Thursday, November 05, 2009

The Middle East's demographic time bomb

Commentary - Executive magazine

With the end of the summer holidays, children and young people across the Middle East and North Africa (MENA) once again donned uniforms, packed satchels and headed to school, amounting to more than a quarter of the region returning to class.

In Syria, a quarter of the country's population, some 5.3 million people, are enrolled in schools, while 38 percent of Saudis, 46 percent of Yemenis, 31 percent of Jordanians and 31 percent of Egyptians are below 14 years of age. Altogether, half of the MENA's (including Iran) 300-million-plus people are under 24 years old.

While all these kids are in school, there is no pressing socio-economic problem. But over the next decade as students graduate and want to enter the workplace, finding employment for them all will be difficult. Already the Middle East and North Africa has the highest unemployment rates in the world at 9.4 percent and 10.3 percent respectively, according to an International Labor Organization report.

According to UN projections, the MENA's population will reach 430 million by 2020, of which 280 million are expected to be urbanites — already the three mega-cities of Tehran, Cairo and Baghdad are home to 25 percent of the region's population. This rapid urbanization stresses infrastructure and exacerbates not only the employment problem, but other issues afflicting the MENA region to varying degrees, including political instability, food sufficiency, drought and energy shortfalls. Furthermore, a main pressure valve used to keep some of these woes at bay — finding work abroad — has led to remittance reliance, a revenue stream that cannot be taken as a certainty.

The Gulf was once considered an employment paradise for the rest of the MENA region, taking in millions of white and blue-collar workers alike. But given the economic contraction of the past year, the Gulf gold rush is not as robust as it once was, with workers laid off and remittances down. Moreover, the majority of expatriate workers in the Gulf are not Arabs but Asians. Some 1.5 million Egyptians, for instance, work in the Gulf, compared to 4.8 million Indians. Unless there is a pro-Arab employment policy, the Gulf cannot create enough jobs for the MENA's burgeoning youth.

The viability of migrating outside the MENA region for employment is also questionable. Europe’s rapidly aging population will increasingly be leaving the workforce, but it is far from a given that this will lead Europeans to be more accommodating to large numbers of Arab job-seekers, whether 'guest workers' or given full citizenship. While many Europeans acknowledge that there will be a need for migrants to take up the slack, there is also jingoistic concern about a 'Eurabia' developing.

The onus has to be on the MENA region’s public and private sectors to come up with viable solutions and programs. But what kind of model should they follow? Promoting more of the 1970s-style American capitalism flaunted in the Gulf and elsewhere in the region, with its rampant consumption, large cars and excess is as undesirable as it is unattainable and unsustainable. Indeed, last year the Worldwide Fund for Nature's Living Planet report ranked the UAE at the top of the list of carbon emissions, with an ecological footprint of 9.5 global hectares per person, more than triple the global average of 2.7 hectares and exceeding the USA, ranked number two, of 9.4 hectares.

Moreover, the Western economic ideological model, championed by the World Bank and the International Monetary Fund, has taken a serious battering, evidenced by the rising unemployed in the West and the billions of dollars of taxpayers’ money used to bail out the financial sector. Economic growth is all well and good, but when surging growth is then followed by a staggering collapse, it's two steps forwards, one step back.

Economic reform in the region is clearly needed, but the crux is in the implementation. For places like Syria — which has been undergoing reform for the past decade — the reforms have created jobs and opportunities, but the main beneficiaries have been the already well off — those able to invest funds into the new stock market and establish holding companies. Reforms are benefiting Syria’s elite, while the vast majority of the population has seen salaries remain stagnant as real estate prices and food costs have soared. It's a similar story throughout the MENA region, particularly in Egypt, Lebanon, Jordan, Saudi Arabia and Yemen.

One of the ways to shrink this widening disparity in income and equality is through bolstering small and medium sized enterprises (SMEs), coupled with the micro financing that enables such ventures to happen. Improving education levels — to create 'knowledge-based societies' — implementing more progressive taxation regimes and population control are other components.

It has long been debate whether a more democratic MENA would be better able to surmount its sociological and political hurdles — an equally pressing issue, however, is how to defuse the demographic ticking time bomb the whole region is sitting on.

PAUL COCHRANE is the Middle East correspondent for the International News Services