Arab nations need to pump nearly $70 billion in urgent investment to create jobs for their citizens and tackle festering unemployment which is cited as one of the main causes of the current unrest in the region, according to an official study.
Before the eruption of turmoil in Egypt, Tunisia, Libya and other Arab countries, the region needed to create at least five million jobs annually to absorb the massive number of job seekers and newcomers to the labour market, said the study by the Cairo-based Arab Labour Organization (ALO).
“There is an urgent need to expand inter-Arab investment to fund development projects that will provide more jobs for the Arab youth who are suffering from a severe unemployment problem….such a problem is expected to exacerbate following the wave of unrest hitting the Arab world,” it said.
“There was a need to create more than five million jobs in the region every year in the next decade before the eruption of the current incidents in Tunisia, Egypt, Libya, Oman, Bahrain, Algeria, Morocco and Yemen…what is needed now is the investment of at least $70 billion to curb the unemployment ordeal.”
But the study stressed that Arab nations, which are major capital exporters, should improve their investment laws and create a better environment to encourage domestic investors to pump funds at home.
“Arab governments need to improve investment laws and create more incentives for local investors…they should encourage small and medium enterprises to attract domestic funds and stop a continuous capital flight,” it said.
“There are many other factors that will help spur inter-Arab investment including better administrative procedures, improvement of measures to set up a project, creation of more economic cities, expanding promotion campaigns and development of free zones, mainly Dubai’s Jebel Ali.”
Despite a relative improvement in the investment environment in the region, inter-Arab capital flow has remained a fraction of the total Arab investments abroad. Between 1995 and 2009, the cumulative inter-Arab investment totalled just over $100 billion, less than five per cent of the overseas Arab assets
Official figures showed the 2008 global fiscal distress also depressed foreign direct investment into the Arab region in 2009 for the first time in many years despite a surge of more than 26 per cent in 2008.
It showed FDI pumped into Arab nations soared by nearly 26.9 per cent to around $89.2 billion in 2008 from nearly $70.3 billion in 2007
“As for 2009, FDI flow into the Arab region declined due to several factors, including the slowdown or contraction in the economies of industrial nations, which have constituted a major source of foreign direct investment for Arab states over the past few years,” the Kuwaiti-based Inter-Arab Investment Guarantee Corporation (IAIGC) said in a recent study.
“Another factor was the continuation of turbulence in most Arab and global markets as such instability contributed to increasing uncertainty regarding investment decisions in the medium and long terms and to shelving of more projects in the region in infrastructure, hydrocarbon, and real estate sectors.”
In another study, a key Arab League organization said regional nations need to create nearly 40 million jobs by 2020 to tackle unemployment that has remained the highest in the world despite a steady expansion in the private sector.
Although it was cut from around 14.3 per cent in 1990 to about 13.7 per cent in 2009, the unemployment rate in the region is still the highest in the world and requires intensification of reforms to spur economic growth and create jobs, said the study by the Abu Dhabi-based Arab Monetary Fund (AMF).
“As a group, the Arab countries are suffering from the highest unemployment rates in the world despite a slight improvement in the past years….the Arab joblessness rate is estimated at 13.7 per cent compared to an international average of nearly 5.7 per cent,” the study said.
“The improvement over the past years has been mainly a result of greater participation by the private sector…but the region now faces a serious challenge in matching the rapid growth in the population and labour force and how to ensure jobs for those who are about to join the labour market, mainly the youth, who account for nearly 50 per cent of the total jobless Arabs….if the Arab countries want to face that challenge and reduce unemployment by half, they will have to create nearly 40 million jobs by 2020.”
Besides slow creation of jobs because of low growth, ALO said it saw another problem which involves the concentration of nationals in the public sector in Gulf oil producers. It said this had aggravated the unemployment problem among local citizens as the public sector has become redundant and can no longer accommodate the rising number of nationals entering the job market.
“Another major problem in the Arab world is the large number of young Arabs entering the labour market every year and the accumulating government debt and debt servicing…all these problems require expanded reforms, cutting the public debt, rationalizing expenditure and opening up the economy.”
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