Will Work For Work
The phrase ‘right to work’ may not sound like a particularly controversial topic but employment has emerged as one of the most debated subjects in the Arab world over the past year.
As last year’s revolutions continue to reverberate across the region, authorities across North Africa — and the Middle East as a whole — are desperately striving to come up with solutions to better ensure job security and stave off further discontent. However, sporadic unrest — ranging from electoral protests to strikes — combined with a drop in demand and capital inflows, has dampened economic growth, exacerbating unemployment rates and slowing job creation.
In Tunisia, for example, where Mohamed Bouazizi first sparked the revolt against Ben Ali, the official unemployment rate stood at 13% a year ago. It has since risen to 18%, with the number of unemployed accounting for approximately one million. Unofficial estimates put the percentage of unemployed at more than 20%. Similarly, Egypt’s official unemployment rate has risen closer to 15% today from approximately 10% a year ago, with the young hit particularly hard. According to UN statistics, the youth unemployment rate in North Africa increased to 27% in 2011 from 23% in 2010.
While part of the increase undoubtedly arises from the more accurate tallying of unemployment figures, the greatest reason for the increase can be attributed to the broad economic slowdown. Last year proved to be a tough year for growth in North Africa. In Libya, economic activity is estimated to have contracted by more than 50% with foreign direct investments (FDI) dropping from $3.8 billion (LE 22.95 billion) a year prior to nearly zero. Growth in Egypt declined to 1% from 5% with foreign inflows declining by nearly $6 billion (LE 36.23 billion) year-on-year. As for Tunisia, the respectable growth rates the country saw in recent years came to a crashing halt, as the economy fell into stagnation. According to the Tunisian government, some 172 foreign companies halted operations after the revolution kicked off, resulting in the loss of 9,000 jobs. More than 500 strikes across a wide swathe of sectors dropped production, leading to additional drops in temporary and seasonal employment.
Job safety has therefore become one of the top priorities — if not the top priority — for virtually every electoral agenda in North Africa, in a bid to reduce popular discontent, restore confidence, revitalize flagging growth and, most crucially, provide a measure of political stability.
A large proportion of government initiatives are focused on the promotion of key sectors, to safeguard existing jobs and prevent further losses. Tourism, a major employer and foreign currency earner for both Egyptian and Tunisian economies, is perhaps the best indicator of this. The sector was severely hit by the unrest. In Egypt, revenues dropped by $3.7 billion (LE 22.34 billion) to $8.8 billion (LE 53.14 billion) in 2011 and arrivals fell by a third. In Tunisia, where the sector employs some 400,000 people, arrivals fell by two million in 2011, with revenues sliding 33% year-on-year. Hotels shed staff and seasonal work decreased at an alarming rate, but with growth dropping across the board, the fallout was hardly limited to hospitality and entertainment industries.
To prevent further declines, Tunisia has embarked on a series of programs to jump start job creation, with employment minister Abdel-Wahab Maatar targeting the creation of 250,000 new jobs over the coming year. Chief among Tunisia’s more ambitious initiatives is the creation of a new Deposit and Consignment Fund: Caisse des Dépôts et Consignations. Launched late last year and modeled in part on the Deposit and Management Fund of Morocco — Caisse de Dépôt et de Gestion, the new government-owned but independently managed fund will take control of confiscated assets, including stakes in major firms like mobile firm Tunisiana and Zitouna Bank, with the intention of using them to buttress development in those areas most in need. One of its primary objectives is to increase employment, a mandate it shares with the government’s new proposed generational fund, an investment vehicle that aims to stimulate growth in the private sector, particularly in job-heavy sectors such as manufacturing, textiles and technology.
Egypt has faced more of an uphill climb, which is perhaps unsurprising for a country where an estimated 700,000 graduates must fight for 200,000 available jobs every year (in comparison, Tunisia must grapple with 85,000 graduates applying for 65,000 positions each year). Youth unemployment, at around 25%, is a particular concern in the country — as indeed it is across the Middle East, where 40% of the unemployed are under the age of 24 — but the government has yet to articulate a clear vision on how best to tackle the issue. There are a number of measures that can be taken — from tapping into Egypt’s vast consumer market to improving SME access to credit — yet there are few concrete policies in place.
As a result, the private and non-governmental sectors have stepped into the vacuum to stimulate further growth through a variety of small-scale initiatives, in an attempt not only to safeguard existing jobs, but also create new ones by developing non-traditional sectors of the economy — sometimes with the help of foreign aid — through increased entrepreneurialism and an improved investment environment.
To some extent, this is being facilitated through direct investments. There are a number of new projects from both foreign investors and international financial institutions, which have helped instill confidence and boost employment. Channeling this quantity of capital into Egypt, whether in the form of GE’s $300 million (LE 1.81 billion) contract to expand domestic power generation or the IFC’s financing facilities for new chemical manufacturing plants, has helped provide cause for optimism that job creation — in spite of the broader uncertainty — will show positive gains in 2012.
However, improved employment is dependent in large part on initiatives that target the mismatch between local skill sets and the broader demands of the job market — a discrepancy that a large number of social enterprises are attempting to tackle. One of the most aggressive has been Silatech, a Qatari foundation that seeks to boost training and entrepreneurship throughout the region. In Tunisia, for instance, the company signed a Memorandum of Understanding earlier this year with mobile operator Tunisiana to launch a new platform that announces job openings in both the private and public sectors via free text message alerts to youth in rural areas. In Egypt, the NGO has pledged $10 million (LE 60.38 million) to support SME programmes through GAFI and unveiled an online job portal to provide information on new openings as well as advice and guidance on training and work experience.
While such initiatives may not provide the immediate quick fixes that the governments are hoping for, they do help underwrite each country’s long-term growth prospects, by bridging the gap in the labor market between supply and demand. However, to ensure that unemployment rates inch down, more will have to be done. The higher education sector will need to be overhauled, vocational training will need to be improved and the economies of North Africa will need to take a close look at some potentially unpleasant restructuring if they are to capitalize on their inherent competitive advantages.