Can Entrepreneurs save the Arab World?

The incredible media buzz around Chris Schroeder’s bookStartup Rising: The Entrepreneurial Revolution Remaking the Middle East” is, per se, a very telling fact. A new positive narrative on the MENA region is in the making: in the gloomy Arab winter of the failed revolutions, a bright glimmer of hope is emerging; despite everything, a new generation of daring entrepreneurs is carving out a future for the region.

The heroic figure of the individual rising up against all obstacles – institutions, conflicts, repression…- seems to satisfy simultaneously the liberalism of westerners, the orientalism of regional connoisseurs, Arab’s dignity and the need for international organizations to circumvent failing/”unfriendly” state institutions.

However, this opportune “positive thinking” on the Arab world entails a number of implicit assumptions that must be analyzed and questioned. In the context of the upcoming Fikr 12 Conference on “Enabling Job Creation in the Arab World” (Dubai, 4-5th December 2013), we would like to explore these assumptions.

The Unemployment Pandemic – Striking Facts

Youth unemployment is a global issue that affects both developing and developed nations: Youth make up of 17% of the world population and 40% of the world’s unemployed[1]. Newcomers to the labor market suffer from the lack of experience, pay a high price in times of economic downturn (“last in, first out”) and are more exposed to forced forms of precarious jobs.

The Arab region is by far the most affected area in the world and the problem goes back well before the 2008 financial crisis (see table below), suggesting structural problems that the unlikely return to growth will fail to solve.

The region’s dynamic demography, with an increasing number of Youth entering the labor market, represents a huge challenge instead of a historical opportunity. According to the World Bank, the region needs to create 80 million jobs by 2020. This daunting task would only suffice to maintain the current high level of unemployment.

Youth Unemployment Rates by Region (%)

2000 2012 (previsions)
World  12.7 12.7
EU & US  13.5 18
MENA 26.3 27.3

Source: ILO, Global Employment Trend for Youth 2012.

Another characteristic of Youth unemployment in the Arab world is the high proportion of unemployed graduates compared to non-graduates. In Tunisia, 40% of university graduates are unemployed against 24% of non-graduates. This has been identified as an important element of the Tunisian Jasmine Revolution. Higher education in the Arab region is thus not a protection against unemployment, as is increasingly the case in the EU (“Education to unemployment”).

Finally, the Arab world labor market is characterized by an oversized public sector[2], some of the world’s oldest firms, the highest average age of CEOs and one of the lowest numbers of newly registered firms per working-age population in the world (see below figure).

Newly Registered

Deconstructing Misleading Stereotypes

Supporting local Entrepreneurs appears to be a common sense solution to enable job creation in the Arab World.

However, the implied profile of the entrepreneur appears to be gender and sector-biased and, to some extent, discriminatory. The typical entrepreneur that comes first to mind often matches the following check list

  • He is a male,
  • Rather young,
  • Urbanite,
  • Educated,
  • Polyglot,
  • Geeky, and preferably focused on mobile app. development.

This leaves aside most of the population and the economic sectors of the region and raises the question of the relevance of supporting such a narrow fringe of the economic actors.

Entrepreneurship should rather be understood as a wide, inclusive concept, encompassing key economic sectors of relevance to the Arab region: labor intensive economic activities, rural development projects, industry and promising sectors with high growth potential (green economy, “grey” economy to address the needs of a fast ageing population…). In short, entrepreneurship should be determined less by temporary market infatuations and more by long-term strategic vision for the region’s future.

The other implicit idea underpinning the Entrepreneurs’ positive narrative is that success relies on the will power of a handful of talented individuals who persevered and finally got lucky. Consequently, a “smart Public Policy” should just focus on “discovering” – through competitions and prizes – these limited talents and give them a push via some seed capital and media coverage. Although very attractive, we see at least two important weaknesses in this reasoning:

First, it is based on an individualistic vision of economic development and leaves little leverage to public policy. The future of the nation seems to rely on an elite of globalized connected individuals rather than on the political choices of a real development strategy based on national competitive advantages.

Second, such a policy evades the issue of the long awaited reform agenda (tax and competition policy, reform of public sector and energy subsidies).

Conclusion: Back to Public Policy

In our upcoming Fikr12 Workshop on “Entrepreneurship and Startups” (5th December 2013), we intend to tackle the issue of private initiative from a strategic perspective by focusing on how Public Policy can create the most enabling environment for local start-ups and entrepreneurs to strive.

The real question we are asking ourselves is actually: how to transform a collection of individual achievements into collective success?

As a Knowledge Partner of the Arab Thought Foundation, NGC will be moderating the Fikr 12 Workshop on “Entrepreneurship and Start-ups” on December 5th  at the Ritz-Carlton, Dubai International Financial Centre (Program and Speakers on Fikr 12 website). More soon on our special guests. Join us to continue the conversation!

[2] MENA Public sector wages are 30% higher than private sector wages, compared to 20% lower worldwide.

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