The Middle East faces a huge challenge this decade in providing meaningful jobs for a surging number of young people, Chadi Moujaes, Samer Bohsali, Karim Abdallah write.
The Middle East is facing a huge employment challenge.
With more than half of the region's population under 25 years of age, a staggering 75 million jobs will have to be created by 2020 just to keep pace with demographic growth. Essentially, the Middle East has less than 10 years to generate 40 per cent more jobs than exist today - an enormous feat if governments continue to use their current approaches.
Governments in the GCC have attempted to alleviate their unemployment crisis through two main initiatives - mandating quotas for hiring nationals and contributing to the cost of employing them. While these policies have had some success, they did not fully achieve their objectives.
Mandatory nationalisation of the workforce, such as Saudisation in Saudi Arabia and Emiratisation in the UAE, involves state-imposed quotas for certain professions. These programmes can have unintended effects such as "shadow workers" who assume fictitious jobs and are on the payroll only to meet nationalisation targets. The other programme in use involves governments who subsidise salaries of nationals, thereby providing an incentive to employers to hire them. This programme's track record is equally flawed and has led to companies that hire nationals for only a designated period before letting them go as well as driving some employees to quit.
A new paradigm is needed to tackle this urgent unemployment problem in the Middle East. Potential jobs need to be identified, followed by specifically tailored training programmes designed to deliver the required skills. Key stakeholders in this new paradigm include government, business, and academia, which should intertwine efforts to align skills with national economic needs, thereby maximising the impact of the new approach.
Remarkably, it is large employers, rather than governments, that are becoming increasingly important stakeholders in the trio. One reason is because they best understand what the labour market needs, they have the levers to influence decisions within their organisations as well as within their suppliers, and thus have the ability to develop the talents of nationals who can eventually take on the required jobs.
To make a difference, large companies need to play a larger role in the labour market beyond hiring employees solely for their operations. This new role of large companies is twofold. First, these companies should create demand for local talent by directing their procurement departments to buy from local companies, which offer domestically produced goods as well as services (local content) and who employ a high number of nationals - this is especially important in the GCC. Second, large companies should play a role in preparing the local workforce for these newly found jobs by partnering their suppliers, government and training institutes to run programmes that build specific capabilities of potential workers - nationals who will work for the large companies and their suppliers. Through these two steps, companies effectively spur job creation and match nationals to employment opportunities.
One such company that is nurturing skills that lead to employment is the Saudi Basic Industries Corporation (Sabic), one of the world's largest chemical and petrochemicals producers. The firm has long stressed internal innovation and training, recognising these as a means of staying ahead of the competition. In that vein, Sabic now has a programme that involves the training of 5,000 young Saudi nationals, who are then required to be hired by the company's suppliers. In return, Sabic will cover the cost of the new employees.
Two elements make the scheme compelling. First, Sabic makes a firm commitment to the trainees as well as suppliers who will be provided qualified employees and continued business, drawing on the corporation's market position and ensuring trainees are hired. Second, two government entities are closely involved, giving the project a seal of official approval. These are the Royal Commission for Jubail and Yanbu and the Saudi ministry of labour's Human Resources Development Fund, which, respectively, provide training and financial support.
The role of the government is to facilitate such partnerships by bringing stakeholders together. The government has the ability to link universities, employers and others to catalyse dialogue. That means fostering collaboration between industries and education, particularly the public universities that dominate many Middle East education systems.
Such partnerships help the company, its business sector and the country. The company will be able to reduce imports because it will buy more from local suppliers with skilled staff who deliver high quality products and services. The sector will gain through improved abilities among its workforces, which encourages innovation and entrepreneurialism. And, ultimately, the country benefits from increased employment and skills development that make it more competitive.
The Middle East's demographic youth wave poses enormous opportunities. Essentially, the new generation of young workers can fuel economic expansion for the region.
However, the region's economies must capture the full economic potential and promise of the region's youth by providing meaningful jobs and careers.
Through the new paradigm's collaboration of large employers, governments and education systems, the Middle East has a strong chance of achieving this.
Chadi Moujaes and Samer Bohsaliis are partners and Karim Abdallah is a senior associate, all with Booz & Co