“I was frustrated to see that even with my Master’s degree, it wasn’t possible for me to find a decent job, and that made me hate the county I am living in,” Kefi Ghazi explained. Despite graduating from the top of his class, he had spent three years looking for a job in his hometown of Tunis, Tunisia.
He was not alone in his frustration. Over 42% of young Tunisians are unemployed (Tunisian National Institute of Statistics, 2014), and across the Middle East & North Africa (MENA), more than one in four youth is locked out of the labor market. For women in the region, the statistics are especially sobering: less than one in five are currently employed (OECD, 2013).
According to a recent study by Beyt.com, the Middle East’s leading career site, 79% of Millennials in the Middle East say that the foremost challenge of their generation is finding a job.
As these young people can attest, the obstacles to youth employment in MENA are very real. But it is the opportunities for youth employment that motivated me to foundEducation For Employment (EFE) as a network of demand-driven job training and placement organizations. From decades of launching successful businesses in a wide range of industries, I knew first-hand that access to skilled talent is crucial to economic success — whether at the company or country level.
With global headlines relating conflict and discord in the region, some doubt whether meaningful job growth could occur there in the near-term. Focusing on only a small slice of a much larger region, the global media tends to ignore some of the changes that — with the right support from local and international actors — could transform the future employment outlook for the region’s youth.
In “Challenges and Opportunities for Youth Employment in MENA,” a recent report funded by The Citi Foundation, EFE found that a number of industries are well-positioned to generate significant entry level job opportunities, and stand to benefit tremendously from the energy and creativity that younger workers contribute.
For example the MENA region’s improved legal and regulatory system, better broadband infrastructure and a rapid uptick in digital adoption have made information and communication technology (ICT) one of the most promising fields for job creation in the near-term. If the current pace of industry growth continues, it could generate nearly 4.4 million jobs over the next five years (Strategy&, 2012).
Along with burgeoning high-speed Internet connectivity, MENA boasts a relatively large population of youth with basic English or French skills, making it a promising location for IT and Business Process outsourcing. Growing international interest in “impact sourcing,” which brings digitally-enabled jobs to disadvantaged communities, could catalyze opportunities in this area. Already, large international companies such as Accenture and Vistaprint have found that through partnering with EFE and similar organizations, they are able to source entry-level employees with globally competitive cost and work quality profiles, and simultaneously create a positive social impact in communities with particularly high unemployment.
Women stand to become the most significant beneficiaries of such growth, as ICT is one of the top sectors employing women in MENA. Online work platforms such as Nabbesh.com have emerged, providing flexibility to workers with family commitments and enabling women to work from home where cultural sensitivities might otherwise prevent them from participating in the labor force.
Recent modernization in MENA’s retail industry, particularly in tourism hotspots, has also led to significant and consistent growth despite political unrest and the global recession. The sector is uniquely positioned to offer employment opportunities to a wide range of young workers, given the diverse options that it provides such as supply and distribution, inventory systems management, finance, and sales.
What’s more, tech-savvy Arab youth are driving growth in e-commerce, and are staffing the field’s expansion. According to PayFort’s State of Payments Report 2014, e-commerce payments in the Arab world are growing faster than anywhere else on Earth, at an annual growth rate of 45. Traditional education institutions have been unable to produce sufficient numbers of entry-level employees with the right e-commerce skills, and regional industry giants such as Souq.com are scrambling to onboard talent. Non-traditional education providers have stepped in to fill the gap. For example, recently, over 40% of Souq.com Egypt employees were EFE graduates.
As “Challenges and Opportunities for Youth Employment in MENA” points out, the potential for significant job creation extends beyond retail and technology into such diverse fields as agriculture, automotive, health and tourism.
While these industries offer promising platforms for job creation, such growth is far from assured. The scale of the Arab youth unemployment challenge eclipses the independent activities of any one set of actors; hence concerted efforts are required at the local, regional and international levels, and across the public and private sectors.
The World Economic Forum provides an ideal platform for turning such multi-stakeholder talk to action. Collectively, we need to prioritize youth employment in the MENA region as both a social and economic imperative, and recognize its momentous power: to throw the region into discord, or to elevate it to new levels of dynamism.
- RON BRUDER, WORLD ECONOMIC FORUM
- Published: JAN. 22, 2015, 11:29 AM
- Source Business Insider
The political stability of the Arab world needs a long-term plan to increase economic stability and move away from dependence on oil as the major economic driver, while also addressing the region’s dangerously high unemployment, particularly among young people.
The proposed Arab Stabilisation Plan, ASP, would build a regional framework to promote infrastructure investment and create jobs. Taking its inspiration from the US-led Marshal Plan to rebuild post-war Europe, it would prioritise infrastructure projects on a national level and boost economic growth in countries such as Egypt, Jordan, Yemen, and Tunisia.
It would be important that the investment would come mainly from within the Arab world such as the Gulf countries, and the private sector, and not rely on external sources which lack the long-term will and commitment to make this work.
Speaking at the “Arab World Context” session on the first morning of the Annual Meeting in Davos, Majid Jaafar CEO of Crescent Petroleum made a strong case for the urgency of a long-term plan which is also large enough to make a serious difference. Other speakers included Salam Fayyad, former Prime Minister of Palestine, and Khalid Abdullah Janahi of Vision 3.
“We need quick and urgent economic action to address the issue of high youth unemployment in the Middle East and North Africa. Insufficient economic growth in the region has led to massive youth unemployment, in some areas more than 60 per cent. This is turning into a demographic time-bomb,” Jafar said.
“The recent fall in the oil price is also a warning that the region cannot be over-reliant on energy resources for GDP growth. We must create long-term sustainable economic growth. Employing our youth is the key to unlocking our true natural resource. We cannot achieve political stability without economic stability,” he added.
“In many cases the region has failed to build national identities let alone a regional one. It has failed to build inclusive and stable institutions, and above all failed to build private-sector driven competitive economies. There is plenty of capital in the region, but it needs a focused multinational effort to create regional trust and direct it into long-term infrastructure investments. This will create employment and sustain economic competitiveness,” Jafar concluded.
Jafar’s comments on the urgency of tackling youth unemployment are backed up by the World Economic Forum’s 2014 Outlook on the Global Agenda, which cites persistent youth unemployment as the number one challenge for the region in the year to come, ahead of managing political transitions and societal tensions.
It comments that “high levels of youth unemployment and a mismatch between education and the skills required by employers have led to a vicious circle, where economies stagnate and there is an over-reliance on extracted commodities”.
The need for a coordinated economic plan to offer hope and enhance stability for the entire region is clear.
In the rocky aftermath of the Arab Spring, leaders across the Middle East have called for a regional “Marshall Plan”.
Most recently, Egypt’s finance minister and Tunisia’s former prime minister both asked for such a plan to mobilise massive resources to unlock the enormous potential for economic growth in promising sectors, such as tourism, energy, transportation and manufacturing, and to meet the urgent demand for jobs and better living standards from rapidly growing populations.
Given the dramatic events now unfolding in Iraq, the need for a coordinated economic plan to offer hope and enhance stability for the entire region is clear.
A recent study by the International Labor Organization (ILO) found that not only does the Middle East have the highest youth unemployment rate in the world, but it also experienced the greatest increase in unemployed youth over the past year.
To address this sharp increase in unemployment and bring it down to an 8pc level, it is estimated the region needs upwards of 6-7pc economic growth versus the near 3pc rates forecast for 2014.
The Marshall Plan was an instrument to transfer large amounts of finance to economies ruined by the Second World War but with essentially healthy institutions and a skilled workforce.
However, what the post-Arab Spring nations also need is transformational finance that targets fundamental reform of the institutional environment and helps raise the skill levels of the population.
For resource mobilisation to be successful, private companies must play a central role, but the aftermath of the Arab Spring has actually depressed private-sector investment in much of the region. If anything, the already-poor investment climate has further deteriorated, with increased macroeconomic uncertainty, political instability and security challenges.
At the same time, investment needs are even greater today than they were three years ago.
Infrastructure investment is critical. The World Bank estimates that the region requires $100bn (£60bn) annually, in sectors such as transport, telecoms and energy. Infrastructure still accounts for only 5pc of expenditure in the region (compared with 15pc in China).
Direct investment into critical infrastructure projects and partnering with the private sector would limit the bureaucracy often associated with large government projects and enable quicker and tangible economic improvements in countries such as Jordan, Yemen, Egypt and across North Africa.
Each $1bn invested in infrastructure could create up to 100,000 new jobs according to World Bank figures.
A large-scale “top-down” infrastructure effort must be complemented with a “bottom-up” approach focused on education, skills training and SME development. All elements are necessary to underpin a dynamic and sustainable economy.
The most effective way to create jobs is to spur the growth of new companies and allow small and medium-sized companies to grow into larger companies. Investments would need to be project-based and held to best practice in governance, while encouraging much-needed reforms in the investment climate and regulatory environment.
In a joint report on the competitiveness of the Arab countries, the European Bank for Reconstruction and Development (EBRD) and the World Economic Forum recently called for urgent institutional reform to support private-sector growth, arguing that excessive red tape and ineffective enforcement of competition policy and governance rules were hampering entrepreneurship. A private sector-led approach would enhance regulatory reform in this respect.
Private-sector principles are also important in expanding infrastructure investments. Lack of transparency and accountability is undermining efficiency and quality of service throughout the economy. Boundaries between central and local governments, and between local governments and utilities, are unclear.
In order to meet the needs of increasing populations, with legitimate demands for safe drinking water, more reliable power supplies and better transport, management of these services must improve.
Ultimately, private investors should also be attracted into municipal infrastructure, but only once these deficiencies in the investment framework have been addressed.
Additional resources must not be used to further distort the economies by subsidising wasteful use of energy and food consumption. Reducing subsidies is of the highest priority in improving the fiscal situation and encouraging better resource management.
But as policymakers are only too aware, subsidy reform must be handled with the utmost care. These countries have substantial pockets of deep poverty, where energy and food are important items in household budgets. The most vulnerable must be protected through carefully targeted interventions.
An Arab-led coordinated regional investment plan could promote much-needed economic growth and encourage improvements in the region’s business environment.
With additional income from sustained high oil prices, the Gulf co-operation council states are well placed to play a leading role as investor countries. They have already generously provided emergency finance, especially to Egypt. It is vital that the recipient countries use this efficiently while properly addressing the underlying structural problems of their economies.
Just as in the case of the Marshall Plan, for which the World Bank was once created, a multilateral framework is needed to ensure funds are managed, invested and governed through a transparent and coordinated mechanism, building upon global best practice.
Through a common regional investment platform, participating countries will be able to benefit through enhanced regional economic development, stability and security.
Majid Jafar is CEO of Crescent Petroleum and founder of the Arab Stabilisation Plan
Erik Berglof is chief economist for the European Bank for Reconstruction and Development
How to get more of the world’s savings to pay for new roads, airports and electricity
IF YOU have been to New York’s La Guardia airport recently, taken a train during London’s rush hour, tried to drive in Lagos or endured one of India’s ubiquitous power cuts, you will have first-hand knowledge of the world’s infrastructure deficit. According to the World Economic Forum, global spending on basic infrastructure—transport, power, water and communications—currently amounts to $2.7 trillion a year when it ought to be $3.7 trillion. The gap is almost as big as South Korea’s GDP. And it is likely to grow fast.
Much of the money to plug the gap needs to come from the public purse: even in an age of austerity many governments should be spending more. With the economy weak and borrowing cheap, it is daft that America’s public infrastructure spending is at a 20-year low, even as the country’s roads, bridges and dams are rated D+ by the American Society of Civil Engineers. The most cash-strapped emerging economies have room to cut inefficient subsidies (such as for fuel) and switch the money into building better roads and sewers.
But public money can be only part of the solution. The greater opportunity lies in tapping private capital. Unfortunately, the big global banks which used to lend money to finance infrastructure projects are pulling back, as new “Basel 3” capital rules make such lending less attractive (see article). The potential pot of gold is elsewhere, in the $50 trillion of capital managed by pension funds, sovereign-wealth funds, insurance companies and other institutional investors. Only 0.8% of this is currently allocated to infrastructure. A tenfold increase would be a good target.
From pension funds to power stations
In principle, investing in a power station or toll road ought to be an attractive prospect for institutional investors. The long life of these assets is a perfect match for the long-term liabilities of a pension fund. Infrastructure projects offer reliable cashflow, a hedge against inflation, low volatility and returns that are generally not correlated with other assets. In practice, though, many money managers have shied away, scared by the scale, complexity and political risk involved. Individual pension funds lack the expertise to assess complicated projects, too many of which are dreamt up by politicians who care more about winning votes than commercial viability. Corruption is rife and political pitfalls, from angry environmentalists to voters furious about rising power prices, are legion. In emerging economies these dangers are magnified by the possibility of currency crises.
But in two areas a few innovations could transform the market. The first is the professionalisation of project management. Every country needs a competent group of bureaucrats who have the authority and skills to design a pipeline of viable infrastructure deals and the political clout to standardise procurement procedures and other practicalities of getting a road built or a tunnel dug. Some countries already do this well. Chile has a National Public Investment System that has dramatically improved the efficiency of its capital spending. Canada and Australia stand out too. But in too many countries technocrats tend to be under the thumb of politicians and not up to the job. In poorer countries aid money could usefully be used to pay for top-notch infrastructure teams.
The second priority is to streamline the system for slicing risk unrelated to a project’s commercial viability. Governments and international financial institutions like the World Bank already, for a fee, protect private investors against political risks, such as the expropriation of their assets. Rich-world development agencies also offer guarantees for projects their countries’ firms invest in. But the system is small, fragmented and geared to banks. To encourage the growth of a market in infrastructure bonds, the big development organisations, led by the World Bank, ought to provide a bigger and more standardised menu of credit enhancements and guarantees.
These changes could have dramatic results. Infrastructure bonds could become as ubiquitous as mortgage-backed securities. That won’t mean every African country gets the road network it needs. But it would help ensure that more of today’s savings finance the building blocks of tomorrow’s growth.
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.
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.
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.
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.
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.