At the narrowest point, only a few kilometres separate the European Union from a region that has developed from an area with individual conflict zones into one extensive conflict zone: North Africa and the Middle East. This region, also known by the acronym “MENA”, includes 19 countries stretching from Morocco to Oman, from Qatar to Yemen. Except for Israel, these are all predominantly Muslim societies that are very diverse in their development. The region is characterised by historical conflicts, by arbitrary borders drawn at the end of the colonial era, by the aftermath of the Cold War, by the battle for natural resources, by inter-Arab and inter-religious fighting as well as the Israeli-Palestinian conflict, currently the longest-lasting trouble spot in the world. The MENA region is consequently one of the world’s politically most unstable regions. Contributory factors have included poor governance, corruption as well as religious and ethnic conflicts. Demographic and social changes taking place in recent years have added to the unrest.

The Correlations between Political Stability and Demographic Changes – an Analysis

As in other emerging and developing countries, the number of children per woman has declined significantly in parts of the MENA region as well. This has meant an increase in the proportion of people of working age within society. School enrolment rates and educational qualification levels have improved at the same time.

Social science experts agree that changes such as these have a major impact on political stability. They differ, however, in their opinions about whether the impact is on the whole positive or negative. Two schools of thought come to different conclusions here. The first one, which focuses on the economics, works on the assumption that large numbers of young people of working age, referred to as the Youth Bulge in the specialist literature, facilitate an economic upturn and a rise in prosperity, thereby fostering political stability. According to this theory, it would be possible to achieve a “demographic dividend” if these people could be furnished with jobs. Then, the young people could boost the economy and thereby contribute to political stability. The Asian tiger states are considered prime examples of this type of development. According to a study by the Berlin Institute for Population and Development entitled (in translation) “MENA: A Region in Crisis. The influence of demographic change on developments in the Middle East and North Africa and what this means for Europe”, this correlation can be seen around the world – particularly in developing countries – but not in the MENA region.

Developments there seem to support the second school of thought, which focuses more on conflict theory. According to its ideas, a rapid change in population structure has a destabilising effect. A Youth Bulge consequently does not represent an opportunity but a high risk. If it is not possible to provide a large proportion of the young adults with good job opportunities and thereby a place in society they will be likely to express their dissatisfaction with the situation, potentially using violence. This applies particularly strongly to better-educated individuals who do not see a way of putting their talent and their commitment to profitable use. And this is precisely the dangerous course of development the MENA countries are following – according to the Berlin Institute’s study – taking a separate route to any other region.

In MENA, More Education Does not Create More Stability

While social modernisation processes resulting from demographic change and better education have produced an economic upturn, job creation and greater political stability elsewhere, these effects are not seen in the MENA countries.

On the contrary. In this region, the rise in the proportion of the better-educated among the population of working age goes hand in hand with a rise in the risk of political instability. In the MENA region, education, which means access to the realm of higher value creation elsewhere, is more likely to cause conflict. Here, as formally, the overall education attainments rose, the degree of political stability declined during the period covered by the study. To date, the region has not succeeded in leveraging the growing human capital for the benefit of society. Instead, an increase in the proportion of better-qualified individuals seems to fuel unrest in the population. The potential of the young people of working age is therefore not being utilised.

One could conclude from these findings that it would be better for the MENA countries to keep the educational level of their inhabitants as low as possible in order not to risk political instability. But education is a human right for good reason. It offers people the basis for informed, self-determined action and gives them the opportunity to make the most of their lives within the existing social framework. Low educational standards also result in high population growth, which in turn makes it more difficult to solve most of the problems in the affected countries.

To allow the MENA region to leave this dangerous development path, they would need to succeed in transforming education from a risk factor into a success factor. To find out how this could be accomplished, it is worth taking a closer look at the current economic and political circumstances in these countries and at the demographic and socioeconomic changes forecast to take place between now and 2030. In its study, the Berlin Institute conducted a cluster analysis to identify two groups of countries that are very similar in terms of these characteristics. The first group comprises 13 on average relatively unstable states, the second comprises six relatively stable ones.

Job Scarcity Causes Growing Problems for MENA States

Today, 86 per cent of MENA inhabitants, namely some 363 million people, live in the relatively unstable countries of Algeria, Egypt, Iran, Iraq, Jordan, Lebanon, Libya, Morocco, Oman, the Palestinian Territories, Syria, Tunisia and Yemen. This proportion is likely to remain stable over the next 15 years, while the total population of these countries is set to grow by 95 million. Educational standards generally are likely to rise. One can also expect large shifts in the different age groups in these countries, with the population as a whole ageing. And as greater numbers of young people attend secondary school or even university, the group of better-educated 20 to 29-year-olds will be growing strongly – in some countries their share in the population is set to increase by almost half.

To ensure that this group can contribute to stability as happens in other countries, the MENA countries must give their young, capable entrants to the labour market the opportunity of using their skills profitably. It is not enough to provide them with simple jobs, because the pay for those is hardly sufficient to make a living. And as most of such jobs are in the informal sector they also do not provide any social security cover. Both these factors represent unfavourable conditions for the start into adult life and are likely to cause great dissatisfaction among the young population.

The unemployment figures illustrate how poor the job opportunities are for young people. In Libya, almost half of those aged 15 to 24 who are officially recognised as job seekers cannot find a job. In the Palestinian Territories, it is 41 per cent, in Tunisia 38. In Egypt, three quarters of all 15 to 29-year-olds work in so-called irregular jobs without the protection of a contract. Half of them would like to change jobs. Over ten per cent of Moroccans in work aged between 15 and 24 are considered to be underemployed, i.e. they would like to work more than is currently possible.

The outlook is particularly dire for young women. They are the most likely to be unemployed and frequently do not even enter the labour market because of family responsibilities. Fewer than 20 per cent of young Syrian women between 25 and 34 work or are seeking work compared to over 90 per cent of the men.

58 million of all MENA inhabitants, representing some 14 per cent, live in countries that are currently reasonably stable politically and likely to remain so according to the forecast demographic and socioeconomic developments. These are mostly oil-rich Gulf States – Bahrain, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates – as well as Israel. Their total population is set to rise to nearly 72 million by 2030. The currently high proportion of young people is likely to decline in these countries, but their absolute numbers will continue to rise. The already relatively high average level of educational standards by comparison with the other MENA countries will probably not rise a great deal.

Considering these facts, it seems likely that these countries will remain politically stable in the foreseeable future. However, another aspect not linked to demography will create problems. The governments in these countries are currently using high profits from the sale of natural resources to subsidise the population without asking for any significant quid pro quo, partly by providing disproportionately remunerated jobs to people in a bloated administrative apparatus. Due to falling oil and gas prices and the envisaged worldwide move away from the use of fossil fuels for energy by 2050, this business model is becoming increasingly questionable. This does not apply to Israel, which stands out among the MENA countries anyway on account of its very high educational standards and level of development. The countries on the Gulf, however, are finding it increasingly difficult to guarantee prosperity and provide job prospects for their growing indigenous populations.

In the past, most activities in the private sector have been performed by people recruited from abroad, not only in construction and road building but also in skills-intensive sectors such as banking and scientific research. The latter areas could represent attractive alternatives to the public sector for local job seekers. But currently, schools and universities are not doing enough to prepare the young people for these jobs, which is why the local population cannot keep pace with global competition.

While things demographically look reasonably good, the group of the currently relatively stable countries is therefore also facing great risks to their political stability. If they don’t quickly find an economic model that will ensure prosperity in the post-fossil-fuel era and create well-paid jobs for the local population, these countries could also become destabilised.

Areas of Action for the MENA States

To achieve greater political stability, the MENA countries would need to be successful in benefiting from their population potential by taking the necessary steps to get the large numbers of people with a good formal qualification into productive jobs – whether they are currently considered stable or unstable.

A UN study from 2011 indicates how difficult it may be to change the current situation. Just to prevent unemployment from rising in the MENA countries outside the Gulf region would have needed over six million new jobs to be created there since 2011. By 2030, over 22 million additional jobs would be required. It would be considerably more difficult if the countries wanted to halve the 2011 unemployment rate (a highly desirable objective) and simultaneously raise women’s labour force participation rate to even the modest level of 35 per cent. This would have required almost 25 million new jobs to be created between 2011 and 2015 alone, and a further 67 million would be needed by 2030. For this to become reality would require investments in the trillions. Many MENA countries are not in a position to raise the necessary funds themselves and have to rely on external assistance. That said, the investments would pay off for all those concerned within and outside the region.

This is because the currently critical situation in many areas could deteriorate further if the MENA countries continue to develop as poorly as they have and leave their growing human capital untapped. This would produce far greater financial, security-related and humanitarian costs. It is therefore important to create appropriate conditions in the MENA region for furthering the creation of jobs for the growing young population of working age. For the reasons mentioned above, the public sector will become less and less capable of playing a role in this. It will therefore be predominantly the private sector that will have to meet the future challenges in this area.

Currently, however, most of the economies within the region are not well equipped to compete in the global markets. The economy of many MENA countries is predominantly pre-industrial in character, with a low level of diversification and low productivity. Outside the Gulf region, agriculture provides around 20 per cent of the jobs, while its contribution to GDP is markedly lower. Because agriculture hardly produces any profit, people working in the sector frequently live below the national poverty line and have no social security cover whatsoever. The situation is equally critical in the services sector. This provides the greatest share of jobs in all the countries. However, most of these are not modern occupations but jobs involving little value creation. Many services are provided by self-employed people with modest incomes working informally as fruit vendors or bicycle couriers, for instance. Or jobs in the bloated administrative apparatus.

To create adequate numbers of paid formal jobs and thereby enhance political stability, changes in three areas are particularly important:

Firstly, there is a need to strengthen entrepreneurship so that the private sector will create paid jobs. Successful and competitive enterprises are usually built on the basis of innovative ideas. Consequently, there is secondly a need to foster young people’s creativity through good education and to prepare them for the requirements of private enterprise. Currently, companies often cannot find the right personnel despite burgeoning numbers of job seekers. This skills shortage is exacerbated by the fact that not many women work despite many of them having achieved a high level of formal education. Thirdly, it is therefore necessary to promote gender equality and to allow women to participate in all processes within society, from work to politics.

Entrepreneurship

Throughout the world, small and medium-sized enterprises (SMEs) are the growth engines of the economy and therefore also of the labour markets. It is the case that in less-developed countries SMEs are frequently micro-businesses with few growth prospects and hardly any employees. But in most countries, around four per cent of start-ups account for roughly half the new jobs created.

The business start-up rate in the MENA region is lower than in any other region of the world except for Sub-Saharan Africa. Added to this is the fact that the proportion of companies planning to expand and significantly increase their workforce in the next few years is also low.

There are different factors at play here. Large numbers of those who are self-employed in the MENA region are so out of necessity. Many of them sell simple goods and services that do not require any particular skills. There is as yet no community of entrepreneurs who, as is the case in Germany’s SME sector, manufacture globally sought-after products, create many jobs and thereby prosperity as well as a broad middle class.

There is a general lack of an entrepreneurial culture in the region and there are too few individuals willing to set up new businesses and take risks. While many young people have started to realise that starting a business is an alternative to employment, they rarely have the courage to take this step – frequently because their own family is against it as parents prefer to see their children employed in the public sector rather than working in the private sector. The work done by the enpact organisation shows how engrained the prejudices are. This NGO brings together young business founders from the MENA region, Austria and Germany in mentoring programs. In some MENA countries, the organisation not only provides assistance to the program participants themselves, but has also introduced parents’ courses to reduce fears and illustrate the benefits of self-employment. The young businesspeople learn from the enpact seminars what they need to pay attention to when planning the realisation of their ideas. Offers of assistance such as this are important because the education systems in the MENA region have hardly been doing anything to prepare young people for going into business for themselves.

The universities in particular make little effort to use their facilities for translating the results of their research into products and successful businesses. There is little collaboration between academia and business. Consequently, it is difficult for industry sectors involving a higher level of value creation to develop. In many MENA states, innovation and technology centers are now being set up to make up for this deficit. In Morocco, for instance, the government designated 14 cities as innovation zones in 2009. The aim was to have 100 start-ups founded per year from 2014 and to increase the number of new patents from the 2013 level of 316 to 1,000 a year.

But to allow an energetic entrepreneurship to develop, the structural conditions must also be improved comprehensively. Even if potential business founders have a promising idea, circumstances often prevent them from realising it. One of the reasons is the so-called wasta, which roughly translates as nepotism. This makes it easier for old-established companies to survive even if their products are hardly competitive. Young companies without the relevant connections find it difficult to obtain building permits, have to pay more for transport, communication, financial services and energy, and are also subjected more frequently to tax audits than their old-established competitors. In addition to these corrupt practices behind the scenes, there are also hurdles put in the way of entrepreneurship by officialdom. This is illustrated by the World Bank’s “Ease of doing business index”, which measures the structural conditions for companies’ existence, ranging from the procedures to register a business to insolvency proceedings. Eight of the 19 MENA countries rank in the lower third of 189 countries, nine in the mid-range, and only two (the United Arab Emirates and Israel) in the upper third.

In most MENA countries, entrepreneurship is also hampered by poor infrastructure. Slow internet connections, poor roads, overloaded power grids and unreliable water supplies are particularly harmful to companies in sectors at the upper end of the value chain. These conditions are not just the result of a lack of investment; they are also shaped by political or even moral considerations. In Iran, for instance, online activities are censored on the orders of the religious leader Ayatollah Khamenei, and worries about increased internet use resulting in the moral corruption of young people hinder the development of a digital economy. Until very recently, the Iranian internet was considered one of the slowest in the world. In opposition to the will of the religious leadership, the current President Rohani has spoken out in favour of greater freedom on the Net and advocated an expansion of the digital infrastructure. Since he took office, the proportion of the population with internet access has at least increased by almost ten percentage points to 39 per cent.

Not least, there is frequently the problem of raising the required starting capital. It is estimated that just 20 per cent of all SMEs in the region have access to loans – it is 40 per cent in Latin America. Many business founders fund their enterprises from savings during the start-up phase or with money borrowed from family or friends. The example of the Palestinian Territories shows how this can be changed. There, private and public funds have been set up in the last few years and there is now a small thriving IT scene developing.

Education

At the beginning of any successful enterprise is a good idea. It takes knowledge and creativity to even develop such an idea. That is why there is a need to improve the educational landscape in the MENA region.

School Education: Not Much beyond Basic Skills

Some MENA countries do not even manage to equip the coming generations with basic skills such as reading, writing and arithmetic. In Morocco, over a third of people ages 20 to 29 have not even completed primary school. Almost 20 per cent of those between the ages of 15 and 24 are illiterate.

Generally speaking, however, primary and secondary education is the norm in most MENA countries. However, teacher training and curricula are inadequate with the result that the majority of MENA countries do very poorly in international comparative tests of educational standards such as TIMSS, PIRLS or Pisa – be it in the area of maths, literacy or problem solving. Israel is the only country that matches the level of the Western industrialised nations. Technical subjects and foreign languages, i.e. precisely the types of skills that would make young adults internationally competitive, are given little space in school education. Religious education, on the other hand, frequently plays a large role. Imparting theoretical knowledge and teacher-centered instruction dominates in the school system, and the pupils do not learn how to work in a team or how to prepare presentations about what they have learned.

Poor Preparation for the Labour Market

In the MENA countries, the type of education aimed at preparing young people for the workplace frequently does not meet employers’ requirements. One reason is that it mostly takes place at universities. The proportion of graduates in the group of 25 to 29-year-olds in Saudi Arabia is 41 per cent, in Jordan 35 per cent and in Lebanon 33 per cent, in each case exceeding the level of 27 per cent in Germany. Vocational qualifications, which represent a recognised alternative to university education in Germany, are considered to be inferior to university degrees in the MENA region. In addition, lecture-based teaching and rote learning rather than the imparting of practical knowledge determines university education. This causes a paradoxical situation. Because the thousands of young people who are released onto the labour market every year have neither the English language skills nor the competence to solve complex problems and work constructively in a team, there is, in fact, a skills shortage. At the same time, huge numbers of young people with good formal qualifications are on the street.

The situation is not just due to the frequently inadequate teaching but also to the students’ choice of subject. While there is a clear shortage of engineers and technicians in the MENA countries, many young people opt for an arts or social sciences degree – areas where there are few jobs in the private sector. The young people themselves hope that it will help them to secure a job in the public sector, but the number of jobs available there is declining all the time. Consequently, subjects that will be relevant in the future should be promoted at school level already to inspire the youngsters at an early age. Iran has shown that this can work. The proportion of prospective scientists and engineers among university students there is now extraordinarily high at 40 per cent. The country has thereby built a valuable foundation that will enable competitive products to be manufactured in skill-intensive areas, although this is still happening far too infrequently.

To equip the young people for the labour market will not only require changes to be made in the teaching at the universities and in the choice of degree subjects. Vocational education programs in particular are deemed to hold great promise; but they are currently very rare in the region. In the Palestinian Territories, for instance, the unemployment rate among the 15 to 29-year-olds with vocational qualifications is markedly lower than that of their peers who went to a standard secondary school or a university. Nonetheless, not even one per cent of pupils at secondary level go to a vocational college. For this to change, acceptance of vocational education programs will need to increase. This is one of the objectives of the work done by the GIZ (a German organisation active in International Cooperation) in the Palestinian Territories. In an interview with the Berlin Institute for Population and Development, the program director, Andreas König, stressed the importance of raising the public image of successful people with a vocational qualification as role models to show others that such qualifications open up great opportunities.

But school graduates are not the only ones who need to be convinced of the benefits of vocational education; the companies themselves must be convinced. However, businesses are frequently not aware of their responsibility for fostering the young talent that may join their workforce, explains Bassant Helmi in the interview for the study conducted by the Berlin Institute. Helmi heads the liaison office of the German-Arab Chamber of Industry and Commerce in Berlin and is the Managing Director of Global Project Partners, an association devoted to professional training in the MENA countries among other things. In all of Egypt, only 40 companies have apparently set up a vocational college. In many cases the companies are not clear about the standards regarding teaching contents, financial instruments and the legal framework. To create those will require political will. In addition, efforts will need to be made to involve numerous relevant actors. To facilitate the setting up of a generally accepted system of vocational education in the Palestinian Territories, GIZ employee Andreas König collaborates with representatives from civil society, vocational colleges, the chambers of commerce as well as businesses. He explains that this creates mutual trust and a feeling that a vocational education system can be beneficial to all sides.

Gender Equality

To combat the skills shortage, there is also a need to make greater efforts to include women in the labour market. These days, the education systems in most MENA countries officially allow women the same freedoms and opportunities as men. In the 20 to 29 age group, there is hardly any difference between the level of education achieved by men and women. In some countries, women even do better than men. During the subsequent course of their lives, however, women are pushed towards the margins of society. Only a fraction of them enter the labour market at all. In countries such as Syria, Jordan, Iraq, Algeria and the Palestinian Territories, far fewer than 20 per cent have a paid job. Women who wish to work are far more likely to be unemployed in the MENA region than men. When they do find work, this is frequently in the informal sector; the y are also paid less than men and rarely rise into leadership positions.,, Instead of leveraging the educational investment in women, many Arab countries fail to realise the potential of their female population willing to work.

The capability to utilise women’s skills could help the economies in the MENA region to prosper. However, going down this road can also cause problems, at least in the short term, because more working women means more competition in an already difficult labour market. If many young women were to succeed in translating their educational achievements into productive work, this could stimulate the economy. But they could also push less qualified men out of the labour market and thereby cause even greater frustration and social conflict among that group. The Iranian government even used this potential correlation as an argument for partly enshrining the discrimination against women in the recruitment for vacancies in law and barred women from 77 degree courses – particularly those with good job prospects. But such measures will, in fact, be more likely to have a negative impact. According to the experience from industrialised countries, increasing the number of women in the workforce drives up productivity within society and creates more jobs than they take over themselves. That in itself is reason enough to promote gender equality in the MENA countries.

Traditional value systems as well as existing legislation are currently working against this imperative. Not only are many women tied to their allotted role in the home, there is also a lack of childcare facilities. In any case, it is frequently the family that makes decisions on whether a woman is permitted to take up an occupation and the field in which she may work. Safety concerns also militate against women working. In some countries, women are not allowed to move around in public without a male accompanying them and will therefore find it difficult to get to a place of work independently. In many places, working in the IT sector or in tourism is not deemed to be appropriate for women. Instead, the occupations open to women are mainly limited to teaching and healthcare services. There are some professions that women are barred from by law. In some MENA countries they cannot become lawyers or work in the banking sector. And hardly any women run their own businesses.

In some respects, women’s circumstances have improved in the MENA countries as well over the last few years. The Arab Spring has resulted in gender equality being declared a constitutional right in Tunisia and in the introduction of a women’s quota of 30 per cent in parliament in Algeria. Even in Saudi Arabia, where discrimination against women could hardly be any greater, a woman has recently been appointed to a position in government, and active and passive suffrage has been extended to women in local elections. That said, the MENA countries are still nowhere near to realising gender equality. From Egypt to the United Arab Emirates, human rights organisations such as Amnesty International and Human Rights Watch publicly denounce the partly inhuman treatment of women. Israel is the only country in the region where women operate on equal terms with men.

Sharing Responsibility, Learning from Each Other

To avoid further political destabilisation, the entire MENA region faces the challenge of providing jobs for a growing and increasingly better-educated population. The work to be done in the three areas of entrepreneurship, education and gender equality is huge and needs to be embarked on as quickly as possible. However, the challenge is not only addressed to the governments, the business world and civil society in the respective countries but also to foreign investors, to NGOs and to International Cooperation.

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Dr. Reiner Klingholz is Director of the Berlin Institute for Population and Development.

Ruth Müller is Head of the Department International Demography at the Berlin Institute for Population and Development.

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