From Morocco to Oman, apart from the obvious official language and religion, there is history. In effect, it is the movement of people from the outer edges of the MENA that was always throughout millennia a common carrier upon which carriages would transport migrants away from danger and bad life. So, what is the link if any between the countries of the MENA region?
Recent examples of mass movements of Syrians into Jordan, Turkey, and the European Union would be the most edifying sample. More recently, Yemen despite its status as a poorer country compared to other Gulf ones went nevertheless through conflict with its neighbours and its populations had to flee away to its immediate adjacent countries. Before that, there was the Libyan case where a large desert country with a small population did produce as it were some migrants mostly to Europe for the well offs and the neighbouring Tunisia and Egypt for the masses.
After more than half a century of migratory movements between the two shores of the Mediterranean, the North African migration system was definitively “formatted” as it still stands today: organically linked to France first, and then to Western Europe.
The Levant conflict and civil wars, and finally the crises and successive wars here and there since the 80s, have consequently forced the exodus of millions. North African countries have in turn been affected, directly or indirectly, by these Middle Eastern crises.
But geopolitical issues are also not the only differentiator of these countries and apart from armed conflicts and/or civil unrest, oil and conflict are felt like the main drivers of migration to and from or within the MENA.
Climate change and its subsequent life deregulations are affecting its inhabitants. Would this, despite all the goodwill of all the COPs and SDGs, affect the numbers and the flows?
Would all countries be subject to this culturally well-established custom since the Exodus from Egypt, to run away to search for better climes?
Like most of the MENA region non-hydrocarbon producing countries, Lebanon faces an exodus of its most educated citizens. This Financial Times article is about those reasons prevailing in this conjecture. It must however be noted that the country where the moving out attitude is known to be millennia old, is perhaps going through a first in terms of a democratic claim by its people.
Many doubt their future prospects as country sinks into economic meltdown
Lana Noura is only 18 and a first-year computer science student at the prestigious American University in Beirut. But like many of her classmates, she already knows she wants to leave Lebanon once she has finished her course.
“I will leave for work and hopefully take my parents with me,” she said. “Anywhere would be fine, but I would prefer somewhere in the Middle East. It’s for a good life. Here it’s not stable and you never know what will happen next.”
Jad Masry, a fifth-year medical student, also plans to leave, either for Germany or America. “It will be a better income, better education and better lifestyle,” he said. “The politicians in Lebanon cannot bring us a good future because they are corrupt.”
Lebanon has always had a huge diaspora after waves of emigration over the past two centuries, particularly as a result of the 15-year civil war that ended in 1990. Now, once again, as the country sinks deeper into economic meltdown, it faces a new exodus of its brightest and best-educated citizens.
Forced to grapple daily with hyperinflation, power cuts and shortages, many Lebanese have little confidence in the future. They have lost hope their fractious leaders will take action to reverse the country’s catastrophic financial collapse. Two years after the onset of a fiscal and banking crisis, little has been done to salvage the sinking economy in what the World Bank has called a “deliberate depression . . . orchestrated by an elite that has captured the state”.
“Lebanon has yet to identify, least of all embark upon, a credible path toward economic and financial recovery,” said the World Bank in December. “In consequence, highly skilled labour is increasingly likely to take up potential opportunities abroad, constituting a permanent social and economic loss for the country.”
Lebanese people seeking jobs abroad include formerly well-paid professionals whose dollar accounts are blocked by the banks and young people who see no future in their home country. About 40 per cent of the population of almost 7m is considering emigrating, according to a recent survey commissioned by Konrad-Adenauer-Stiftung, a German think-tank.
About 40 per cent of Lebanon’s doctors have already left for the Gulf or the west, either permanently or temporarily, according to the World Bank. At least 10,000 teachers have also found jobs abroad, according to some estimates, cited by the World Bank. The Lebanese lira has lost more than 95 per cent of its value against the dollar over the past two years, rendering teachers’ salaries almost worthless.
The German survey found that 40 per cent of Lebanese have had to cut down on food and a third are unable to afford their medication. Three-quarters of the population has been plunged into what the UN terms “multidimensional poverty” — a measure that includes access to health, education and public utilities in addition to income poverty.
The debilitating impact of the brain drain is already being felt in the health sector. Charaf Abou Charaf, head of the doctors’ union, said the main university hospitals in Beirut, which employed highly skilled specialists, had each lost between 100 and 150 doctors. “It means some specialised procedures cannot be carried out,” he added. “And it is not just a question of doctors, there is also a shortage of supplies and medicines. If the political and financial situation are not quickly rectified, the health situation will be in danger.”
At the American University of Beirut Medical Center, Mona Nasrallah, an endocrinologist, said three out of the 10 doctors in her department had gone abroad. “The clinical, teaching and administrative load has increased, taking time away from my research,” she added. “It is also more complicated now because you can’t refer patients to certain specialists if they are no longer there. You have to work to find suitable replacements.”
Nasrallah said the government had made no effort to retain doctors, but individual hospitals were trying to find ways to keep them by paying a proportion of their salaries in “fresh dollars” — a term that refers to money transferred into the country from abroad or to new cash that enters the system that is exempt from restrictions on bank accounts. “It’s not a lot of money, but enough to get by on,” she added. “If you have already made up your mind to go, it won’t make you stay. But if you want to stay, it will keep you afloat.”
Experts warn of the long-term impact of the mass emigration of the skilled. Saroj Kumar Jha, World Bank Mashreq regional director, said that the quality of education in Lebanon had been declining even before the crisis and the departure of highly skilled doctors and teachers meant there was not the flow of “human capital” to replace them.
“The Lebanese children born in today’s times when they become 18 years old, their productivity will be only 48 per cent of their potential, which means that there is structurally something wrong with the quality of learning in the schools.”
Nasser Saidi, a Lebanese economist and former minister, also warned of the dangers of the depletion of Lebanon’s “stock of human capital”.
“When you have skilled people working alongside unskilled people, they help them improve because they teach them,” he said. “If the skilled people and the educated people are not there, then we just have misery.”
Such long-term considerations, however, are not a priority for those grappling with the everyday realities of a worthless currency, lengthy power cuts and expensive food and fuel. “If I knew it was going to be like this, I would have left a long time ago,” said Zaher Nashabe, a fourth-year chemistry student who plans to go to the US. “I will work there for a few years, get some financial stability and maybe return. But if my family come too and I find work, I will stay there.”
According to the International Monetary Fund (IMF), some of the emerging market economies grew in 2020 as government incentives and support were put into action. The Forum‘s article by Ragui Assaad, Caroline Krafft and Mohamed Ali Marouani confirm that the impact of Covid-19 on labour markets in MENA in 2021 was unprecedented and not really well lived in by most. Would this pace or resilience continue in 2022?
Employment is recovering but income losses persist in MENA countries in the second year of the pandemic. Two recent ERF policy briefs summarised in this column illustrate the mix of recovery and ongoing challenges for households and firms.
With the Covid-19 pandemic on the verge of its third year, Middle East and North African (MENA) economies are recovering from the slump caused by lockdowns and other economic disruptions, but households and firms are still experiencing steep income and revenue losses well into the pandemic’s second year.
In two recently published policy briefs, we examine how workers and firms have fared in the first half of 2021 in Egypt, Jordan, Morocco and Tunisia (Krafft et al, 2021, 2022).
Household and enterprise surveys during the pandemic
The analysis is based on the COVID-19 MENA Monitor Household and Enterprise Surveys conducted by ERF over the second half of 2020 and the first half of 2021 (OAMDI – Open Access Micro Data Initiative, 2021a, 2021b).
The surveys were conducted by telephone on a panel of firms and enterprises. The household surveys are the main source of information on how households, workers and microenterprises experienced the pandemic, whereas the enterprise surveys focused on the experience of small and medium enterprises (those with between six and 199 workers) in February 2020 (pre-pandemic).
Four waves of the household survey were conducted in Morocco and Tunisia centred around November 2020, February 2021, April 2021 and June 2021. Two waves were conducted in Egypt and Jordan centred around February and June 2021.
Two waves of the enterprise surveys were conducted in each of the four countries corresponding to the first and second quarter of 2021. Household and enterprise surveys were conducted in Sudan as part of the same series, but are not discussed here.
Health and economic outcomes in the pandemic
Among the four countries, Jordan and Tunisia experienced much higher rates of Covid-19 cases and deaths in the first half of 2021 than either Egypt or Morocco. But while Egypt gradually loosened its closure measures in 2021, Morocco, like Jordan and Tunisia, maintained more stringent measures than the world average.
Egypt was also the only one among the four countries that managed to maintain a positive economic growth rate of 1.5% in 2020. In contrast, Tunisia experienced a large economic contraction of 8.8% and Morocco likewise contracted 6.3%, while Jordan’s economy contracted by 1.6%. Despite relatively strong recoveries in Morocco and Tunisia in the first half of 2021, their economies, as well as that of Jordan, remained depressed relative to pre-pandemic levels.
The tourist and transport industries were the hardest hit in all four countries, with tourism-related industries the most negatively affected in terms of closures, reduced hours and revenue losses.
Labour market outcomes
The evidence suggests that aggregate labour market indicators, such as labour force participation, employment and unemployment rates, were recovering in the first half of 2021, except in Morocco where the progress made earlier in the year later reversed. With the exception of Morocco, more of those who lost jobs early in the pandemic were regaining employment over the course of 2021.
Private wage workers, especially those hired informally, faced substantially more challenges related to layoffs/suspensions and wage reductions in Egypt, Jordan and Tunisia than in Morocco. But the prevalence of these challenges decreased in these three countries from February to June 2021, while it increased in Morocco.
The results of the household and enterprise surveys suggest that microenterprises were the most likely to be closed due to Covid-19 in the first quarter of 2021. If open, micro and small firms were more likely to have reduced hours than medium firms.
As Figure 1 shows, a similar proportion of microenterprises across the four countries reported substantially reduced revenues, but higher proportions of small and medium enterprises reported such revenue losses in Jordan and Morocco than in Egypt and Tunisia in the first quarter of 2021.
Figure 1: Revenue change (past 60 days versus 2019), by firm size in February 2020 and country, micro, small and medium enterprises (percentage), quarter one, 2021.
Source: Krafft et al (2021), based on data from the ERF COVID-19 MENA Monitor Household and Enterprise Surveys
Despite some recovery in employment rates, household income levels remain depressed, with just under a half to two-thirds of households in all four countries reporting income losses in June 2021 compared to pre-pandemic levels. In fact, the share reporting income losses increased from February to June 2021.
As Figure 2 shows, household income losses were highest for the households that were poorest pre-pandemic, confirming the adverse effects of the pandemic on poverty and inequality.
Figure 2: Changes in household income from February 2020 to June 2021 (percentage of households), by country and February 2020 income quartile
Source: Krafft et al (2022), based on COVID-19 MENA Monitor Household Survey in June 2021.
Social support reached a relatively limited fraction of the population, except in Jordan, where it reached 53% in February and 44% in June 2021. Assistance was generally well-targeted, reaching a higher proportion of lower-income households than higher-income households. But while targeting efficiency improved in Morocco over time, it deteriorated in Egypt.
Targeting of assistance was generally not based on the workers’ vulnerability with respect to labour market status, again with the possible exception of Jordan, which successfully targeted irregular and informal workers.
It appears that firms in Jordan and Morocco were experiencing more difficulty than firms in Egypt and Tunisia due to the Covid-19-induced crisis in the first quarter of 2021. Although the Tunisian economy had the deepest overall downturn in 2020, it appears to have recovered somewhat by the first quarter of 2021 so that the adverse effects on firms were reduced.
The downturn in Egypt appears to be shallower than in the other countries, sparing Egyptian firms the worst of the negative outcomes. Yet in all countries, there is a clear need for continuing support, especially targeted to the most affected industries and firms, as the economic effects of Covid-19 continue to affect micro, small and medium enterprises.
Support for firms
Although policies were instituted in all four countries to support firms through the crisis, the reach of these policies appears to have been limited. A half to three-quarters of small and medium enterprises reported they had not applied for or received any government assistance.
The most common type of support received (and needed) in all four countries was business loans, but firms in Morocco and Tunisia also report needing (and sometimes receiving) salary subsidies. A substantial proportion of firms in all four countries also expressed the need for reduced or delayed taxes.
The featured top image is for illustration and is credit to Reuters
Academic and policy-based research demonstrates that women and youth in most Middle East and North Africa (MENA) countries face legal, regulatory, and socio-cultural barriers to entering the formal labor market and generating income. The economic role of MENA women and youth is vital, as they represent the demographic majority and are highly educated. Nonetheless, they control fewer assets than men.1
Entrepreneurship can be a viable alternative for MENA women and youth because of its prestige in the region and its ability to catalyze inclusive growth.2 Women and youth, however, are less likely to own small businesses and experience greater difficulty in starting and sustaining them. MENA women have lower entrepreneurship rates than men and this has been trending downward over the past decade despite increases in overall entrepreneurship rates. This brief draws on research and evidence to formulate policy advice on how support for entrepreneurship can enhance the economic security of women and youth in what will be a slow and painful post-pandemic recovery.
Prior to the pandemic, extreme poverty was trending downward globally, except in MENA. Extreme poverty in general is likely to worsen as the COVID-19 pandemic persists. The pandemic has compounded the pre-existing economic hardship of both women and youth (age 15-24) in MENA, although individuals in some countries are faring better than others. The MENA region faces rising unemployment, declining household incomes, and deteriorating livelihoods. Furthermore, countries like Iraq, Jordan, and Lebanon are hosting millions of refugees, and Syria and Yemen have a significant portion of their population internally displaced. The prospects of a very uneven two-speed global economic recovery and rapidly rising public debt will limit MENA governments’ spending on social protection for their citizens and refugees alike. As a recent World Bank report notes, the MENA region is expected to face rising poverty, exclusion, inequality, food insecurity, and growing gender divides.
The Political Economy of Protest, Violence, and Extremism
A decade on, the drivers of the Arab Spring, such as youth unemployment, worsening socioeconomic conditions, and dim future prospects, have not been addressed. As noted, the pandemic has only worsened these regional trends. Considering that life satisfaction in MENA was falling over the past decade while the global average was rising prior to the pandemic, the prognosis for MENA’s current political instability must be considered as part of recovery support efforts. It is notable that a majority of MENA academic experts (76% of 1,293) believe that the region is still in a state of protest or will experience another mass wave of protests within the next 10 years. Indeed, many young people recently surveyed by Arab Barometer have continued to say they have lost trust and confidence in their governments.
Research suggests a correlation between higher economic security and lower rates of conflict. Moreover, inclusive governance that promotes transparency and accountability demonstrably improves economic performance. Inversely, corruption and loss of public trust in governments exacerbate political instability and economic stagnation. Hence, regional specialists concur that the Arab Spring was an expression of discontent with governments’ economic policies, which led to unequitable wealth distribution, stagnant social mobility, and the ascent of oligarchic crony capitalists. In essence, a strong and widespread societal perception of economic and political exclusion can contribute to conflict and unrest; when people perceive their prospects of economic security to be deteriorating and they lack hope that things will improve, they are prone to unrest, violent conflict, and protest. This was a contributing factor to the Arab Spring.
While academic studies show that economic insecurity can lead to youth (and wider social) protest, it rarely explains radicalization and violent extremism. Nonetheless, youth perceptions of governments being unjust and corrupt can partly explain radicalization; for example, many ISIS members were attracted by its perceived moral clarity and commitments to economic justice. Disaffected youth who blame the state for their economic insecurity are a powder keg and need more attention from global and regional actors. Improving the livelihood and economic security of women and youth can mitigate civil disorder and stem irregular migrant flows. Moreover, women’s economic empowerment improves their agency and advances women’s rights, promoting economic growth and inclusive governance.
Entrepreneurship among women and youth can be a pathway to the prevention of conflict and inclusive growth. Entrepreneurship can help improve inclusive governance by disrupting rent-seeking crony capitalism whereby economic elites have been protected by political authorities.3 Entrepreneurs push for liberalizing the regulatory environment and removing rent-seeking advantages that insulate crony capitalists from free-market forces. Enhancing inclusive governance can mitigate against political instability and radicalization by promoting transparency, reducing corruption, and raising people’s hope for a better future. As the joint U.N. and World Bank Pathways to Peace report aptly notes, preventing conflict and instability is not only a moral responsibility, it is also far more cost-effective than responding to violence and instability after the fact. The report notes, prevention is best realized through “investment in inclusive and sustainable development. For all countries, addressing inequalities and exclusion, making institutions more inclusive, and ensuring that development strategies are risk-informed are central to preventing the fraying of the social fabric that could erupt into crisis.”
With this appreciation of the political and economic forces currently at work in the MENA, this policy brief draws on academic research and related literature and includes input from internal consultations with Global Affairs Canada (GAC) officials on the challenges of women and youth in advancing their economic security through meaningful employment and income generation. This brief also argues that success on this front can help to address the main drivers of political instability across many countries in this diverse region. This brief identifies avenues for supporting entrepreneurship to advance both inclusive growth for everyone and gender equality and empowerment. In MENA, attention to these opportunities can catalyze a more inclusive recovery from the pandemic while also demonstrating the wider economic benefits for society from progressive reforms and shifts in gender norms.
To this end, development assistance policies, as well as trade promotion and diplomatic engagement, must consider MENA’s social and cultural norms. Both family honor and social respectability are highly valued, and entrepreneurship has a positive socio-cultural connotation in many MENA societies. Supporting MENA women and youth entrepreneurship provides a niche for Canada and other Western countries’ international assistance and related policies in the region and this brief demonstrates the ways in which it can catalyze economic security more broadly.
While women in MENA surpass men in post-secondary education, their labor force participation is the lowest globally and these figures have barely budged in a decade. While more men than women work in the informal sector — which in MENA accounts for 68% of total employment and is predominantly in the agricultural sector — these vulnerable workers may be unreported and undercounted. Similarly, MENA youth are far more educated than previous generations, but their unemployment rates are often double their countries’ national averages and double the world average (13.6%) with an unemployment rate of 28.1% in 2018. Until the post-COVID recovery becomes firmly entrenched, labor market participation rates of women and youth will certainly worsen before they improve.
Why are women and youth under/unemployment rates so high? There are socio-cultural barriers that prompt women and youth to choose not to work. For example, the phenomenon of “reservation wages,” or the lowest wage one is willing to accept, can be relatively high in the region, distorting incentives in the labor market. They are higher for relatively wealthier MENA women and youth such that they are voluntarily unemployed. Reservation wages are often higher for young MENA women than for young men; reservation wages are also higher for married MENA women than for unmarried women. Moreover, MENA women with post-secondary education are more likely to be unemployed than women without post-secondary education. Women who obtain post-secondary education thus represent a significant underutilized knowledge and skills resource. Moreover, this also suggests that reservation wages are higher for middle-class MENA women than for poor, rural women. Consequently, introducing more MENA women and youth into the labor market requires an understanding of intersectional and demographic identities; there is no one-size-fits-all approach.
Another factor in MENA women and youth unemployment is their common preference for working in the public sector, which is bloated and unable to absorb additional labor. Often MENA women prefer to work in the lower-paid public sector (although Gulf countries’ public sector wages are higher than the private sector) because of shorter workdays for those with care responsibilities. Similarly, MENA youth have historically preferred to work in the public sector for its perceived security. That said, these attitudes are rapidly changing, particularly outside of the Arab Gulf countries.
Despite high reservation wages and preferences for public sector jobs, there are very strong favorable socio-cultural attitudes toward entrepreneurship in MENA.4 Notably, the region is second only to sub-Saharan Africa in the favorability of public attitudes toward entrepreneurship: 73.4% of the surveyed MENA public believed that “starting a business is considered a good career choice” and 77.8% believed that “persons growing a successful new business receive high status.” Youth in MENA have high aspirations to start a business; 84% want to be entrepreneurs. A persistent challenge, however, is involving MENA women and youth in entrepreneurial activity; while aspirations and respect for starting a business are high, actual entrepreneurship rates are relatively low compared to other developing regions. Identifying and addressing the impediments is an urgent priority for economic security and for an inclusive and sustainable recovery.
Many entrepreneurs gain valuable employment experience before starting their own businesses. Yet, for both women and youth, there are socio-cultural, legal, and regulatory barriers to participating in the labor market. Moreover, these barriers are often worse for women in MENA than in any other region of the world. Persistent legal and regulatory barriers across MENA that disadvantage women include low public sector retirement ages (50 to 55 years), which can impede women from entering the labor force after rearing children, inadequate childcare benefits and maternity leave, and the absence of legislation (in 70% of MENA countries) protecting women from workplace harassment. In a survey of young MENA women, they noted that flexible working hours (part-time and home-based work), nursery and daycare facilities, soft skills training, and on-the-job training would help them to enter and stay in the workforce
The absence of safe public transportation in MENA is a notable impediment to women’s full labor force participation in two respects. First, women are in general subject to physical and verbal harassment by men when riding buses and minibuses. Second, safe public transport is often unavailable into the evening hours when private sector owners expect their employees to continue working. Notably, in 55% of MENA countries, women are legally restricted from working night hours. Certainly, gender norms remain conservative throughout the MENA: Women experience the “double burden” of trying to balance paid employment and unpaid domestic work, and find childcare challenging. Women’s income is perceived as disposable rather than necessary, as men are still perceived as responsible for providing for their families. Successful entrepreneurship by women can help shift these norms in a more progressive and inclusive direction.
Policy research suggests that when entrepreneurs take off, they can be valuable sources of new job creation. Indeed, early-stage entrepreneurs in MENA noted that they expect to employ 45 individuals in the first five years of their operations. Research finds that women-led micro, small, and midsized enterprises (MSMEs) can improve household welfare more than men-led businesses, provide women the flexibility to work from home, and enhance their empowerment and stature in households and society. Increasing rates of entrepreneurship among women and youth in MENA requires a multifaceted approach that includes promoting business development literacy, providing mentorship programs for less experienced entrepreneurs, and encouraging incubator-like programs in both the public and private sectors.
Many MENA countries have improved considerably in the World Bank’s Doing Business indices in the past decade, particularly in the Gulf. Nevertheless, there remain many gendered impediments: 13 MENA countries have regulations for women entrepreneurs that men do not face. In a survey of 1,210 MENA women entrepreneurs in select countries, they noted that their most significant barriers were accessing financing, lack of personal business or other work experience, and absence of networks and contacts. This ease of doing business, from business registration to obtaining financing, can facilitate or hinder entrepreneurs’ success. Without regulatory reforms, the environment for private sector-led sustainable economic growth remains constrained.
Accessing credit remains more difficult for women and youth in the MENA region than anywhere else in the world. On average, it costs MENA entrepreneurs 26% of income per capita to start a small business compared, for example, to just 3% in OECD countries. MENA youth and women report that financial support, such as accessing microcredit loans in mainstream banks, remains the greatest impediment to starting and expanding a business. MENA women’s MSMEs have the second highest financing gap after East Asia and the Pacific region: 29% of total finance gap amounting to an estimated $ 16 billion compared to 37% of $103 billion. MENA’s women entrepreneurs concentrate in personal services, creative sectors, and health care. Venture capitalist rarely invest in these areas, but banking loans are difficult to access due to high interest rates and requirements for collateral assets against potential insolvency. These requirements are known to disadvantage women and young clients, particularly because of wide and persistent gender gaps in asset ownership. Only 38% of MENA women have bank accounts, and gender discrimination in both investment and inheritance laws hinder potential women entrepreneurs from accessing the resources their businesses need to take off.
While most entrepreneurial activity is currently in wholesale and retail, followed by professional and other services, communications, financial services, and information technology are growing rapidly. Nearly 37% of MENA entrepreneurial businesses are deploying new technologies and 25% are offering new services or products to the market. When compared to other regions, the MENA has a far higher technology orientation. Most of the region is online, yet digitized services remain untapped, including e-commerce.
This policy brief provides a review of entrepreneurship in the MENA region as a promising entry point for policy dialogue, programs, and trade and investment promotion. As labor market participation of youth and women in MENA remains stagnant, entrepreneurship can be a viable alternative and catalyst to the promotion of economic security among these groups. Policy options should be tailored to reflect the size and scale of firms and consider the intersectionality of entrepreneurs. Foreign countries have an important role to play in fostering entrepreneurship for women and youth in MENA. Canada has programming experience in this space, such as the Launching Economic Achievement Program for Women in Jordan (LEAP), that can inform its policy toward the region. As MENA faces a tough recovery from the pandemic, preventing conflict and instability are cost-effective and smart. International assistance entails programs that can give people in the region hope that their livelihoods will improve. There is still much to do to provide a positive ecosystem for entrepreneurs in MENA countries, and Canada and other Western nations can convene donors to share best entrepreneurial practices that can assist MENA’s economic and socio-political development. The MENA region needs specialized tools for women and youth to enhance their financial inclusion, break down regulatory barriers, access microfinance, and acquire valuable skills. Western countries can deploy their international and regional leverage in this crucial policy area.
Dr. Bessma Momani is Full Professor in the Department of Political Science and Assistant Vice-President, Research and International in the Office of Research at the University of Waterloo. She is a senior fellow at the Centre for International Governance Innovation, a non-resident fellow at the Arab Gulf States’ Institute in Washington, DC, a Fulbright Scholar, and a member of the Advisory Council for MEI’s Program on Economics and Energy. Dr. Momani was the second Global Affairs Canada International Assistance Visiting Scholar in 2021 and Global Affairs Canada provided financial support for this brief. The views expressed in it are her own and the content is the sole responsibility of the author.
Photo by Morteza Nikoubazl/NurPhoto via Getty Images
Women and youth have some shared realities as demographic groups that have least access to formal economic labor markets, but there is great variation between them, and this brief acknowledges that the intersectionality of both groups is important to devising better policies.
National and regional data shows strong support and respect for entrepreneurship; however, this varies between countries and within countries.
Disrupting rent-seeking is more difficult for microenterprises than it is for medium-sized enterprises, nevertheless over time when successful firms scale up, rent-seeking is challenged, and this may lead to a disruption of crony-capitalism. This linear argument is not a guaranteed outcome but is a theoretical proposition. There is, perhaps then, a positive role for donors to assist microenterprises and small enterprises to scale up.
Regarding the scale and size of entrepreneurs, it is important to note that entrepreneurs are likely to start and remain micro-sized and small, and few grow to become medium-sized enterprises (MSE). Self-employed businesses or microenterprises may generally be home-based or solo-operated businesses with lower income to supplement paid work, while SMEs can have substantial revenues. Microenterprises and SMEs have been labeled MSMEs. Starting an MSME is usually done by an entrepreneur, and hence the interchangeable use of the terms. This policy briefing will use the term entrepreneur to mean MSMEs. Generally, the MENA region defines MSMEs based on the number of employees in an enterprise. These numbers can vary across the region, but generally micro implies fewer than 10 employees, small implies fewer than 50, and medium implies fewer than 200. Large companies often have 200 employees or more. MENA countries have more microenterprises than SMEs, and even fewer large companies. Policy interventions to assist these entrepreneurs need to be tailored to take size and scale into consideration.
Here is Gilgamesh Nabeel in MENA Region Digital Transformation Can Create More Jobs as per a recent report that says so.
Over 230 students attend a workshop held by the Elaf Center and the Earthlink Telecommunications at Diyala University, northeast of Baghdad, to be better prepared for the labour market. (Photo Courtesy: Elaf Center for Media Training, 2021).
Lack of digital infrastructure contributes to high rates of youth unemployment in the MENA region, a new report says.
The report, “COVID-19 and Internet Accessibility in the MENA Region”, was published in mid-December by the U.S.-based Woodrow Wilson International Center for Scholars. It assesses the readiness of the MENA region countries to shift employment online, both in terms of Internet availability and digital literacy among the populace.
Its authors, Alexander Farley and Manuel Langendorf, argue that increasing internet accessibility and investing in digital infrastructure development can help governments’ efforts to form a digitally-enabled economic recovery strategy.
While the MENA region is projected to have 160 million potential digital users by 2025, the paper draws a bleak image of its internet infrastructure and accessibility.
Last year, 34 percent of the population in Arab states was not using the Internet, according to ITU data. In 2019, the GSMA, which represent the interests of mobile network operators worldwide, found that almost half the people in countries such as Egypt and Lebanon, which have a mobile broadband network, are not using the Internet. Around 60 million people in the MENA region were not covered by a mobile network.
“Studies have shown that broadband development leads to increased GDP and has a positive impact on employment in the short term – part of the picture are newly created jobs to build new digital infrastructure,”
Manuel Langendorf A researcher focusing on digital transformation in the MENA region and co-author of the report
Furthermore, with the exception of the UAE and Qatar, which cover about 80 percent of households directly with fiber, only nine out of 100 inhabitants in Arab states used fixed broadband subscriptions, the second-lowest rate of all world regions, after Africa.
The paper says the development of digital infrastructure overall continues to lag behind the rest of the world. This holds back the region’s digital transformation and deprives it of the benefits of investment in improving national core networks.
Digital Infrastructure Development Boosts Jobs
Overall, unemployment in the MENA region stood at 11.6 percent with the “the low-skilled, the young, women, and migrant workers were affected the most” by the pandemic, the report says. In 2019, youth unemployment was over 25 percent, with further decline in youth employment by an additional 10 percent in 2020.
Manuel Langendorf, a researcher focusing on digital transformation in the MENA region and co-author of the report, argued that proper investment in digital infrastructure can help government confront unemployment.
“Digital transformation is not a silver bullet to solve the MENA region’s protracted unemployment problem, but it can create new job opportunities, especially for the large young and relatively tech-savvy population,” Langendorf told Al-Fanar Media.
“Studies have shown that broadband development leads to increased GDP and has a positive impact on employment in the short term – part of the picture are newly created jobs to build new digital infrastructure,” he added.
While the longer term effects seem less clear, Langendorf thinks a country-wide improvement to digital infrastructure can bring new economic opportunities, including for disadvantaged populations and rural areas.
“These include the expansion of remote working, as an employee or freelance worker, and also allows workers to search for employment opportunities more widely,” he added. “An improved digital infrastructure also opens up new job opportunities in online education.”
Citing the installation of ten submarine internet cables between Europe and Africa, he said: “We found a significant and large relative increase in the employment rate in connected areas when fast internet becomes available.”
Do We Need More IT Graduates?
In the Internet era, when many traditional jobs might disappear, students see IT-related courses as a route to secure jobs.
However, the report highlighted that some countries, like Jordan, graduate around 5,000 students in IT-related fields each year, yet less than 2,000 are hired. Still, some see an opportunity for ICT graduates from the region to fill the shortage of skilled IT workers in Western countries.
“University curricula in most MENA countries are slow to update, thus creating a situation where many fresh graduates hold a diploma but are not ready to start working in the IT sector as their knowledge is outdated,” he wrote to Al-Fanar Media.
“Nevertheless, many MENA startups have had great success in the past years. In 2021, MENA-based startups raised close to $3 billion, a new record for the region.”
He called on the education and the private sectors to collaborate to improve the university-job pipeline and close the skills gap. “Both sides should make sure that the latest IT knowledge is integrated into curricula and set up internship opportunities for students and graduates,” he said. “Beyond universities, the private sector and educational institutions can hold more workshops to bring people up to speed.”
The report also identified management skills as one of the biggest challenges to expanding potential of IT in the MENA region. “The lack of management skills affects the scalability of projects and businesses that can make use of the surplus of advanced IT skills,” said Farley.
Moreover, the authors said the MENA region lacks truly innovative IT ventures, and is focused instead on adapting ideas created elsewhere.
“In this context, the region is often described as a consumer rather than a creator of technology,” said Farley. “Nevertheless, many MENA startups have had great success in the past years. In 2021, MENA-based startups raised close to $3 billion, a new record for the region.”
Fruitful Digital Transformation Tips
Governments and other stakeholders need to ensure that the expansion of digital infrastructure focuses not just on connectivity (areas covered by Internet), but accessibility, the authors went on.
“Is using the Internet affordable? Do people have access to devices to use the Internet?” wondered Langendorf. “Mobile industry body GSMA estimated those living in areas with a mobile broadband network but not using mobile internet increased from 41 percent to 48 percent between 2014 and 2020.”
To enable investments in digital infrastructure to tackle unemployment, Langendorf calls on governments to support entrepreneurship. “They need to facilitate starting a business and obtaining loans, and decriminalizing bankruptcy,” he said.
“Besides, they should enable cross-border trade and the movement of skilled people between countries.”
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