How to absorb the highest labour force growth in the world? According to the World Bank, improving the business climate is the answer, reports Sherine Abdel-Razek The countries of the Middle East and North Africa (MENA) suffer similar economic problems. They share a history of colonisation followed by years of socialism. They have all witnessed varying degrees of political unrest and though some are in a better situation than others there is one feature they all have in common -- a growing labour force and a job market currently incapable of absorbing new entrants. A World Bank study on employment in the region estimates that 80 to 100 million jobs will have to be created by 2020 to absorb new entrants to the job market, more than the number of jobs created across the region during the past half century. Meeting the challenge will require an average growth rate of 6-7 per cent annually, in a region where growth currently stands at 3.4 per cent. The picture becomes even bleaker when comparatively low levels of foreign direct investment (FDI) inflows to the region are factored in. MENA attracts just two per cent of the FDI inflows to developing countries, an alarmingly low level given its strategic location and abundance of cheap labour. A two-day conference held by the World Bank this week in Cairo set out to outline ways in which the situation might be improved. World Bank experts agree that improving the investment climate is the most important step in tackling unemployment. Michal Ruthowski, director of the MENA Human Development Department at the World Bank, explained to Al-Ahram Weekly that one notable regional feature is just how few jobs are being created by the private sector. "The public sector is looked at as the main source for providing jobs, and worldwide this has become untenable." Speakers at the conference repeatedly stressed the importance of reinvigorating the private sector to the extent that it provides 90 per cent of all. Ruthowski also pointed out that it was no longer practical to maintain a system in which graduates are guaranteed a job in the public sector, given the negative impact such a system has on workers' efficiency. "Why," he asked, "should graduates make efforts to improve their skills if at the end of the day they will get a place on the public sector pay roll?" But the real problem, Ruthowski stressed, is not one of numbers. If real jobs are to be created then the skills of workers will have to be matched to the needs of the workplace. What really matters, he says, "is how well equipped they are with the skills the job market demands". To balance the equation will require a major overhaul of vocational education and training systems in such a way as to equip graduates and workers with the skills needed in the private sector. MENA workers are in urgent need of vocational training geared towards market needs. Improving skills should not be confined to pre-employment training; it must be an ongoing process, something that hardly exists in the region. One paper presented at the conference, a study of 3,700 firms from across the region, revealed that only 17 per cent provided any kind of training course for their workers. And of those 17 per cent, training schemes were marred by bad management and tended to focus on workers already in possession of skills rather than those who most needed training. While MENA ranks at the bottom of international formal training league tables it leads the rest of the world in its perceptions of the constraints on skills. At 0.9 per cent, worker productivity growth came in MENA is among the world's lowest. Some 27 per cent of employers in the MENA region reported that low levels of education and inadequate skills constituted a severe constraint to growth and development. In East Asia the figure is six per cent. If supply and demand need to be more carefully matched in the job market the market is itself in desperate need of reform. Labour market policies must be improved and the institutions overseeing them and upgraded. Workers must have clear avenues through which they can bargain benefits and wages. Mechanisms are also needed to promote labour reallocation towards more productive and rewarding jobs, while workers are in need of help when it comes to coping with shocks in the job market and in researching new employment opportunities Speakers at the conference did, however, warn that overprotection of workers can hinder investment and places a heavy burden the private sector. Freedom to hire and fire is a plus. While hiring rules has become more flexible with labour law reform in countries like Tunisia and Egypt employers still, the conference was told, face restrictions when it comes to firing workers for economic reasons or low productivity. The labour market, argued several speakers, remains distorted by legislation fixing substantial severance packages, an anomaly when it comes to international practice.
