This week, PITAPOLICY is sharing PartII of this two-part post by our Assistant Editor Nassrin El-Gosi who zeroes in on existing research and methodology describing the underlying causes of youth unemployment in the MENA region and specifically in Egypt.  In case you missed it, check out Part I here. 

Youth Unemployment in the Middle East and North Africa (MENA) – Part II

By: Nassrin El-Gosi

Egypt: Economic Overview

Egypt faced multiple economic challenges, including the interruption of economic activities, during and following the revolution. The World Bank summarized the outcomes of this economic slow-down as follows:

• Drop in Foreign Direct Investment (which fell by 50% from 2009 to 2010 to average $3.7 billion, or under 1% of GDP, and even further in 2011 to $0.9 billion)
• International reserves also fell sharply in the first quarter of 2011 after the revolution and have continued to fall since, reaching US$18 billion by end of December, 2011, the equivalent to three months of imports of goods and services. (World Bank Egypt Overview 2012)

While the slow-down in economic activity is a direct result of the revolution, there are multiple underlying causes for Egypt’s long-term economic challenges. With a total population of 81,121,077 and a GDP of $218,894,280,920, Egypt is a strategic and unique case study in the Middle East and North Africa (MENA) Region given its significantly large labor force:  half of the total labor force in the Arab World (just above 100 million) is concentrated in Egypt and labor-exporting countries.  If fully engaged and empowered, an active labor force can contribute to increased production and foster economic growth and individuals’ well being.

Unemployment in Egypt

Egypt’s youth (belonging to the 18 to 29 age group) make up 20 million individuals or approximately a quarter of the population.  Investment in this human capital will influence youth choices in the future, which would affect the economic well being and welfare of societies. On the one hand, if youth have better access to information, competitive global education, job opportunities through equal-opportunity structures, they will contribute to increased production and improving societies’ welfare. Post-revolution challenges in Egypt presented an opportunity for the new government to adopt, new and effective strategies to empower a quarter of its population.

National Action Plan on Youth Unemployment

Previous research evidenced that Egypt needs a comprehensive youth-inclusive strategy, and recently a National Action Plan on Youth Unemployment was developed, as part of the Proposed National Policy for Youth in Egypt.  The plan placed priority on the following activities and objectives in order to advance youth employment in Egypt:

• Developing and implementing a national employment strategy based on a partnership between public, private and civil society organizations
• Promoting a culture of entrepreneurship and self employment
• Providing adequate funding for small projects for youth people
• Encouraging the private sector to provide training opportunities and volunteer work for young people
• Determining an employment quote for youth with special needs
• Promoting awareness among youth concerning labor laws and rights

Existing Policy Recommendations

In analyzing the global employment trends for Egyptian youth, the International Labour Office recommends the following Policy Measures to improve the state of youth employment:

1. Developing integrated strategies for growth and job creation to ensure long-term, sustained and concerted action for the promotion of decent work for youth people
2. Establishing broad-based partnership to turn youth employment commitment into reality
3. Improving the quality of jobs and the competitiveness of enterprises
4. Enhancing the design and increase funding of active labor market policies to support the implementation of national youth employment priorities
5. Reviewing the provision of employment services with the objective of offering a set of standard services to all young people and more intensive assistance to disadvantaged youth
6. Pursuing financial and macroeconomic policies that aim to remove obstacles to economic recovery

Such policy recommendations are broad enough for consideration and inclusion in Egypt’s new political and economic agenda. Other Arab nations may consider adopting these recommendations and adapting them locally to meet domestic and market needs. With existing initiatives and proven models that encourage Investment in the MENA region as well as propose new models for youth employment and job-creation, Arab governments are well-equipped with the resources needed to tackle the challenges affecting their economic well-being.

Furthermore, policy makers should examine other existing models that create public-private partnerships among stakeholders and encouraging private sector investment in large projects. Increasing funding through international donor agencies, for example, to encourage private sector investment, Entrepreneurship, and bridging the skills gap are key in advancing youth employment.

According to the World Bank, Investment will be needed to stimulate business activity, as the only source for the scale of jobs and opportunities needed. “The education system will need reforms that gear it more toward a market economy, as enterprise surveys have shown that worker skills do no match the needs of private business. Equally critical will be reforms that restore confidence in the private sector. As growth recovers, it is vital that investors are given clear signs that the rules are being changed to level the playing field, and for Egyptians to see that potential opportunities will be for the many not the few.” Additional support is needed to strengthen Entrepreneurship and International Trade through implementing youth-specific initiatives that allow promising entrepreneurs access to seeds funds to launch their businesses as well as for established businesses seeking to achieve global expansion and create jobs.

Summary of Analysis and Recommendations

Addressing the youth unemployment challenge in the Middle East and North Africa (MENA) region will require major structural changes in order to effectively invest in human capital and achieve youth inclusion. Chaaban finds achieving youth inclusion largely depends on the efficiency with which countries use their available resources, and that is true for the case of Egypt (poor in hydrocarbon wealth but rich with abundant labor/ human capital). MENA country governments should consider implementing policies that attract external investments in order to stimulate business and economic activity.  Increased investment in and support of start-ups and entrepreneurship initiatives can result in creating more jobs.  However, investing and creating jobs takes time. This amount of time is strongly needed to apply structural changes to educational and economic institutions, now that research identified the intricate reasons behind youth unemployment and needed policy recommendations.