Bloomberg News

Middle East Leaders Address Unemployment in Arab Spring Wake

October 21, 2011

(Updates with analyst’s comment in 19th paragraph.)

Oct. 21 (Bloomberg) -- Middle Eastern politicians and business leaders meet today in Jordan to confront the problems of persistent unemployment and slow economic growth after almost a year of regional unrest.

King Abdullah of Jordan is hosting leaders including Iraqi Prime Minister Nouri al-Maliki and Egyptian Prime Minister Essam Sharaf at the event, organized by the World Economic Forum, to address job creation in the region. Senior executives from Riyadh-based Saudi Basic Industries Corp., the world’s largest petrochemical maker, the Coca-Cola Co., Huawei Technologies Co. Ltd. of China, National Bank of Kuwait and Egypt’s Beltone Financial are also scheduled to attend the event on the Dead Sea, which ends Oct. 23.

Led mainly by Arab youths seeking jobs and greater political freedoms, popular uprisings have toppled autocratic leaders in Tunisia, Egypt and Libya this year in what has been termed the Arab Spring. The political unrest has caused risk premiums to rise and private financing and tourism receipts to fall, undermining economic growth and putting pressure on governments to support their expanding populations.

Employment “is going to be a tough challenge,” Abdelkhaliq Abdulla, professor of political science at the United Arab Emirates University in the U.A.E., said in a phone interview. “Arab Spring or no Arab Spring, it’s one of the major challenges facing all the countries throughout the Middle East. It’s good to lower expectations.”

Youth Unemployment

The youth unemployment rate of 25 percent in the Middle East “exceeds that of any other region in the world,” the International Monetary Fund said in its April 2011 regional outlook for the Middle East and Central Asia. Joblessness “is largely a youth phenomenon,” with people between the ages of 15 and 24 accounting for 40 percent of all people without jobs in the region, and this figure rising to as much as 60 percent in Egypt and Syria, the IMF said.

Violence has spread across the Middle East as demonstrators seek the ouster of presidents Ali Abdullah Saleh in Yemen and Bashar al-Assad in Syria. Libya’s former leader Muammar Qaddafi was killed during fighting in his hometown of Sirte, opening the way for the country’s new rulers to declare liberation and hold national elections.

An unemployed 26-year-old in Tunisia, Mohamed Bouazizi, helped trigger the regional unrest with his self-immolation in December. Zine el Abidine Ben Ali fled the country Jan. 14, putting an end to a 23-year rule, after a month of protests over unemployment, food prices and corruption. Hosni Mubarak was forced from power in Egypt a month later, after thousands of protesters took to the streets across the Arab world’s most populous nation.

Economic Disruption

Economic growth for Middle Eastern oil importers is forecast to slow to 1.4 percent this year, from 4.5 percent last year, according to IMF data. The oil exporters’ economies will expand by 4.9 percent in 2011 from 4.4 percent last year, according to the IMF.

Tunisia will record no economic growth this year, from 3.1 percent last year, due to “disruptions to economic activity,” the IMF said in its outlook. Growth in Egypt will slow to 1.2 percent from 5.1 percent last year, according to the IMF. Previous governments have said the Egyptian economy needs to grow by at least 7 percent to provide enough jobs for the rapidly expanding population.

The unrest has had a “negative impact” on services and investment in the region, said Liz Martins, a senior economist with HSBC Bank Middle East Ltd. “We don’t have regular data for many Middle East and North African states, but for those where we do, the impact so far has been net negative. For Egypt, the revolution has cost 600,000 jobs.”

Borrowing Costs

Egyptian government borrowing costs have risen to the highest level in almost three years, with the yield on one-year treasury bills soaring 344 basis points since the start of the revolution to 13.88 percent last month. The rate was at 13.72 percent at an auction Oct. 13.

Egypt’s tourist arrivals from January to July dropped 39 percent compared with the same period last year, Tourism Minister Mounir Fakhry Abdel Nour said on Aug. 17. Tunisia’s tourism revenue dropped 39 percent during the first nine months of 2011, the Tourism Ministry said in a statement on Sept. 28. Tourism and related service industries are one of the main employers in both countries.

Egypt’s stock exchange is also down 40 percent this year, while Tunisia’s has fallen 9 percent.

Contracting Economy

Syria’s economic growth may contract by 2 percent this year, according to the IMF. In April, it had forecast 3 percent growth for the country, where President Bashar al-Assad has deployed tanks, armored vehicles, artillery and helicopters to put down an uprising that began in mid-March. The protests are the most serious challenge to the regime since the 1980s, when Assad’s late father, President Hafez al-Assad, crushed a rebellion centered on the town of Hama.

At least 4,000 Syrian civilians have been killed by security forces in the current uprising, according to Ammar Qurabi of the National Organization for Human Rights in Syria. The United Nations published a lower death toll on Oct. 14 of more than 3,000, including at least 187 children.

The Syrian government needs to do more to tackle corruption and reduce unemployment, which is the country’s “biggest problem,” Assad said in a televised speech in April. The Syrian jobless rate stood at 8.4 percent in the first half of 2010, the Arab country’s state statistics office said in December.

Demographic ‘Disaster’

“The waves of people born in the 10 years following the regime’s 1982 crackdown have entered or are entering the job market,” said Andrew Tabler, a Syria analyst at the Washington Institute for Near East Policy and author of the book “In the Lion’s Den: An Eyewitness.” “They make up the backbone of the protest movement. This is a disaster for the Assad regime.”

The oil-rich Gulf nations are trying to use oil revenue to create jobs for their citizens. In June, King Abdullah of Saudi Arabia imposed quotas that may force employers to cut foreign staff, in a country where nine out of 10 non-government employees are foreigners.

“What we have seen is an expansion of the public payroll in many countries, both boosting the jobs of those already employed and some job creation, but in many cases the slowdown of growth -- especially in North Africa -- has led to private sector job losses,” said Rachel Ziemba, senior analyst at Roubini Global Economics LLC. “Ultimately the hard job of boosting employment will take time. It involves skills and education improvements to offset the skills mismatches and regulatory changes.”

Between 2000 and 2010, approximately 7 million new jobs were created in the Gulf Cooperation Council countries, of which fewer than 2 million went to nationals, according to a report issued by the IMF this month. Although job creation is set to remain high, there could be as many as 2 million to 3 million additional unemployed GCC citizens by 2015, it said.

To address this issue in Saudi Arabia, King Abdullah has vowed to get more women working and his government is hiring too. He pledged 66,000 jobs in teaching and health care, mostly for women, as part of $130 billion of extra spending announced in February and March.

“Rapidly growing labor forces and, in several countries, reduced financial capacity to absorb new entrants in the public- sector, the traditional source of employment, means it is very important that new jobs are created in the region,” said Paul Gamble, head of research at Riyadh-based Jadwa Investment Co. “Saudi Arabia creates a lot of jobs, but these are filled mainly by expatriates.”

--Editors: Digby Lidstone, Heather Langan

To contact the reporter on this story: Glen Carey in Dubai at gcarey8@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net


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