a new vision for arab employment youth …...a new vision for arab employment 3 introduction in...

Regional Agenda

A New Vision for Arab EmploymentYouth Employment in Arab Resource-Endowed Economies

First Quarter, 2014

Project Update

2 A New Vision for Arab Employment

Contents

3 Introduction

4 Dynamics and Vulnerabilities of the Current Employment System

9 Insights from the Session at the World Economic Forum Annual Meeting 2014

9 Next Steps

10 Annex: Acknowledgements

© World Economic Forum2014 - All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, including photocopying and recording, or by any information storage and retrieval system.

The views expressed are those of certain participants in the discussion and do not necessarily reflect the views of all participants or of the World Economic Forum.

REF 200614

3A New Vision for Arab Employment

Introduction

In light of the long-term economic aspirations of the Arab world as well as the current social context, addressing the employment challenge is at the top of policy and business agendas. Generating economic opportunities for the youth is a particularly high-stake issue, with Middle East and North Africa recording the world’s highest youth unemployment rate at 27%. There is a clear need to develop action-oriented partnerships that will deliver job opportunities in the quantity and quality and at the pace necessary to address the urgency of the challenge. This requires an extraordinary increase in collaboration, innovation and commitment.

Initiated by the World Economic Forum and its Middle East and North Africa Business Council in May 2013, the New Vision for Arab Employment initiative provides a neutral platform to facilitate these partnerships. It brings together government, business and civil society leaders at the highest level to share knowledge and best practices, as well as advance common action for creating employment in the Arab world.

The initiative recognizes the diversity of the Arab region, and aims to address the challenge in all Arab countries. The first project of the initiative, Youth Employment in Arab Resource-Endowed Economies, which started in August 2013, seeks to advance institutional reforms that will sustainably increase productive youth employment in resource-endowed Arab economies. Developed in collaboration with key stakeholders, using the World Economic Forum’s Strategic Foresight approach, the project generates new insights on the root causes of youth unemployment and provides a framework for better-informed decision-making and more effective policy reforms. The goal of this approach is to encourage implementation on a structural level.

Between August and December 2013, the Youth Employment in Arab Resource-Endowed Economies project engaged leaders from business, government, civil society and academia in a consultation process. Insights emerging from this consultation have nurtured the development of a system map analysing the reasons, underlying dynamics and vulnerabilities of the employment situation in Arab resource-endowed economies.

At the World Economic Forum Annual Meeting 2014, a session convened business and government leaders to explore policy interventions to sustainably increase the number of young people productively employed in the private sector, using the system map as a framework. Discussions contributed to creating a common understanding of the youth employment challenge in Arab resource-endowed economies and led to the prioritization of policy interventions, which will be taken forward by the Middle East and North Africa Business Council and through the Employment, Skills and Human Capital project, which is a global effort of the World Economic Forum. The next phases will address the Arab economies that are non-resource endowed.

About the Middle East and North Africa Business Council

The Middle East and North Africa Business Council is the primary gathering of foremost business leaders from the Middle East and North Africa, helping the World Economic Forum steer and structure its initiatives and programmes related to the region. The leading initiative of the council is the New Vision for Arab Employment, launched in recognition of the importance of business and government leaders’ interest in solving one of the region’s top challenges.

Stakeholder Consultation World Economic Forum Annual Meeting 2014, Davos-Klosters,

January 2014

High-Level Strategic Dialogues

In-Country Dialogues in Resource-Endowed Arab

Economies

Step 1: Perspectives and Analysis

August – December 2013

Step 2: Exploration of Insights January 2014

Step 3: Synthesis and Implications

February – September 2014

Hala Hanna Senior Programme Manager and Global Leadership Fellow, Middle East and North Africa

Natalie HatourAssociate Director, Strategic Foresight

Dynamics and Vulnerabilities of the Current Employment SystemSystem Map

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The system map and description of its dynamics reflect the most dominant stakeholders’ views and understandings of the situation of youth employment in Arab resource-endowed economies expressed throughout the consultation process and during the session at the World Economic Forum Annual Meeting 2014.

The employment system in Arab resource-endowed economies serves two purposes: securing social stability and ensuring economic prosperity. To this end, the system relies on two parallel sub-systems, the first one representing the relationship between the state and its citizens, and the second one depicting the relationship between non-national workers and their host countries. While these sub-systems operate side by side, following different dynamics, their outcomes are closely linked to each other. As social stability cannot be sustainably ensured without economic prosperity, and vice versa, both sub-systems must be well-functioning for the whole employment system to be a success.

One sub-system is aimed at securing social stability and based on the interplay of protective authorities and a dependent youth. The other sub-system intends to ensure economic prosperity by providing economic benefits for non-national workers whose rights and integration in society remain limited.

Pressures represent current and future threats to the stability and sustainability of the system. Four of these pressures – political pressures; decrease in private-sector productivity; social tensions; and departure of non-nationals – are not yet hindering the functioning of the system. However, the two other pressures – public productivity constraints and budget constraints – are seen by stakeholders as already threatening the sub-system aimed at securing social stability, as some governments are no longer able to provide enough public-sector employment opportunities to absorb the youth bulge.

Summary of Dynamics and Vulnerabilities


Budget constraints

Public productivity constraints

Education driven dynamics

Incentive driven dynamics

Protective parents, governments and teachers

Protected local youth relying on the government

Securing social stabilitySocial contract between government and locals

Local youth employed in guaranteed and comfortable public-sector jobs

Political pressures (middle class,youth, women)

The social contract aims to provide citizens with services and rests on the government’s ability to secure its citizens’ well-being. The social contract is reflected in the caring and protective relationship established between authorities – government, parents and teachers – and young people, generating two dynamics:

Education-driven dynamics

The educational system does not stimulate enough independent and creative thinking and is designed primarily to provide citizens with the skills needed to take up public-sector positions. Protected by their parents and teachers, young people grow up in an environment where their current and future needs are answered for, perpetuating a culture of dependency on authorities.

Young people in turn seek comfortable and secure public-sector jobs.

Incentive-driven dynamics

Governments’ commitment to providing secure and well-remunerated jobs attracts young people to the public sector, elevating their expectations and limiting their appetite for risk in a context in which the ecosystem for entrepreneurship is still nascent. Additionally, the absence of a comprehensive tax system levied on the private sector, while financially advantageous, limits its ability to contribute to wealth redistribution and hurts its image with the local population. This strengthens the role of the government as the employer of choice.

Young people in turn economically rely on the government and accept its authority.

The social contract might be further destabilized if it becomes unaffordable for the public budget or if the size of the public sector increasingly undermines its productivity and hinders the efficient delivery of public services. The stability of the social contract might also be threatened if political pressures emerging from citizens’ increasing awareness and changing demands and expectations unfold against the current protective system. The latter might be triggered by rising economic constraints due to inflation, particularly for the middle class, as well as by the emergence of new leadership structures, notably a broadening range of influencers, accelerated by social media.

Securing Social Stability: The Social Contract


Ensuring Economic Prosperity: The Economic Contract

The economic contract, established between non-national workers and their host countries, is needed to enable the social contract.

The economic contract relies on a large non-national labour force that is allowed to enter the country. Non-nationals are limited in the rights that they can claim (e.g. temporary residency, limited job security, no minimum wage, impossibility to obtain citizenship, restriction of movement between jobs, no mandatory pension schemes), hindering them from identifying with their host country and integrating into society. Limited labour rights make non-nationals more attractive hires than locals for the private sector in terms of cost and flexibility. In addition, their limited integration incentivizes foreign employers to hire their peers; as a result, non-nationals fill the majority of private-sector positions.

The relationship between non-national workers and their host country can be depicted as an economic contract, as they accept their legal and social situation in return for the economic benefits offered by their employer.

This system suffers from three pressure points. Firstly, easy access to and heavy reliance on low-skilled non-national labour could impact over time the incentives to innovate and invest in technology, leading to a decrease in the private sector’s productivity as the economy develops. Secondly, the large presence of non-nationals coupled with their limited integration can create social tensions jeopardizing the well-functioning of the sub-system. Thirdly, the non-national workforce could unexpectedly and massively emigrate, leaving the local workforce unprepared to take-over.

Non-nationals filling the majority of private-sector jobs

Entrance of non-nationals in the country

Ensuring economic prosperityEconomic contract between country and non-nationals

Limited integration and rights of non-nationals

Productivity decrease in the private sector

Social tensions

Non-nationals leaving and not entering


Reinforcing Dynamics

The dynamics of the social and economic contracts reinforce each other.

Youth unemployment

Entrance of non-nationals in the country

Ensuring economic prosperityEconomic contract between country and non-nationals

Limited integration and rights of non-nationals

Protective parents, governments and teachers

Securing social stabilitySocial contract between government and locals

Local youth employed in guaranteed and comfortable public-sector jobs

Non-nationals filling the majority of private-sector jobs

Protected local youth relying on the government

Political pressures (middle class,youth, women)

Budget constraints

Public productivity constraints

Social tensions

Non-nationals leaving and not entering

Productivity decrease in the private sector

Education driven dynamics

Incentive driven dynamics

The dynamics of the economic contract reinforce the ones of the social contract.

The limited integration of non-nationals provides few opportunities for trust-building with local citizens, making it harder for locals to feel comfortable in the private sector. Additionally, both the limited rights and lower relative cost of non-nationals limit the social recognition of private-sector employment among locals. Moreover, the ease of access to inexpensive labour can hinder investment in more technology-intensive industries or SMEs (e.g. creating taxi companies instead of hiring drivers).

As a consequence, the attractiveness and accessibility of the private sector for locals is weakened, reinforcing their dependency on public-sector employment.

The dynamics of the social contract reinforce the ones of the economic contract.

The education system and public employment incentive schemes do not prepare local youth for a private sector driven by competition and flexibility. In addition, local young people tend to have little contact with private-sector activities and role models growing up, and are by consequence often unaware of opportunities offered by private companies.

As a consequence, the relative availability and attractiveness of non-national workers for private employers is further strengthened.

As a result, the two sub-systems are engaged in dynamics which prevent them from integrating with each other. The two labour markets – private and public – are therefore disconnected from each other, relying almost exclusively on two different labour supplies – non-nationals and nationals.


Insights from the Session at the World Economic Forum Annual Meeting 2014

Discussions among business and government leaders at the Annual Meeting 2014 in Davos-Klosters contributed to creating a common understanding of the youth employment challenge in Arab resource-endowed economies. In the second part of the session, discussions focused on policy interventions to sustainably increase the number of young people that are productively employed in the private sector. The system map analysis provided a framework for identifying the reasons for unemployment, exploring the impact of policy interventions and testing their robustness against current and future pressures.

Participants aligned on the structural reasons of youth unemployment in most Arab resource-endowed economies, noting that the system does not apply to all resource-endowed economies. They highlighted labour laws, critical thinking, entrepreneurship and the creation of small and medium enterprises (SMEs), and employees’ motivation as key elements of the problem. Participants identified inflation, a shrinking middle class and changing leadership concepts as key pressures on the current system.

Increasing the flexibility of the legislative and regulatory framework (labour laws, including female employment, and regulations related to entrepreneurship and SMEs); developing effective training programmes; and leveraging the supply chains of targeted industries to encourage entrepreneurship were identified by participants as the three most strategic policy interventions. This is where the “golden triangle” of business, government and civil society collaboration is needed to create a virtuous cycle of employment creation.

Next Steps

The outcomes of the session at the Annual Meeting serve as a basis for a deepened exploration of policy interventions. Members of the project board, government leaders and other participants have committed to further driving policy actions aimed at reducing youth unemployment. High-level strategic dialogues will be held in resource-endowed economies in 2014, to take specific policy interventions forward. In the meantime, the project board will hold regular virtual meetings to develop these interventions.

With the momentum created by the MENA Business Council on employment issues, the World Economic Forum has taken the issue of employment and skills to a global level with the creation of a global project on Employment, Skills and Human Capital.


Annex: Acknowledgements The project team would like to thank members of the project board, participants in the stakeholder consultation and in the session at the World Economic Forum Annual Meeting 2014 for contributing so generously their time, energy and insights.

Members of the Project Board

Majid Jafar Chief Executive Officer Crescent Petroleum

Mohammed H. Al Mady Vice-Chairman and Chief Executive Officer Saudi Basic Industries Corporation (SABIC)

Samer S. Khoury President, Engineering and Construction Consolidated Contractors Company (CCC)

Salem Ben Nasser Al Ismaily Chairman Public Authority for Investment Promotion and Exports Development (PAIPED)

Iyad Malas Chief Executive Officer Majid Al Futtaim Holding LLC

Houssam Mahmoud Chief Executive Officer Al Dahra Agriculture

Ammar Aker Chief Executive Officer Paltel Group

Mazen S. Darwazeh Vice-Chairman and Chief Executive Officer, Middle East and North Africa

Hikma Pharmaceuticals Plc

Mohammed Alshaya Executive Chairman Alshaya Group

Participants in the stakeholder consultation and select participants from the session at the Annual Meeting

Mustafa Abdel-Wadood Partner and Chair of the Management Executive Committee

The Abraaj Group

Muna AbuSulayman Partner Directions Consulting

Ammar Aker Chief Executive Officer Paltel Group

Omar K. Alghanim Chief Executive Officer Alghanim Industries

Patrick Allman-Ward Chief Executive Officer Dana Gas PJSC

Mohammed Alshaya Executive Chairman Alshaya Group

Thomas Andersson Professor International University of Entrepreneurship and Technology

Rabea Ataya Chief Executive Officer Bayt.com Inc

Lulwah Ayyoub Research Coordinator, Human Capital Development

Ministry of Labour, Saudi Arabia

Pasha Bakhtiar Chief Executive Officer ES Bankers (Dubai) Ltd

Waleed Al Banawi Director Banawi Industrial Group

Arup Banerji Director, Social Protection and Labour The World Bank

Yousef Al Benyan Executive Vice-President, Corporate Human Resources

Saudi Basic Industries Corporation (SABIC)

Samer Bohsali Partner Booz & Company

Henri Chaoul Chief Investment Officer Al Khabeer Capital

Jay Cziraky Member of the Board Move One Inc.

Mazen S. Darwazeh Vice-Chairman and Chief Executive Officer, Middle East and North Africa

Hikma Pharmaceuticals Plc

Rola A. Dashti Minister of Planning and Development and Minister of State for National Assembly Affairs of Kuwait (2012-2014)

Rajeeb Dey Chief Executive Officer Enternships.com

Reenad Al Enazi Researcher Medical Informatics Department, KSU University

Fadi Ghandour Founder and Vice-Chairman Aramex International

Wadie Habboush President and Chief Executive Officer Habboush Group

Habib Haddad Chief Executive Officer Wamda

Mona Hammami Senior Manager Office of the Crown Prince of Abu Dhabi

Mohammed Al Hawi Head of Innovation The Executive Office

Participants in the session at the Annual Meeting

Steffen Hertog Associate Professor London School of Economics and Political Science

Leila Hoteit Principal Booz & Company

Göran Hultin Chairman and Chief Executive Officer Caden Corporation

Ayman Ismail Assistant Professor and Jameel Chair of Entrepreneurship, AUC School of Business

American University in Cairo

Salem Ben Nasser Al Ismaily Chairman Public Authority for Investment Promotion and Exports Development (PAIPED)

Majid Jafar Chief Executive Officer Crescent Petroleum

Yasar Jarrar Partner Bain & Company Inc.

Mohamed Husnee Jazeel Chief Executive Officer Al Dabbagh Group Holding Co. Ltd

Hisham El Khazindar Co-Founder and Managing Director Citadel Capital SAE

Hani Khoja Managing Director Elixir Business Consultancy

Samer S. Khoury President, Engineering and Construction Consolidated Contractors Company (CCC)

Khalid Al Khudair Chief Executive Officer and Founder Glowork

Bernd van Linder Managing Director Saudi Hollandi Bank

Andrew N. Liveris Chairman and Chief Executive Officer The Dow Chemical Company

Giacomo Luciani Scientific Director of the Master in International Energy

Sciences-Po Paris

Mohammed H. Al Mady Vice-Chairman and Chief Executive Officer Saudi Basic Industries Corporation (SABIC)

Vijay Mahajan John P. Harbin Centennial Chair Business University of Texas

Hany El Mahrouky Dale Carnegie certified Management Trainer

Sami Mahroum Academic and Executive Director, Innovation and Policy Initiative

INSEAD

Iyad Malas Chief Executive Officer Majid Al Futtaim Holding LLC

Mohammed Mosly Deputy Director General Human Resource Development Fund

Rainer Münz Head, Group Basic Research Erste Group Bank AG

Tilman Nagel Programme Coordinator for Employment Promotion

German International Cooperation (GIZ)

Aref A. Nayed Director Kalam Research and Media (KRM)

Lubna S. Olayan Deputy Chairperson and Chief Executive Officer Olayan Financing Company

Eman Akbar Rafay Director E.A.R Enterprise

Fahd Al Rasheed Chief Executive Officer and Member of the Board King Abdullah Economic City

Joe Saddi Chairman of the Board Booz & Company

Peter-Michael Schmidt Adviser German International Cooperation (GIZ)

Rowsch N. Shaways Deputy Prime Minister of Iraq

Richard Shediac Senior Vice-President Booz & Company

Karim El Solh Chief Executive Officer and Director Gulf Capital Pvt. JSC

Abdulaziz A. Al Sugair Chairman Saudi Telecom Group

Maha K. Taibah Vice Governor of Strategic Initiatives Technical and Vocational Training Corporation (TVTC)

Ayman Maamoun Tamer Chairman and Managing Partner Tamer Group


The Youth Employment in Arab Resource-Endowed Economies project team includes the following individuals at the World Economic Forum:

Miroslav Dusek, Senior Director, Head of Middle East and North AfricaKristel Van der Elst, Senior Director, Head of Strategic ForesightNatalie Hatour, Associate Director, Strategic ForesightHala Hanna, Senior Programme Manager and Project Manager, Middle East and North AfricaRemy Duverney, Senior Community Manager, Middle East and Africa MembershipDiane Davoine, Project Associate, Strategic Foresight

Editing: Janet HillCreative Design: Ruslan GaynutdinovIllustration: Studio Blackburn

For more information on the initiative or to get involved, please contact Hala Hanna at [email protected]

Project Team

World Economic Forum91–93 route de la CapiteCH-1223 Cologny/GenevaSwitzerland

Tel.: +41 (0) 22 869 1212Fax: +41 (0) 22 786 2744

[email protected]

The World Economic Forum is an international institution committed to improving the state of the world through public-private cooperation in the spirit of global citizenship. It engages with business, political, academic and other leaders of society to shape global, regional and industry agendas. Incorporated as a not-for-profit foundation in 1971 and headquartered in Geneva, Switzerland, the Forum is independent, impartial and not tied to any interests. It cooperates closely with all leading international organizations.

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