quotes SMEs are key to fighting youth unemployment surge in the Middle East

06 July 2020
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Updated 06 July 2020

SMEs are key to fighting youth unemployment surge in the Middle East

Youth unemployment has long been a concern in the Middle East. In 2008 the financial crisis resulted in a surge in youth unemployment in the region. In the Arab Spring protests a few years later, it was a key factor in an uprising that spread like wildfire.

Now the COVID-19 pandemic has presented another setback and youth unemployment in the MENA region is currently the highest worldwide, reaching over 25 percent.

Several countries have established comprehensive roadmaps to develop their economies such as the Saudi Vision 2030 reform plan launched by Crown Prince Mohammed bin Salman. Although this provides clear directions for creating skilled jobs, the Middle East cannot afford to sit back and wait for a long-term goal that is over a decade away to solve problems like youth unemployment. Instead, drastic measures need to be taken to protect the growing youth population in the immediate aftermath of the pandemic.

So, what is the answer? The public sector has proven inefficient in catering to the demand of the unemployed youth due to an over-regulation of the labor market. The public sector is not diversified enough —  there is an over reliance on jobs that cater to the dominant markets of oil and gas in the region. But what happens to the youth if these markets fail, as has been the case during the pandemic when oil prices plummeted to an all-time low?

In the face of this unprecedented crisis public sector spending is being reduced across the Middle East. Most of the public sector in Saudi Arabia has suspended its hiring as part of the country’s spending cuts. In light of the current crisis in unemployment, it is critical that young people are offered more support in their development, rather than less.

With the drop in oil, the youth in the Middle East are likely to feel even more unstable and feel like there is a lack of opportunity available to them. The issue is not just about creating jobs, it is about creating genuine, long-term professional opportunities where they can survive and grow and achieve greater social justice and stability.

The answer rests with small and medium-sized enterprises (SMEs). Not only do SMEs amount to 90 percent of all businesses in the region but they promise a lot more than mere job positions to the unemployed. It is the type of jobs that SMEs create — digital, agile and entrepreneurial opportunities which will allow the youth to thrive and grow, to adapt to a changing digital and social environment generated by the pandemic and to take control over their own professional development.

Through SMEs, the youth in the Middle East can build business models that are agile and capable of staying resilient to the changing economy. They can even progress their entrepreneurial skills and become employers themselves, leading to the creation of more jobs.

SMEs nurture a budding entrepreneurial ecosystem comparable to that of the biggest players in the world, such as the UK or US. They provide an ecosystem made of both locals and expats who wish to stay in the Middle East and thrive there because their needs are catered to. Rather than relying on traditional business models and the volatile oil market, the Middle East needs to stake its ground as a region willing to adapt and transform in accordance with the changes that the coronavirus is placing on society and on the digitally-adept and ambitious youth.

Although the pandemic is sure to only exacerbate youth unemployment in the Middle East, it is also opening up a wealth of digital and entrepreneurial opportunities worldwide. Unfortunately in the Middle East, this entrepreneurship is not at the same stage of development as places such as the UK. Although the youth are in many cases digitally-adept, there is a lack of infrastructure in place to support their development. The result? It is likely that the youth will set their sights abroad, both for education and professional development.

To resolve this issue, particularly in the wake of the pandemic, governments need to enhance their support of SMEs by collaborating with them and by understanding the obstacles that they currently face. One problem that SMEs in the Middle East have long suffered from is poor access to finance as they have the largest gap in financial inclusion in the world. Governments can help alleviate this by providing loan guarantees to small businesses and encouraging banks to work with SMEs that want to expand. In short the public sector should not be the antagonist of the private sector, ideally they should work productively together.

Perhaps the pandemic is the herald of a new approach to the youth, or a reminder of the things that went wrong in the Arab Spring, and how to address them again.

Youth unemployment is not just about creating jobs — it is about securing economic, political and social stability in the region too. The wave of dissatisfaction that spread through the region in the Arab Spring is almost certain to return, with COVID-19 worsening an already grave situation. SMEs need to provide a source of stability for the youth, to make them feel nurtured and to offer them a platform to use their talent and find social and economic stability. Our young people need a more professional and entrepreneurial ecosystem that will help them grow - and SMEs may be the answer.

Abdullah Faisal Al-Othman is a Saudi businessman and serial entrepreneur working in the fields of financial technology and real estate. He is founder and co-chairman of Geidea Financial Tech and AO Holdings and co-founder of United Lemar Company Ltd.