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Arab Unemployment Frustration Is The Real Danger

Thursday February 3rd 2011

The Arab world stradles the Northern Coast of Africa as well as the Arabian Gulf Peninsular and is the region that carries the highest rate of unemployment in the world. Source: The International Labour Organisation (ILO). They reported unemployment in the region is running at 10.3% compared to 6.2% on average globally.

This situation that was presented in “Global Employment Trends 2011″ becomes even more critical when one puts the youth of the region into focus.  For people up to age of 25 years the unemployment rate is estimated to be 40%!

This data that has been published by the UN agency is a serious cause for concern given the level of disturbance seen in Tunisia and of course, more dramatically and right now in Egypt. One has to hold one’s breath ahead of Friday, 4th February. As the people leave the Mosques, one wonders if the disturbance between the Anti and Pro Mubarak factions turn really ugly?   

The feeling is that 30 years as president is long enough. President Mubarak said he never sough the office, maybe so, but he sure has held onto it for all it is worth. Under his rule, Egypt has fared quite well economically under President Mubarak as in 1981 the GDP was just $23.405Bn. (Source: World Bank).  In 2009 that figure had increased to 4188.413Bn. Sadly though the last decade has seen Egyptian unemployment average 9.94% with the rate for those under 25 years of age running at 25.0%. The wealth has not trickled down outside of the ruling elite so it is no wonder that the people in the street have shouted, “more bread, more work”, as well as calling for the president to quit his office.

The clear unequal distribution of wealth and the absence of opportunities is a combustible cocktail that will lead to a risk of total social disorder. Any investors that are still exposed to MENA assets should selectively disengage, although not make a complete exit.

Economic growth in the entire area is forecast between 4.5% and 5.1% between 2010 and 2012, but it does not seem destined to translate into actual jobs. The Arab world has severe bureaucratic and structural issues to overcome.

The priority, both for all Arab states whether they be well endowed with natural resources such as oil, gas, gypsum or even fertile soil is the ability to create opportunity for  an already high number of young people ready to enter onto the job market.

We should heed the wise words of Queen Rania of Jordan who in 2008 called the situation a “a ticking time bomb”.

 It is all too easy to forget that Arab Autocracies often have a thriving private business sector.

 Indeed not so many years ago, Egypt made a play on this fact by running a TV advertising campaign called “EGYPT – OPEN FOR BUSINESS”

 The Arab world will need to create 100m jobs in the years through to 2020 to keepthese souls occupied. It cannot from the dead hand of the state. The private sector will have a key role to play for meaningful, economically productive jobs will only come from the private sector.

However, it is not a simple as it might be in the US or Western Europe. A solution in the Arab world will be shaped by the high level of bureaucracy that is a hallmark of the region. So it will require a private and public sector partnership  with business having to take the leading role.

Certain resource rich Gulf States can, with the current high price of oil, afford to bathe the youth in financial largesse. But young minds, particularly, well educated minds need to be occupied. That means mind stretching employment.

The real worry is in Yemen. A true failed state that has no resource wealth and could be an incubator of fervent Islamic  revolt. Maybe it is time for the Arab Brothers to help their distressed neighbour.

Jobs alone are not enough…there has to be an environment where red tape is reduced and an entrepreneurial spirit  can be encouraged. Of course, far easier said than done.

Stephen Pope ~ Managing Partner

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