Times of Oman also report dated July 5th 2011.
MENA: The Great Job Rush
The ‘unemployment’ ticking time bomb and how to fix it
Today MENA has the dubious distinction of having the highest unemployment rate in the world, say the report. It drills into the causes, identifies the problems and creates a check-list of mandatory solutions.
Regardless of whether you call it the Arab Spring or refer to the changing dynamics in the MENA region as unrest, there has been a dramatic shift in the overall paradigm and the localized effect on the job market has been definitive in both long term and short-term scenarios.
The cause of the various civil uprisings can easily be traced to authoritarian rule, corruption, large rural-urban divide, high inflation and unemployment in the region. Unemployment in particular has played a significant role in energizing the masses.
Today, MENA has the dubious distinction of having the highest unemployment rate in the world, according to a recent report released by Al Masah Capital. The ground breaking report drills into the causes, identifies the problems and creates a check list of mandatory solutions that need immediate government support and implementation; otherwise the Arab Spring will become a relatively benign side note to a much more explosive societal upheaval in the not too distant future. The Middle East clocks in at an unemployment rate of 10.3% while North Africa registers in at 9.8%. The situation in GCC is somewhat better with an unemployment rate of 4.2%. In countries like Djibouti, Yemen and Libya have unemployment rates in excess of 30% and there is little relief in sight. Joblessness is a structural problem, particularly among youth in the region. What created the spontaneous flood of people marching for change was huge numbers of unemployed youth; the level of disaffection and disenchantment with the system was and remains palpably raw.
With one in every four youth living in this region being unemployed the numbers are growing exponentially. The figures are staggering and unless they are recognized for their potential danger, things can get badly out of hand. A World Bank report released in 2003 had mentioned that the MENA region needs to create some 100 million new jobs during 2000-2020 to combat unemployment. The demographic data indicates that as many as 76 million people (male and female) in the MENA region will enter the 20-30 (youth) age group by 2020. Based on an employment rate of 65% among the youth and the exit of 18.3 million from the working age group (retirees), the total number of new jobs required stands at 30.7 million.
Similar analysis places the total number of new jobs required in GCC nations at 3.3 million.
Generating jobs in proportion with the growing youth population over the next 10 years will be an undeniable priority for MENA countries and one that will have to be taken very seriously indeed, according to Al Masah Capital’s research.
However, the job market is not that dynamic at present with global and regional economies growing gradually after the recession and to gear up for such an induction will tax resources and systems. “For the new generation the choices seem to be clearly leaning towards the public sector. It remains the primary source of employment in the MENA region yet, aradoxically, is also usually also the last resort, especially in many GCC countries. The job
security that comes with it is a very attractive element,” said Shailesh Dash, founder and CEO of Al Masah Capital.
The World Bank registers that the services sector accounts for 52% of the jobs in the MENA region, 70% in the GCC region compared to 43% for the rest of the world. On the other hand, the agriculture sector and industry are responsible for 24% each compared to 35% and 22%, respectively on the global scale. A lower number of people are engaged in agriculture and this is but natural for the Middle East region due to poor climatic conditions, the terrain and the
relatively low yield. Sectoral employment trends in the MENA during 1999-2009 indicate the rising importance of the services and industry sectors. The share of both sectors has increased 1.1% and 1.2%, respectively, over the past decade. These sectors gained at the cost of agriculture which is down 2.3%).The services sector accounts for 52% and 70% of the jobs in MENA and GCC region and is expected to retain its position.
“The demographic breakdown does have a large percentage of expatriates in the labour force and this has been the case since the early days of the oil boom. This will not change hurriedly
and will require more than just legislation because private sector employers prefer foreigners over nationals due to their knowledge and skills, lower salaries, higher productivity and flexible hiring arrangements,” added Dash.
Exhibit 3: Employment statistics by sector – World, MENA and GCC
Knowing that the situation is explosive many of the MENA countries are significantly investing in improving their education system to equip their citizens with the knowledge and skills needed to join the workforce. Some countries have gone into forward thinking mode and have been hiking their budgetary allocations for education. Saudi Arabia, for example, allocated USD40 billion (more than one-fourth of its 2011 budget) for education and training. The country’s budgetary allocation for education and training was USD36.7 billion in 2010 and USD32.5 billion in 2009, highlighting the increased focus on this area. Nationalization policies, despite criticism, are also being actively pursued across the region (especially GCC) to spur employment for the local population and reduce capital outflows in the form of expatriate
remittances. MENA governments do realize the valuable contribution that expatriates offer to the economy in terms of expertise and knowledge, so they are unlikely to be targeted as unwelcomed guests. However, as more citizens come up to take job there will be slowing down of the expatriate influx.
Each MENA and GCC country faces unique challenges pertaining to unemployment and hence similar solutions cannot be applied to eradicate their problems. Therefore, each government will have to react based on its available resources and intensity of the problem and create customized solutions.
The confusion over the Saudization program recently underscores the problem. It was misunderstood to mean that all expats would be told to leave after a maximum of six years and then later clarified that it applied only to those companies that would not comply with the Saudization parameters. At this juncture, Saudi Arabia is not alone in battling a high unemployment of 10.8% (countrywide). Unemployment rates in GCC countries were lately recorded as follows: Bahrain (15%), Oman (15%), Saudi Arabia (10.8%), with UAE (2.4%), Kuwait (2.2%), Qatar (0.5%) showing less reason for fear but the overall future trends all pointing towards an escalation rather than a deceleration.
Demostrators in Libya
Governments need to look at long-term viable solutions that go to the heart of the unemployment problem. Al Masah Capital’s suggestions for solving the unemployment
dilemma are: (1) Assist self-employment/entrepreneurship, (2) Encourage investments from the private sector, (3) Continue to give greater emphasis to education, (4) Nationalization, and (5) Diversification.
To make it work deep structural changes are required, changes that go to the heart of cultural mentality, methods and processes that themselves will take generations to bear fruit.
The government support has to be long standing, unequivocal and resolute. Using Singapore as a case study, the report shows that its experiment was based on an education system that not only taught the young generation a new way of the world but equally it taught the existing generation the need to adapt to a changing world.
Demonstrators in Yemen
The fact is that over reliance on expatriates will not go away as long as the indigenous population only expects the best jobs with the best perks regardless of merit and competency. The Arab Spring shows that the Arab people are ready for this change and they are ready to accept the challenges that come with a new dawn. A failure on the part of policy makers to recognize this ‘ticking time bomb’, will have deep, long lasting negative connotations., throwing the region and its population off the growth path and into a cycle of stagnation.
In a detailed analysis and prognosis of the MENA unemployment problem, Al Masah Capital’s research report manages to paint a compelling picture. For more information on the report and to request copies, please contact: Nandini Vohra, Managing Director, The Guild, firstname.lastname@example.org.
© Press Release 2011
Qatar has lowest unemployment rate in GCC
DOHA: Qatar has the lowest rate of unemployment in the GCC region at 0.5 percent but experts warn that future trends point towards an escalation rather than a decline.
Among the GCC states, Oman and Bahrain top as far as unemployment is concerned as the rate in these countries is quite high at 15 percent each, with Saudi Arabia trailing with 10.8 percent.
The UAE and Kuwait have lower joblessness rates at 2.2 percent and 2.4 percent, respectively, Al Masah Capital said in a report on unemployment in the Mena (Middle East and North Africa) region.
The region (MENA) has the dubious distinction of having the highest unemployment rate in the world, Al Masah said talking of the political upheaval jolting some countries in the region.
The cause of the various civil uprisings in these countries can easily be traced to authoritarian rule, corruption, large rural-urban divide, high inflation and unemployment in the region, Al Masah said in its report.
It added that unemployment, in particular, has played a significant role in energizing the masses.// The situation in the GCC is somewhat better, the report noted, putting the unemployment rate in the region at 4.2 percent. The report, however, said that the total number of new jobs required in the GCC states is 3.3 million.
The services sector accounts for 70 percent of the jobs in the GCC region whereas the average for MENA is 52 percent and that for the world is 43 percent.
Shailesh Dash, founder and CEO of Masah Capital, was quoted as saying that expatriates will keep dominating the jobs market of the GCC since private sector employers prefer foreigners over nationals due to a number of reasons, including their knowledge and skills, lower salaries, higher productivity and flexible recruiting arrangements.
© The Peninsula 2011