Youth unemployment is among the most pressing challenges facing the Middle East and North Africa region today. The jobless rate for young people aged 15-24 in the region hovers at almost 30 percent, one of the highest in the world and has persisted for more than a decade. Although a young labor force represents a source of great potential, many countries in the region struggle to create opportunities for these youth.
IFC convened a panel of experts from the International Labour Organization, World Economic Forum, private sector and government in October to explore solutions to this looming problem and help move the region forward to realize its full economic potential.
Access to finance remains a key challenges in the region, hindering job creation
“Part of the problem is that, historically, the public sector has been the main source of job creation in the region. However, with many countries facing budgetary shortfalls, this cannot continue,” stated Dimitris Tsitsiragos, IFC VP for Global Clients Services in his opening remarks. “At IFC, we believe that the private sector can offer best solutions for this challenge of youth employment. Private businesses already provide the majority of jobs in the developing world. In emerging markets, 90 percent of the jobs are created by the private sector. But they are often hampered by burdensome regulations and a lack of credit. By creating an environment for these firms to thrive, we can unlock their potential, allow them to grow, create jobs and drive economic development.”
Entrepreneurship is a proven and powerful tool for creating economic opportunities, generating wealth and empowering citizens. Despite their importance to the economy, entrepreneurs often find it difficult to access the financing they require in the Middle East and North Africa (MENA). This severely limits their ability to grow their businesses and create jobs. World Bank data shows that 8 percent of all bank lending in the region goes to small and medium enterprises (SMEs). The total credit gap facing smaller businesses is up to $240 billion.
Even in this challenging, credit deprived environment, there is a vibrancy to entrepreneurial activity in the region that many don’t see it at first brush. Creating an ecosystem that supports entrepreneurs and startups in MENA is vital. IFC has supported entrepreneurship in the region by, providing $10 million to Wamda, to support investments in promising IT companies, and committed $27 million to Souq, the largest ecommerce platform in MENA. IFC is also working to support accelerators in the region, and plans to soon announce its first investment, which will be in Egypt.
H.E. Dr. Sahar Nasr, Minister of International Cooperation in Egypt, added: “There is no one recipe for all. In Egypt we have different challenges in each province, and each regional area. So the reasons for unemployment differ from one place to another in each province. We also need to reflect that and.” Infrastructure–clean water, electricity, sanitation–is also key, especially in lagging regions.
Education, research, and innovation can play a role in addressing unemployment
The importance of research and development was cited by Ruba Jaradat, regional director for Arab States at the International Labour Organization. “Since many of MENA countries are now fragile states, some would say this is not the time to invest in research and development. However, in 1863, Abraham Lincoln, at height of the civil war, established the US National Academy for Science and Technology that advanced innovation and science in that conflict ridden country at the time. A strong embrace of innovation is key to addressing this problem.”
Linked to innovation is the educational environment in MENA. The challenge is not in technical education or the curriculum but rather in the soft skills, such as management and communication skills. One way cited to bridge this gap is by supporting private education companies which have proven adept at tailoring their training programs to the job market; educational training that helps youth acquire the skills required by the market. IFC has partnered with private education providers in Morocco and Jordan to great success.
Mouayed Makhlouf, IFC Regional Director in MENA: “The vast majority of education in MENA today is in the hands of the public sector and this needs to change. Only 15 or 20 percent of students go to private schools in MENA, compared to between 50 and 75 percent in Brazil and Malaysia, is. This is a significant gap between MENA and the rest of the developing world.”
Egypt alone faces a need of 20,000 schools over the next five years, an enormous capital investment. However, Ahmed Alfi, chairman and founder Sawari Venture, a VC firm, stated that his firm’s Nefam initiative put the country’s entire K-12 curriculum online, with an initial investment of only $100,000. Currently, some 500,000 Egyptian students are studying on the educational website, with 65 million lessons being given to date—for free. The advertising supported effort has also uploaded about half of the Saudi and Syrian national curriculums online as well. So technology can have a huge impact in this space and bridge the education/training gap in some instances.
Skills mismatch and the lack of qualified labor
Miroslav Dusek, Head of MENA World Economic Forum emphasized the need for young people to understand that as they live longer, they should expect to requalify at least twice in their lifetime and focus on life-long learning. Skilling people for the future is critical, especially in science-technology-engineering-mathematics (STEM) subjects.
Mindsets have to change as well. A survey conducted with Wamda showed that 90 percent of entrepreneurs in the region were looking to hire someone in next 12 months, while only 12 percent of job seekers said they’d work for entrepreneurs, or SMEs. Most graduates seeking jobs in the region continue to turn to the public sector.
Government can play a role, by changing regulations, making a more favorable operating environment for businesses and working with industry to boost job quality. Good examples from international experience included Cambodia and Vietnam which retrained their labor force from regular seamstresses to fabric and garment design and development, resulting in a quantum leap from low skilled to high skilled and creating multiplier effect. Decades earlier, Taiwan invested in the semiconductor industry and training people. The country transitioned from being a mushroom exporter to exporting semiconductors, moving from low value-high volume to high value-low volume exports.
Gender empowerment is a priority to IFC in MENA
Gender empowerment also has the power to boost the economies and reduce youth unemployment in MENA. An ILO study showed that greater gender equity in the region could raise the GDP of Arab states between 7.5-11.4 percent by 2030, an enormous increase. The government of Jordan created a maternity fund—which was not an employer liability—that raised women employment by 31 percent.
In addition, Mr. Alfi said that women in technology start-up companies at his accelerators across the region at a rate comparable to Silicon Valley (15-20 percent), or even higher as in Saudi Arabia (40 percent). As Saudi women are more college educated than men, but have fewer opportunities, they are more qualified, adding that “they are even better” than their male counterparts.
The panel concluded that boosting youth employment in MENA must be a collaborative effort involving private sector partners, companies and the help of governments. Encouraging entrepreneurial activity across the board and ramping up skills training offer the best and fastest solutions to the persistent problem of jobless youth in the Middle East and North Africa region.