Youth and the private sector hold keys to the Arab world’s future
Everywhere you look, the Arab world is changing — and fast.
A decade or two ago, most countries in the region had an unusual system in which citizens enjoyed relative stability, buoyed by exports of natural resources or foreign assistance. Despite limits to personal development and the chances to increase household income, this system worked fine as long as the public sector continued to dole out jobs alongside generous subsidies to maintain the myths of a low cost of living and prosperity.
However, regardless of whether a country is resource-rich or largely dependent on foreign assistance, when the global economy is beset by falling commodity prices, debt crises in the EU and collapsing markets in the United States and Asia, these old social contracts are doomed.
Populations were, and still are, growing and the public sector can no longer create sufficient gainful employment opportunities. In addition, the old system might have “worked” for a time, but with each new public-sector hire, the government’s role in the economy continued to grow. This added an increasing burden to public finances and stripped the private sector of valuable capital, resources, skills and opportunities for expansion.
More than half of the population of the Arab world is under 25 years of age, but the region has the world’s highest youth-unemployment rate, averaging 25 to 30 percent. In fact, over the next five years alone, about 27 million young people will enter the labor market.
This combination of internal and external factors and growing populations have created a “youth bulge” that could be the key to boundless economic growth and development. However, there has been a palpable increase in social frustration, not only at the lack of jobs and opportunities but also at the prospect of having to endure painful reforms, particularly reductions to subsidies, which have raised the cost of living.
If the Arab world persists with inaction or offers only vague answers, this potential key to economic prosperity instead could become a dangerous ticking time bomb that can easily undo all the “progress” made so far in economic rationalization, restructuring and reform. Worse yet, young people have already been testing the waters of revolt, civil disobedience and mass protests, which will force governments to either play with fire or engage with the increasingly frustrated youths and offer wholesome solutions.
If the Arab world persists with inaction or offers only vague answers, this potential key to economic prosperity instead could become a dangerous ticking time bomb that can easily undo all the “progress” made so far in economic rationalization, restructuring and reform.
Two of the top four priorities in the ASDA’A Burson-Marsteller’s Arab Youth Survey 2018 were the creation of new, well-paying jobs and modernizing the education system.
In education, national curriculums should be re-designed to emphasize merit, develop critical mindsets, promote creativity and impart skills for knowledge application beyond knowledge retention and regurgitation. After all, the private sector requires new hires to be knowledgeable, experienced, adaptable and “tech conscious.”
The finance sector will also need reforms and incentives to encourage banks, creditors and investors to provide financing to a wider array of projects, focusing on innovative ideas, especially in the tech sector, as part of a wider economic-diversification program. Deep reforms are also very much needed to the legal frameworks, labor laws and public administrations if the future is to be any better than the present.
Currently, most low-income households in the Arab world derive their incomes and sustenance from an informal economy that participates in every sector, including food production, retail, construction and a myriad of services. With little gainful employment opportunities in the public sector and anemic private sectors, most of the youth of the Arab world, especially in low-income households, will end up in this informal sector.
The successes of Saudi Arabia and the UAE are important illustrations for the rest of the Arab world of the wealth of potential and opportunity offered by adopting holistic progress-minded strategies aimed at readying citizens to succeed in the modern, global economy. Both countries continue to seek diversification and economic sophistication, as should all other Arab governments.
In short, to quote IMF Director of Middle East Jihad Azour: “The old model, where the state plays the role of primary employer, is no longer sustainable.”
It is therefore imperative that along with current reforms to trim budgets and reshape national policy, any new social contract must also unleash the Arab world’s most potent, underutilized and underexploited weapon: the private sector.
Hafed Al-Ghwell is a non-resident senior fellow with the Foreign Policy Institute at the John Hopkins University School of Advanced International Studies. Twitter: @HafedAlGhwell