A prominent UAE businessman is calling for an Arab-led multilateral policy response that would tackle youth unemployment, a fundamental cause behind the regional political turmoil.
The Arab Stabilization Plan (ASP) drafted by Crescent Petroleum’s chief executive, Majid Jafar, is an initiative that aims to encourage foreign direct investments into economically sustainable infrastructure projects that would stimulate job creation and prevent extremism.
The plan is backed by a team of regional economists, advisers and businessmen, including Fadi Ghandour, the Aramex founder and chairman.
While much attention has been paid to the changing politics in the region, as transitional governments of Tunisia, Egypt and Libya address new constitutions and elections, less attention has been paid to their respective economies.
“Youth unemployment has been a chronic problem and a big driver behind all the unrest,” Mr Jafar said. “The irony is that the political turmoil has made it worse. So it’s gone from being a chronic problem to an acute crisis.”
The World Bank estimates that the region needs to spend US$75 bilion to $100bn each year to match global averages on infrastructure investment. The body issued a joint report with the Islamic Development Bank estimating that 85 million jobs were needed during the next 10 years to meet average global unemployment rates.
ASP estimates that 100,000 jobs could be created for every $1bn invested in the region.
Two years after the uprising that removed the Egyptian president Hosni Mubarak, the nation’s economy is in a dire state. A much-needed $4.8bn loan from the IMF, expected last December, has been postponed to allow time for the government to explain a package of unpopular austerity measures to the Egyptian people.
But IMF negotiations were put on the back burner after Arabian Gulf countries pledged their own $12bn in grants and loans following the Muslim Brotherhood-backed president Mohammed Morsi’s removal from power on June 30.
“The time is not appropriate to begin a new round of negotiations with the IMF,” Ashraf Al Araby, the interim government’s planning minister said in July. “Aid from Arab countries will help Egypt get through the transitional period.”
While the $12bn figure is critical for Egypt’s government to pay the bills, it does not create new jobs, Mr Jafar said.
“At best, while necessary, you pay existing salaries and a lot of it goes to energy and food subsidies,” he said.
The ASP takes inspiration from the US Marshall Plan, the flood of American aid into Europe after the Second World War aimed at rebuilding the continent and preventing the spread of communism.
“In this case, the objective is to stop the spread of instability and extremism,” Mr Jafar said. “This isn’t about grants, or loans or aid to governments, it is about setting up a structure where investments are monitored by an international body with proper safeguards on transparency.”
Under the plan, a trust fund would be created with pools of money being channelled from sovereign wealth funds, donor governments and private sector entities. A legal framework would be created to ensure that the funds are managed and invested with appropriate oversight. The framework would also allow donors to directly invest in recipient states, bypassing local governments and bureaucratic red tape. Investor countries represented would have a voice, but politicisation would be avoided.
“At the national level, teams will be working with host governments and identifying projects, but without solely relying on ministries of those countries to implement,” Mr Jafar said.
In April, Arab finance ministers agreed to the creation of a regional equivalent of the euro zone’s statistics agency in hopes of providing greater transparency for attracting investment. The decision came as the ministers also agreed to inject a 50 per cent capital increase into five Arab financial institutions that required more fiscal firepower to meet the needs for economic development and job creation.
“Political stability is tied fundamentally to the economy, and above all employment of youth, which means providing a meaningful and productive and sustainable job for a young person,” Mr Jafar said.