Economic forum confronts big issue of jobs in Arab world

Everyone at this year's World Economic Forum (WEF) meeting in Jordan agreed on one thing: creating jobs, 25 million of them.

Klaus Schwab, the founder of the World Economic Forum, speaks at the King Hussein Dead Sea Convention Centre in Jordan.

Everyone at this year's World Economic Forum (WEF) meeting in Jordan agreed on one thing: creating jobs. Economists at the WEF say the Arab world needs 25 million new jobs during the next decade just to keep employment at current levels.

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Others put the figure far higher. Whatever the real number, there's consensus that the region must generate tens of millions of new jobs in the coming years to occupy the fast-growing young population.

Where people disagree is how to create them, particularly in the private sector. Here are three influential ideas that emerged at the WEF.

Laissez-faire

This idea maybe be 250 years old, but many of today's leading thinkers in the region believe it can deliver. Laissez-faire (French for "allow to do") involves governments taking a back seat. There's no weighty strategy document with a grand title. Government just puts in place a broadly business-friendly set of laws, and dynamic capitalists take care of the rest.

The great free-market economist Adam Smith laid down the ground rules for laissez-faire capitalism in his 1776 classic The Wealth of Nations: "Little else is required to carry a state to the highest degree of affluence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things."

Abdul Aziz Al Ghurair, the chief executive of the Dubai-based bank Mashreq, put it succinctly: "For us to create these jobs, we have to liberate the economy."

The Arab World Competitiveness Report, released this weekend, highlighted three barriers that are stifling the process: corruption; a lack of transparency; and trade barriers. Remove these, and the region is well on the way to creating "gainful and sustainable employment for the population," said Børge Brende, the managing director at the WEF.

Government salaries

Rising government salaries are crowding out the private sector, distorting the labour market and making it hard for companies to recruit. That was the message from Simon Cooper, the chief executive of HSBC Middle East and North Africa, one of the largest international banks in the region with 12,000 staff: "It is increasingly difficult for people like ourselves, and for many of our clients."

Mr Cooper said the issue is particularly testing when it comes to hiring Gulf nationals.

"It's common sense from a business perspective to seek to recruit the best talent in the market, and many of these markets offer superb talent among local nationals," he said.

But the salaries and benefits offered by governments are so high that private-sector employers struggle to compete in hiring.

Some politicians have suggested that governments pay a subsidy to companies to bridge the gap. Mr Cooper argues that private sector employers don't want subsidies, just a level playing field. "What I want is a free labour market between the two," he said.

Micro entrepreneurs

Klaus Schwab, the founder of the WEF, took a different view. He argued that talk of creating so many millions of jobs misses the point. The global economy is changing structurally, and gains in productivity mean the new order will not create sufficient numbers of conventional jobs. The tradition of people signing long-term contracts to supply their labour at a fixed rate to one employer is fading.

Micro entrepreneurs will take up the slack, said Mr Schwab, especially in the Arab world. Micro entrepreneurs - in many ways a fancy word for freelancers - need two things. Skills that are useful and relevant, which requires a new type of education, and flexibility, which requires a new mindset.

Richard Dean hosts Tonight on Dubai Eye 103.8 FM and is the author of Sink or Swim? How to Stay Afloat in Tough Economic Times: Business Lessons from the UAE