The Expert Commentary

Leading commentators offer their perspectives on the key findings of the ASDA'A Burson-Marsteller Arab Youth Survey 2018.

Arab youth deserve – and demand – a better future

Jihad Azour

Jihad Azour

Dr. Jihad Azour is the Director of the International Monetary Fund’s Middle East and Central Asia Department (MCD). Jihad served as Lebanon’s Finance Minister from 2005 to 2008, during which time he co-ordinated the implementation of important reforms at the national level and within the Finance Ministry. He has held a wide range of posts in the private sector, including McKinsey and Booz & Co. where he served as vice president and senior executive advisor from 2009 to 2013. Prior to joining the Fund, he was a managing partner at advisory and investment firm Inventis Partners. Jihad holds a PhD in International Finance and a post-graduate degree in International Economics and Finance, both from the Institutd’Etudes Politiques de Paris.

For a generation of young Arabs, a decade that began with the promise of change nears its end with tens of millions still longing for peace, prosperity, and the opportunity for a better future. That’s the finding of the latest ASDA’A BCW Arab Youth Survey, which, once again, provides a vital glimpse into the aspirations of young people across the Arab region

The survey shows that young Arabs, rightly, in my view, want capable governments that are accountable, efficient, and provide opportunities for prosperity. A new social contract that sees the state create an environment for youth to thrive and unleashes their ingenuity to drive prosperity for decades to come.

The survey sheds light on their growing frustrations, which are rooted in economic futures that are more and more uncertain. Young Arabs care deeply about regional causes and want protracted conflicts to end. As making ends meet grows harder –the top concern of youth in the region, according to the survey – pressures are growing more acute. For example, for the fifth year in a row, high unemployment rates as one of the top frustrations for young people.

Their frustration is understandable. Youth unemployment is alarmingly high in the region, exceeding 30 per cent in many countries. With an estimated 2.8 million youth joining the workforce in the Middle East and North Africa (MENA) each year over the next 10 years, the urgency of this challenge will only grow. Reforms are under way but reform by its nature takes time. Far faster progress is needed.

Therefore, we must ask ourselves this: will we continue down a path that has not delivered the opportunities that young people seek, or will we chart a new course toward a more equitable, prosperous future?

With the IMF projecting growth for the region at just 1.3 per cent in 2019, a new way is urgently needed. The model of state patronage with the public sector acting as the employer of first resort is no longer capable of providing enough jobs for the region’s well-educated and tech-savvy youth. Education and public services do not equip youth for an era of rapid technological change. The state continues to doleout large energy subsidies that primarily benefit the well-off and distort the economies, while existing social safety nets do not effectively protect the region’s poorest and most vulnerable citizens. Moreover, this system has saddled many countries with large deficits, crowding out social and investment spending while burdening future generations with unsustainable debt. Nowhere in the world can governments provide everything to everybody. Expecting them to do so is not sustainable. Resources are scarce. There is a trade-off between ensuring spending that can benefit all in a sustainable way and spending that is wasteful.

The good news is there is a better way. While governments cannot be the employer of first resort, they have a vital role to play in building an enabling environment for dynamic private sectors, raising living standards and creating opportunities.

The region’s youth are talented and ready to take advantage of such opportunities. Just as an example, MENA has witnessed a seven-fold increase in Fintech startups over the past decade.

What is needed is a new social contract between MENA governments and citizens that ensures accountability, transparency and a commitment to the principle that no one is left behind. A contract that promotes an economic system where all firms compete on a level playing field, leveraging technology and regional trade to expand. A contract that champions greater efficiency by harnessing technology to deliver services to citizens cost-effectively. Further, a contract that moves away from energy subsidies and directs the savings towards infrastructure programs that can boost growth and create jobs. Underlying all of these efforts would be well-designed safety nets to support and empower the vulnerable. Importantly, this proposed contract would provide opportunities for all by providing high-quality education and health services.

One example of how this new vision of government can deliver positive results is through expanding access to finance for small and medium-sized enterprises (SMEs). SMEs account for 96 per cent of the region’s businesses and employ millions of people, but they receive only 7 per cent of bank credit. That is far below the 13 per cent received by SMEs in Europe and 17 per cent by those in Asia. New research at the IMF focuses on how, by promoting policies that facilitate access to finance for SMEs, the region could boost economic growth by up to 1 per cent per year and create as many as 8 million new jobs by 2025.

Unlocking SME access to finance requires a comprehensive approach. Building stable economies, with solid growth and low inflation, is an essential component of this effort. Another critical step is establishing clear rules of the game. That means a system where property rights are protected, and credit information and solvency frameworks are easy to understand and transparent. It is only by tackling this challenge holistically that countries can put in place the conditions for sustainable SME access to finance.

Finally, this new social contract will not be possible unless corruption in the region, which has eroded trust between governments and citizens, is addressed. The IMF has developed a new framework that looks more systematically and broadly at governance vulnerabilities. A key takeaway is that corruption thrives in complexity, and that budget transparency and simplified rules and regulations can help reduce the opportunities for corruption and help promote higher and more inclusive growth.

Transforming this new economic vision for MENA into a reality will require governments to play a key role-just a different one than we have seen in the past. Some progress has already been made. However, the latest youth survey makes clear that we have a long way to go. Despite their understandable frustrations, young people still hold fast to the hope for a better future. They have shared with us their aspirations and fears. Now is the time for all of us to listen—and act.