Marketplace Middle East - Blog
Call of the Arab Youth
Iranians went to the polls this weekend after a thorough airing of heated exchanges during a handful of televised debates. The most prevalent topic surrounded whether incumbent President Mahmoud Ahmadinejad heightened or worsened Iran’s standing in the world.

The subject ignited the youth who took to the streets to share their views, but the campaign did little to address the issue that impacts the next generation the most, creating jobs for them in the future.

Every year two million Iranians are born in a country which is second in the region only to Turkey and Egypt in population size. Nearly two-thirds of the population is below the age of 30, the bulk of the youth, 98 percent, is between the ages of 15-24. With that backdrop, job opportunities and economic management should have taken higher priority.

Iran is a prime example of the challenge that exists throughout the region today. The accepted figure, according to the World Bank, is that 100 million jobs need to be created by 2020 for unemployment to stay where it is, since the birth rate continues to surge.

Youth unemployment is estimated at 20 percent depending on the market, meaning at least one in five is out of a job. The former foreign minister of Jordan and now the Senior Vice President for External Relations at the World Bank, Marwan Muasher said during an interview that “they (the youth) are basically fertile ground for radical ideas.”

What we are talking about here is a complete mismatch between skills provided in schools today and what is needed tomorrow, which, Muasher says, requires, “A totally changed mindset in which people are trained to question authority, to think critically; this is the basis for all innovation and creativity.”

The Middle East has enjoyed regional growth of nearly six percent a year before the downturn, but executives contend that to create the jobs needed we are looking at sustained growth of 8-9 percent for the next dozen years -- that will be hard to accomplish.

The policymakers and chief executives I spoke with are not throwing their hands up in despair. Instead, they are being proactive by taking matters into their own hands.

They single out Lebanon and Jordan as two economies that are providing the training necessary to foster talent. Not surprisingly, they are the two regional economies holding up best during this downturn, minus Qatar which floats on a sea of natural gas.

Within the Gulf Cooperation Council there is another reality, that the private sector is in competition with the public sector for workers. Government has a long standing tradition of creating jobs, even when the role is not needed.

As Tarek Sultan, Chairman and Managing Director of global logistics company, Agility, bluntly stated, "It makes it difficult for us to then propose jobs for them in the private sector if they actually have to work and spend a nine hour day doing something productive." This view is coming from a company operating in 120 countries with 34,000 employees from a base in Kuwait City.

The young leader added, "We would like to see more engagement by the GCC nationals in what we are trying to achieve." Translation: If you are willing to work hard, we have a job and opportunity for you.

To be fair, governments across the region are not sitting idle. The oil rich states in particular are boosting their education budgets by 10-30 percent to address this very issue. Some have probably spent too much money at the top end of the education chain by paying to bring over western institutions, instead of focusing first on primary and secondary education.

We should not forget that technical training is an important part of the mix. For example, Abu Dhabi is setting up an airline services hub with GE and EADS and they are already beginning their plans to train future technicians.

The new generation of regional leaders recognizes the challenge. Last summer when I interviewed the Crown Prince of Bahrain, Salman Bin Hamad Bin Isa Al-Khalifa, he acknowledged what he called an over reliance on the public sector.

As part of a process of labor reforms, the government has created a fund for training Bahrainis to match the jobs needed on the ground -- from financial services to food production.

What we want to do is make the private sector the main engine,” said the British and American educated Crown Prince. “We seek to do that by investing in our people, by transforming the role of government.”

Bahrain remains an attractive target for foreign direct investment, but the region as a whole is taking in only four percent of the total pool of $1 trillion looking for fresh opportunities.

To dent double digit youth unemployment, Middle East leaders need to capture a greater share of foreign direct investment. They must convince investors that they are up to the challenge, by ensuring the next generation of local executives will be as well.

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New Generation, New Challenges

(Manama) First impressions mean a great deal. Mine go back three years in Bahrain at an Arab Business Council meeting. The voice seemed nearly out of place, a mid-Atlantic accent emerged from a crowd of executives and government officials as the American-educated crown prince of the kingdom swept the room.

A big smile and warm greeting clearly mask the undertaking within the court of the crown prince to complete an economic and political reform process.

The intense heat of August is nearly enough to keep movement to a bare minimum, but we made our best efforts to see, what some in government like to describe as the Ireland of the Middle East, is up to nearly four decades after independence.

In an exclusive interview in his office, it is abundantly clear Crown Prince Sheikh Salman bin Hamad al-Khalifa is determined to protect and even enhance the role for Bahrain as a regional financial and services hub. He has accelerated, for example, a process to train workers to stave off intense competition from Dubai, Qatar, Abu Dhabi and neighboring Saudi Arabia.

“If we don't capitalize on diversifying away from oil, the real estate and brand new buildings, stunning architecturally, are not going to solve anything unless there are good people inside of them.”

His Highness is using his chairmanship of the Economic Development Board to consolidate the reform process. After three days of protests last December from the majority Shia population, he sent a letter to his father King Hamad Bin Isa Al-Khalifa, signaling that there was too much resistance to change.

“Change is a constant, change is here, change is never easy but I think it must be tackled with the right ambition. It must be tackled with the right energy as well to achieve success,” said the crown prince, “His (the king’s) reform agenda was not clearly understood by some elements and by him speaking directly to people not just in the government, but also to others in the community, I think it helped to set the record straight.”

One could easily read into that effort a high-stakes move to consolidate authority and renew a mandate to push through privitizations and labor reforms – both sensitive issues to those in government and the private sector who have resisted the change he talked about and who benefited from market protection.

Some of those same elements of society have also not fully embraced the need to spread the wealth during this time of $100 oil. The crown prince sees it quite differently, “Making sure that poverty or relative poverty, this is a very important term, is addressed here in the kingdom and distribution of wealth is managed in a more actionable manner is something that I am very focused on.”
It is a delicate balancing act, something the kingdom of Bahrain is accustomed to. Bahrain remains home to the U.S. military’s Fifth Fleet. Once a new port facility is built, the fleet will be able to spread its wings and have the existing facility to itself. The relationship with Washington goes back decades and partially explains the kingdom’s loyalty to the U.S. dollar, despite its 35 percent correction in the last few years.

“Being linked and pegged to the dollar, of which I am a strong proponent, removes any uncertainty in our revenue collection. Secondly, it facilitates regional trade because five of the six member states are pegged to the dollar,” and the crown prince finished on the diplomatic point, “Thirdly, it is something that we have taken a long view to, since 1980, so you don't quit when the going gets tough and benefit with the good times.”

Those five members of the Gulf Cooperation Council are aiming to launch their own dollar-pegged single currency in the next few years. It is a sign that members of the oil-rich group want to control their own destiny. We are witnessing that as well in the Middle East peace process with both Saudi Arabia and Qatar actively involved in talks to push that process forward.

Meanwhile, Bahrain continues to straddle relations with Washington and Tehran. This effort has been made more challenging by some of the bellicose comments coming from Iran. When asked what he thinks Iran’s intentions are when it said it can block the Straits of Hormuz, a major shipping line, the crown prince steered towards greater collective dialogue, “Only Iran knows what Iran intends with those kinds of comments. But what we certainly call for is an increased dialogue, understanding and tolerance. I hope that cooler heads will prevail and that peace and dialogue are the victors.”
That is certainly something that everyone can sign onto.

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John Defterios’ blog accompanies the weekly business program, Marketplace Middle East (MME) that is dedicated to the latest financial news from the Middle East. As MME anchor, John Defterios talks to the people in the know, finding out their opinions on the big business moves in the region, he provides his views via this weekly blog. We hope you will join the discussion around the issues raised.
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