more grants or loans.

Economic reform in the midst of political instability is challenging and we have yet to see transitional governments in the region address the reform agenda. Jordan has been a notable exception to this rule — undertaking tough reforms on the tax and subsidy front. Unfortunately reforms such as energy subsidies, value-added tax and labour market reforms are often difficult to implement without a strong government willing to undergo some criticism in order to achieve longer-term benefit.

http://www.arabianbusiness.com/time-break-cycle-of-unemployment-535333.html

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Arab youth unemployment “a timebomb”, says Majid Jafar

Majid-Jafar

The Arab world’s high rate of youth unemployment is “a timebomb” which threatens the Middle East’s political stability, according to one of the UAE’s most prominent businessmen, who called for the implementation of a regional framework to promote private investment and create jobs.

Speaking at the 9th Arabian Business Forum in Dubai on Tuesday, Crescent Petroleum CEO Majid Jafar said joblessness, not a desire for democracy, was the major cause of the Arab Spring protests and had still not been addressed by the regional governments.

According to International Monetary Fund figures, around 20m young in the Middle East are out of work, which is among the highest rates in the world. “Three years after the so-called Arab Spring, nothing has been done about this problem,” claimed Jafar.

Jafar said that high unemployment figures in the region were due to insufficient economic growth in Arab countries, rigid labour market policies and a miss-match between education and skills required by employers.

“It has turned into an acute crisis with a need for urgent and rapid attention,” said Jafar. “The threat to the Middle East is instability, which is driven by this youth unemployment timebomb. We cannot achieve political stability without economic stability.”

Jafar said that Arab Spring countries could not rely on hand-outs from Gulf countries in the medium to long-term, and called for a new regional framework to promote private sector investment in infrastructure. “Loans and grants, although necessary in the short-term, do not address the root cause,” he said.

Jafar’s proposal, known as the Arab Stabilisation Plan, would prioritise infrastructure projects on a national level and boost economic growth in countries such as Egypt, Jordan and Libya.

Jafar said that the proposal, which takes its inspiration from the US-led Marshal Plan to rebuild post-war Europe, would create private sector jobs and prevent youths from drifting towards extremism.

He added that the investment would come primarily from within the Arab world, such as the Gulf countries, and that the region could not rely on the West for financial support.

Jafar told delegates at the Arabian Business Forum that jobs, rather than democracy, ought to be the legacy of the Arab Spring.

“Democracy is not a magic wand. Israel is never going to get security if Gaza has the highest youth unemployment in the world,” Jafar claimed.

http://www.arabianbusiness.com/arab-youth-unemployment-a-timebomb-says-majid-jafar-526179.html

Pathways to Progress launches Voices from the Region featuring the Arab Stabilization Plan

Pathways to Progress is pleased to announce its latest feature, Voices from the Region. At its core, Pathways to Progress looks to promote dialogue and the fruitful flow of ideas between the Arab world and the West. In that spirit, “Voices from the Region” highlights some of the most interesting new ideas emanating from the Arab world. Click here to read the first feature, the Arab Stabilization Plan.

Chatham House: Economies in Transition: Strategic Planning in a Changing Middle East Event

Tuesday 17 September 2013 09:30 to 15:00 BST

Location : Chatham House, London

This workshop will convene a selection of experts on political economy in the Middle East and North Africa region to discuss possible solutions to the region’s structural economic problems. It will aim to develop innovative ideas and recommendations, strengthen existing networks of MENA political economy expertise in and beyond the UK, and support the development of longer-term strategic planning amid continuing uncertainty and change in the region.

The morning sessions will be held in partnership with the Arab Stabilization Plan. Please see the attached agenda for further information.

Attendance at this event is by invitation only.

This event will be held under the Chatham House Rule.

Chatham House & ASP Economies in Transition Meeting Summary Sept 2013

The Arab World’s lost generation

By John Defterios, CNN

Amman, Jordan (CNN) — The Arab Spring toppled regimes in power for decades within only months of each other.

The region’s youth were hoping that the adage “out with the old and in with the new” would translate into more opportunity. But on the streets of the region’s most populous city Cairo you hear despair.

Here’s the view of a young, female college graduate who’s been stymied in her search for work and asked to remain anonymous.

“I was not thinking at all about leaving Egypt before the revolution. It is my country and I have to stay here. But now I cannot see anything that is good.”

She is not alone. The International Labor Organization(ILO) put youth unemployment at 28.3% in 2012 and says it will not reverse course for the next 5 years. Despite a global economic recovery the ILO projects a rise to 30% by 2018.

The Middle East and North Africa region is the unfortunate title holder of having the worst youth unemployment in the world.

Deadly protests at the presidential palace in Cairo to finish out 2012, the seizing of the foreign ministry in Tripoli by those who wanted to ban members of the Gaddafi regime to work in government and a murder of an opposition leader in Tunis illustrate that this post Arab Spring journey is fraught with deep potholes.

Mohamed ElBaradei, the Egyptian Opposition Leader and Nobel Laureate said the unsettled nature in this post-Arab Spring environment is scaring off investment.

“We need to restore law and order and we need to jump-start the economy and we need to make sure that people are part of cohesive society and all this not there right now.”

Despite prolonged negotiations with the International Monetary Fund on a near $5 billion loan, one of the largest mall developers in the region, Dubai based Majid Al Futtaim has stepped back into the country, with its sprawling development, the Mall of Egypt. It also has a deal pending for an Egyptian supermarket chain.

But Chief Executive of the group, Iyad Malas, says the youth of the region are paying a heavy price for a lack of action for decades.

“There has been a chronic unemployment issue in our part of the world because of late reforms. But what has happened because of these delayed reforms there is more and more people coming into the labor market, therefore you see higher rates of youth unemployment. It is a time bomb if you like.”

At the World Economic Forum in the Dead Sea last week, it was evident that momentum is building, albeit very late, on public private partnerships, micro financing for small businesses and calls for an Arab Stabilization Plan to fund major infrastructure projects. The panel I chaired “A New Vision for Arab Employment” presented all those concrete ideas and fielded tough questions from the audience and youth outside the forum who were watching online. They were the most skeptical.

In Saudi Arabia, holder of the world’s largest proven oil reserves, the youth jobless rate is right near the regional average, despite a half trillion dollar diversification package from King Abdullah.

One of his corporate champions picked to drive change is Mohammed Al Mady, Chief Executive of SABIC, the petrochemical and steel manufacturer with $27 billion in annual revenues.

“The intention is very good,” admits Al Mady, “The problem is execution.”

Al Mady faced some heat when he admitted that he employs only 50 women in his Saudi operations of more than 20,000 workers. Equal rights remain not only a problem for those unemployed, but it also undermines productivity.

Then there is the giant problem at the heart of the region that no one seems capable of solving. Syria. Its civil war has led to a flood of refugees — over a half million in Jordan. This places additional strains on an economy with the youth unemployment just below 30%.

There remains an economically divided Middle East. On one side, the oil rich Gulf states like Saudi Arabia pump billions of dollars into diversification; on the other are the oil importers which includes Egypt, Tunisia and Jordan.

In his opening remarks this weekend, King Abdullah of Jordan said that “double action” was needed to deal with the disgruntled youth and a potential doubling of refugees in his country.

The IMF released a report calling the situation complex, with downside risks.

“The risks come from further prolonged political transition which could still hold back that investment, hold back that recovery because the private sector is waiting to see how things settle down,” said Masood Ahmed, Director of the Middle East & South Asia for the Fund.

The IMF is projecting regional growth of just over 3%, which looks decent by global standards but experts say it is about half of what is required to generate enough opportunity for those who are part of this unprecedented youth bulge.

Youth unemployment in the Arab world: tackling the demographic time bomb

The threat to stability in the Arab world posed by youth unemployment is such that governments old and new must urgently address the worsening economic environment. If a solution is not found soon, the whole region risks instability or even secondary revolutions.

The FT’s beyondbrics touched on this issue recently in an article about moves towards a higher minimum wage in Saudi Arabia, arguing that job creation is “imperative” for “a country that is throwing money at its potentially restive population”. This is an important point. With commentary on the region mostly focusing on the struggle for freedom and political change, it is often forgotten that the issue that was at the core of these revolutions was the chronic and widening deficit of economic opportunity, combined with the demographic time-bomb of a rapidly growing youth population.

And this is not just an issue for those looking to avoid potential unrest. Arab nations in transition must also address the economic crisis. Expectations are high but just because regimes have toppled does not necessarily mean that jobs and housing will become immediately available.

Egypt, the most populous Arab country, is an important example. The euphoria of Cairo’s Tahrir Square has long died down and, despite burgeoning democratic development and a newly elected government, the country faces immense challenges on the domestic front. While there have been slight improvements in recent months, public security has generally deteriorated since the revolution, with a rise in killings, abductions and theft, in addition to the riots that were so widely reported earlier this year.

At the same time, the economy continues to worsen. More than 40 per cent of Egyptians live below the poverty line and the critical tourism and construction sectors have ground to a halt, causing a liquidity crisis. Fuel shortages are also an increasingly urgent issue.

The fact is that 700,000 jobs per year must be created in Egypt, just to keep unemployment from rising. That pace of growth is just unrealistic. The World Bank expects Egypt’s growth rate per year to be 1 per cent or less, and foreign direct investment has plummeted. In its June draft budget, Egypt’s government projected that its deficit will increase to nearly 11 per cent of GDP.

Egypt’s long-term prospects could be very positive, but without action to stabilise the short to medium-term jobs crisis, the country may never achieve that potential. The IMF recently agreed to a $3bn standby loan to help the country bridge its deficit for fiscal year 2011-2012, but this is only the tip of the iceberg.

So what’s the answer?

Government leadership is, of course, essential. Labor market reform, as we are seeing in Saudi Arabia, is certainly one way of defusing the “region’s social time-bomb”, as is tackling corruption and improving education.

The private sector also has a crucial role to play. Investment in infrastructure projects, such as construction of highways and bridges, and large rural or agricultural projects, could provide attractive returns and create jobs speedily. The private sector could implement them, but the funding needs to be provided. The GCC is probably best placed in this respect, given that gulf companies are already major investors in Egypt and don’t face the same mistrust as western firms.

Egypt is not the only Arab nation facing these issues. Before the so called “Arab Spring”, regional youth unemployment stood at 24 per cent and the stark reality is that 100m jobs need to be created in the Arab world in the next two decades alone, more than was created in the whole of the last century. Tackling unemployment is by no means a panacea but, for those playing a part in the transition of the region the lessons are clear: it is not wise to separate political rights from economic rights.