UNEMPLOYMENT IN THE GULF COUNTRIES:
REASONS AND REMEDIES
AL-DHAFIRY, Abdel Wahhab Mohamed
* AbstractIt is important to note that the negative development on the Gulf States' labour market cannot be attributed to differences in the size of the working age population or the participation rates among working age people. Hence, it would be wrong to argue that labour supply has risen so much in the Gulf, no wonder that labour demand could not expand by an equivalent amount. An extreme version of this thinking is reflected in the folly notion of a lump sum of labour which argues that unemployment can only be solved by dividing more equally among workers a given pie of labour demand. This paper aims at contributing to a better understanding of indigenous problems and their impact on aggregate equilibrium unemployment and social welfare. The paper seeks to diagnose the problem in the six GCC states and suggests some method somewhat connected with a scheme for enhancing social welfare whereby to rectify the current situation with policy implications deemed appropriate for the current situation.
JEL classification: O53, J2, J6
Keywords: Unemployment, Labour Market, Gulf Countries
1. Introduction
Over the past two decades, the six Arab Gulf states have, in unison, managed to overcome a variety of problems on the exterior as well as on the interior sides through the establishment of a cooperative council for the Gulf States and through inter-state politico-economic relationships. Eased by similar government
* A.W.M. Al-Dhafiry is Assistant Professor and Assistant Dean, College of Social Science, Kuwait University, e-mail [email protected]
systems as well as similar socio-economic -political systems, the kind of cooperation meted out between the Gulf States has accrued, bringing developmental burgeoning into the region. However, there are some internal and external perils the Gulf Cooperation Council have yet to confront and are related to unemployment in the six countries constituting the Gulf Cooperation Council and the incoming manpower from the outer world. Unemployment has ratcheted upwards over the last three decades in the Gulf Cooperation Council (GCC) states.
But unemployment is considered an international problem challenging the developing as well as the developed world alike, though there may be some differences in the way the problem looks or is taken into consideration for its severity and consecutive treatment (Vroman, 1999). Reports issued by regional and international organizations related to labour and manpower have emphasized the fact that there is a wide hiatus between the Arab world and the developed world in the way the problem of unemployment is considered (The Arab Labour organization, 2000).
This study aims at recognizing the status quo of unemployment in the GCC, therefore identifying the volume of the problem and factors inducing it in an attempt to lay out a scheme for remediating the problem from a social welfare perspective.
Therefore, this study seeks to achieve the following objectives:
1) Describing the size and features of the problem of unemployment in the GCC in general and in Kuwait in particular through extensive review of the literature, national and regional census and surveys.
2) Describing the role and contributions of social welfare legislatures and institutions in lessening the negative side effects of unemployment in Kuwait.
3) Laying out a scheme based on national welfare for solving the problem of unemployment for the GCC in general and for Kuwait in particular.
Being descriptive in format, this study relies on government reports, reports from the Arab Labour Organization and reports and surveys from International Labour Organization as well as documents available on the topic and pertaining to the GCC.
2. A crisis of unemployment in the Arab countries
The Arab world suffers from a real crisis of unemployment;
it is observed that the Arab manpower grows at a rate of 3% per year, an incremental increase that requires similar incremental job opportunities for more than 3,000,000 job opportunities since the year 2000, gigantically increasing to reach 4,000,000 jobs needed by the end of the current decade for 89,000,000 Arabs in the working age, out of whom are 12,500,000 totally jobless and 22,000,000 partially unemployed, Kweider (1999).
Amongst these figures come prominently the workers in their youth. According to the Arab labour organization, the percentage of unemployed young people reached 96% in Bahrain, 84% in Kuwait, two thirds of young populations in Egypt, Jordan, Algeria, and 40%
of them in Tunisia and Morocco. Arab governments incur a loss of US$ 115, 000, 000, 0 annually due to the escalating unemployment problem. The problem is hotter in the Arab Gulf region, especially with immigrant Arabs who fled to the Gulf in quest of job opportunities, but found themselves prey to covetous work agents in the Arab Gulf states.
Experts indicate that even with the expected growth in employment, the growth rates will not be adequate enough to absorb the unemployment rates ever growing because of a weakling Arab economy. According to the statistics of the Arab labour Organization, the calculated number of unemployed people in 17 Arab countries was 8.257 million inhabitants in 1997, with 30% unemployed people in the other four Arab countries so as the final number of jobless Arabs amount to 11.69 millions in the 1997 census.
Recent census in 2000 indicated that the number has risen to 16.4 millions with a percentage of 15.7% of the total population of manpower. What adds insult to injury is that the major portion of unemployed men fall in the category of able young people of the age category (15-24), where only in Algeria and Morocco, the rate has risen to the unexpected figure of 38% of the jobless, while in Egypt, it reached 34.8%, and in Bahrain and Syria, it reached more than 60% of the working age categories.
The reasons for a rising unemployment rate in the Arab world in general and in the Gulf region in particular goes back to two sets of reasons: that have to do with supply and demand. The most important factors that have to do with the labour market demand are economic restructuring, reform, privatization, and divestiture. These reasons have brought about reduced public expenditure and shrunk job opportunities, lower investiture, and wan economic growth rates.
Other factors to do with the supply set of reasons are weak, backward educational systems and training, and that the study programs are not up to date to keep up with the new demands of the labour market. Interaction with changes in the economic environment is a plausible candidate for explaining rising unemployment. This is in fact the gist of a number of recent papers.
3. Unemployment and Education in the GCC countries
There is widespread evidence that the new economy of the twenty-first century, which has globalization and great technological advancement as its hallmarks, is characterized by greater variability and heterogeneity as well as more rapid change so that more institutional flexibility is called for. This creates great economic opportunities for countries with an appropriately flexible institutional environment which do not artificially try to preserve obsolete economic activities and foster in all respects the creation of new modes of production, such as via featuring sufficiently large incentives to invest in skills in response to skill-biased technological change or in new firms in response to structural change.
However, the whole institutional setting in the Gulf is geared to preserving the status quo and to fostering stability, long-term relationships and an egalitarian income distribution thus impeding the Gulf States from responding flexibly and quickly to these challenges and from making full use of the opportunities created by the new economic environment. There appears to be too much "social insurance" and too little reward for entrepreneurial risk taking in the Gulf thus stifling economic creativity and opportunities for growth.
One more reason has to do with the gap between educational systems outputs and the demands of the labour market. Despite the fact that Gulf States educational systems have achieved high quality educational outputs, the educational systems of such countries have yet more of challenges that negatively impact the hiatus between labour market needs and graduates. Prominent amongst the problems come forth the low performance and efficiency of schools and underdeveloped basic skills.
Like in many other countries, unemployment in GCC countries is also very much and increasingly concentrated among people with little or no formal qualification for the labor market pointing to rising qualificational mismatch. The main dividing line in GCC still appears to be the education system meaning that the probability of being unemployed or of ending up in long-term unemployment is much lower if someone has successfully finished a formal education. Roughly fifty percent of the long-term unemployed have no such formal qualification via the education system.
However, even people who do have such a qualification are getting into greater trouble concerning their employment prospects.
In the 1960s, Arab countries began reconstructing their education systems and other cultural aspects of their societies. They have “invested heavily in education, transforming it from a privilege into a right. As a result, most Middle East and North Africa (MENA) countries are now approaching universal primary school enrollment;
the major exceptions are Morocco, Saudi Arabia, and Yemen, where
access to primary schools remains problematic, especially for girls”
(Eeghen, 2000).
The substantial commitment to education of national governments in this region is reflected in their levels of spending on education, which now average 4% of the gross domestic product (GDP) and 15% of total government spending. These levels of spending are somewhat above those of comparable developing countries and are on a par with those of high-performing Asian economies. In some important respect, this investment has paid off (Eeghen, 2000).
Arab countries of different levels of development also have different sources of funding for education. These economic differences among Arab countries reflect the funding of educational reforms in the region. In Qatar and Saudi Arabia, educational reforms are nationally and regionally financed; that is, they rely on the national governments’ MOEs or on the Arab Bureau of Education for the Gulf States (ABEGS). In the non-Gulf countries, such as Egypt, Lebanon, Algeria, Morocco, Yemen, and Jordan, the national governments’ MOEs and the World Bank support the funding of educational reforms.
The governments of MENA countries have traditionally acted as key players in their economies, investing directly in their industrial capacity and financial institutions. Between 1970 and 1990, petroleum revenues permitted many governments (especially those of Gulf countries) in the region to maintain very high levels of public expenditures in education relative to other low- and middle- income countries.
In the 1990s, however, fiscal constraints, changes in the economic philosophy of governments, and increasing globalization caused a shift in the MENA region toward a relatively greater reliance on the private sector to promote growth, generate employment, and improve standards of living. As the private sector expands, the role of the state is changing from that of a key player
towards a more indirect role, which of facilitating the development of competitive private markets (World Bank Group, 2000).
4. An Overview of the reasons for Unemployment in the GCC and the Arab Region
Besides the great diversity of regional economies across the entire region, there are, however, several longstanding issues which will continue to influence all of the GCC economies in the near term:
1) Oil dependence: Most countries in the region remain particularly vulnerable to adverse developments in the international oil market. Until the oil-producing states diversify their exports, their economic stability can only be uncertain. In addition, the economies of non-oil producing countries (or the minor producers), particularly Egypt, Jordan, Lebanon, Yemen, and Syria are also affected by this dependence because a large share of their foreign exchange earnings are derived from the GCC countries in the form of workers' remittances.
2) The continuing worldwide oil glut: The third Gulf War has caused great fluctuations in oil prices.
3) Centralized economies: In most cases, these inefficient centralized economies are sustained only by oil revenues.
4) Overspending: Many countries in the region have fallen into the trap of importing too much and running up high debts. This is soaking up funds that would have otherwise gone to investment by the private sector.
5) Massive subsidizations: Governments continue to heavily subsidize key sectors of the economy, draining revenues and distorting the market.
6) Poor education levels: The low level of education in many Middle Eastern countries continues to hinder the industrialization of their economies.
As well, the economic environment appears to have become more volatile over the eighties and nineties with an increasing likelihood of firm-specific shocks. This is also reflected in the well- documented fact of a rising instability of workers' earnings and a falling ability of firms to offer their employees lifetime employment.
And labour market institutions which conflic t with this greater microeconomic turbulence give rise to increasing unemployment.
In addition, the nineties and last decade of the 20th century witnessed the arrival of the so-called new economy which many observers classify based on the IT revolution, the internet and the rising importance of such sectors as biotechnology, telecommunication and knowledge-based industries in general.
The new economy not only reinforced the trend toward greater economic turbulence but it also further raised the importance of human capital in a broad sense including especially verbal, cognitive and communication skills, proficiency in working with computers as well as versatility in performing different tasks and in working in teams. Interestingly, soft skills which are harder to prove via certificates gained in weight relative to hard skills thus producing a potential conflict with labor market institutions which enforce wage equality across individuals belonging to certain categories based on certificates and tenure.
In a nutshell, this is an era of creative destruction with greater risks but also potentially larger returns, destroying the old ways of producing and trading but also creating vast new opportunities for entrepreneurial success. Hallmark features of this new economy are heterogeneity, diversity, variability and the importance of risk taking.
This new economy raises the costs in terms of output and employment losses of excessive systems of social insurance and of
clinging to the status quo. Hence, the whole institutional setting, including labor market institutions, must promote entrepreneurial risk taking and economic change in order to not clash with the challenges created by the new economy.
5. The Features of Unemployment in the GCC countries 1) Unemployment in the United Arab Emirate:
The United Arab Emirates is like the rest of the GCC states where there lacks an official census to calculate the umber of unemployed men and unemployment rates. However, some studies have assessed the rate of unemployment in the UAE as reaching 1.8%. according to reports by the Minister of Labour and Social affairs, more than 100.000 UAE citizens who are qualified for work will be unemployed by the year 2005. From another perspective, there exist more than 1.250 million job opportunities in the UAE (170.000 of which are in the local Municipities and government- related, and 80.000 are in the federal constituencies). These jobs need to be replaced by indigenous work force.
A study by the UAE Centre for Strategic Studie s and Research reported that unemployment is becoming a tangible problem with the increasing numbers of graduates from the public and private universities and HEIs and who are high quality qualified.
Indicative of the problem of unemployment in the UAE is that 9.000 graduates in the year 2000 have graduated from universities in the state, but 32.6% only has been employed, a meager percentage of the total graduate population.
The reasons for unemployment in the UAE are similar to those in the other GCC states—a socio-cultural background that staves off the citizen from participating in menial labour on the assumption that these manual jobs are inferior. This way of thinking opened the door wide open before Asian labour to invade the country. Also, the lack of coordination between HEIs and other
training institutions and the productive and labour sectors worsen the problem.
Another problem which is eccentrically esoteric to the UAE problem of unemployment is the widespread of unemployment in the expatriate work force present in the UAE. The problem is double - edged perilously impacting unemployment in the UAE. Research indicates that the problem of unemployment in the United Arab Emirates is not that of a lack of job opportunities more than the lack of a national labour policy for employment. Experts refer the problem to lack of strategic planning and a national vision for the future in the light of which the problem could further be tackled.
Other studies expect that the problem could further escalate so that national labour may shrink to 8.3% in the UK by 2015 (Badrel-Din, 2003; the UAE Centre for Strategic Studies and Research, 2003).
2) Unemployment in Bahrain
In the mid-1995's, Bahrain has witnessed an increasing quest for employment amongst job seekers from national citizens. The number of job seekers in Bahrain has been estimated in 1997 as 5300 citizens rising to 6800 in 1998 , then 7200 in 1999 and 9600 in April 2001. Currently, the number of the unemployed in Bahrain has reached 17402 constituting 13.7% of the labour force in this country.
The number has increased given the fact that women are under- represented in the national work force in Bahrain so that they represent 300% of the unemployed according to reports by the minister of labour in Bahrain.
The problem has been prominently expressed in Bahrain when the Bahraini Unemployed youths have protested in marches before the Diwan of Civil Service and the Ministry of Labour and Social Affairs three times in January 2002. In response to protests, the government of Bahrain has allocated US$ 66.000.000 for providing training opportunities for the jobless and for giving them unemployment aids as well as employment programmes. Under the unemployment aids programme, citizens were given US$ 265 for
married citizens, and US$ 185.5 for singles. In addition, 200 job opportunities are announced every year as guards for schools and Ministry of Education administrative buildings. The ad hoc committee branching of the Bahraini cabinet has studied programmes for providing 7.000 job opportunities annually.
This has been planned to be implemented by an ad hoc commission for the employment of Bahraini nationals. The program started in 2001, and is also planning to cover school graduates and school dropouts, with providing 400 jobs per year.
The pressures of unemployment have brought anew the enactment of the minimum wage law for controlling the labour market in Bahrain. It is worth noting that the Minimum Wage Act is an old law first introduced in 1965 by the minister of Finance. In 1983, the minimum wage for a national Bahraini was 150 BD and 60 BD for non-nationals.
3) Unemployment in Saudi Arabia
Statistics indicate that the aggregate total of jobless Saudis is estimated around 337.330 in 1999 with a percentage of 12% of the labour force (The American Saudi Bank, 1999). The number is expected to reach 14% to 15% in 2000 and 2001.
Over 100,000 foreigners, mostly Asians, who were violating residence laws in Saudi Arabia have left that country in the past four months. Employers were warned that if they illegally employed foreign workers they would be subject to a $13 fine and/or three months imprisonment. Workers violating the residency laws face two years imprisonment and/or a $26,000 fine. In November 1994, the Saudi government allowed those workers without legal residence or work permits to leave the kingdom without penalty. There are over four million foreign in Saudi Arabia.
Unemployment in Saudi Arabia is classified as structural, because there exist many jobs but these lack in trained labour to fill
in the vacant situations. Tackling unemployment in Saudi Arabia requires special attention. Most of the population fall in the age category below 25 years of age; this is worsened by the fact that 38%
of Saudis were born after 1990, and this will worsen the problem for the years to come.
Saudi Arabia is moving in different directions to solve the problem of unemployment. For training and education, the kingdom is exerting efforts to enhance the educational system and the training opportunities for nationals. In this line, a memorandum of understanding has been ratified between the public Association for Technical Education, the Human Resources Fund, and the Industrial/
commercial Chambers in Riyadh to establish a project for national training for the unemployed youth.
The Human Resources Fund contributes 75% of the rewards for trainees while the training institutions provide the 25%- an amount that is estimated around 1000 Rials for the trainee monthly during training for two years. Institutionally, there are many bodies interested in employment in Saudi Arabia, prominent amongst which is the Labour Force Council off the Ministry of Labour and Social Affairs. It is a body concerned with the study of educational and training needs of the labour force, development of human ware and the study of sully and demand in the labour market.
And it is also interested in laying out employment policies and implementing these policies in collaboration with the ministries concerned. In addition, the Human resources Development Fund plays a major role in tackling the problem of unemployment; this fund owns a capital assessed at US$ 160.000.000. It is expected that the fund will contribute towards launching employment projects that aim at Saudization of the labour market in the kingdom.
At the level of policies and strategic planning, the kingdom has endorsed the seventh development plan ratified by the Saudi Cabinet in August 2000 which aims at providing 81.730 job opportunities in the five year period from 2000-2005 through
replacement. The plan seeks to increase Saudi labour from 44.2% in 1999 to 53.2% in 2004. The replacement and Saudization programme aims at reducing expatriate labour force at an annual rate of 2.52%.
4) Unemployment in Oman
As in other GCC states, rigid statistics of unemployment are absent. However, according to research, the Omani policies for tackling unemployment in the Sultanate remains the most successful and effective ever in the GCC. The policy of sharing the emoluments of employees 50% percent with private sector for two years encourages a safer treatment of the problem of unemployment in Oman.
At the level of policies and implementation, the Ministry of Economy has enacted a decision whereby to Omanize labour market in national and government-based enterprises and businesses; this is to be done through national tendering which are only to be granted the businesses that hire Omanis. Oman's Sultan Qaboos has criticized Omanis for boycotting jobs in several sectors because of low wages.
He also charged that the private sector prefers to employ low-paid foreigners. He reported that 30,000 Omanis were jobless, even though there are 535,000 foreign workers.
5) Unemployment in Kuwait
Kuwaiti economists warned in February 1995 that there will be social unrest in the Gulf States unless more jobs are created for local youth and there is less reliance on foreign workers. The population of the Gulf Cooperation Council (GCC) states of Saudi Arabia, Bahrain, the United Arab Emirates, Oman, Qatar and Kuwait is expected to increase from 25 million in 1995 to 39 million in 2010.
Foreign workers comprise 90 percent of the UAE labor force, 83 percent in Qatar, 82 percent in Kuwait, 69 percent in Saudi Arabia, and 60 percent in Bahrain.
The rapid growth of the Kuwaiti economy has led to the creation of a vast number of work opportunities. The state's generous expenditure on social services has originated a greater demand on manpower- a demand which the native population has not been able to satisfy (Annual Statistical Abstract, 2001). Table 1 sums up the employment situation in Kuwait.
Table 1. Census of Workforce in Kuwait, 2001 Employment
Status & Sex 2001 2000 1999
Non- Kuwaiti
Kuwaiti Non- Kuwaiti
Kuwaiti Non- Kuwaiti
Kuwaiti
M 759.359 151.314 769.528 146.203 809.339 140.871 F 209.601 84.443 203.180 78.976 214.294 74.614 Employed
T 968.960 235.757 972.708 225.179 1.023.628 215.485
M 5.748 1.836 5.694 1.773 5.641 1.623
F 1.253 627 1.260 578 1.189 468
Unemployed
T 7.001 2.463 6.954 2.351 6.830 2.091
M 765.107 153.150 775.222 147.976 814.975 142.494 F 210.854 85.070 204.440 79.554 215.483 75.082 Labour
Force
T 975.961 238.220 979.662 227.530 1.030.458 217.576
M 43.719 73.068 45.056 70.105 50.254 68.170
F 140.449 171.493 141.934 165.824 150.361 159.490 Not in
Labour
Force T 184.218 244.561 186.990 235.929 200.615 227.660
M 14.206 11.936 11.858 10.318 7.987 8.811
F 3 0 3 2 - -
Not- Stated
T 14.209 11.936 11.861 10.320 7.986 8.811
M 823.032 238.154 832.136 228.399 873.216 219.475 F 530.356 256.563 346.377 245.380 365.844 234.572 Manpower
T 1.174.388 494.717 1.178.513 473.779 1.239.060 454.047 M 109.604 183.819 114.850 179.472 121.517 175.024 F 103.755 176.797 108.917 172.832 114.986 169.085 Not in
Manpower
T 213.359 360.616 223.767 352.304 236.503 344.109 M 932.636 421.973 946.986 406.871 994.733 394.499 F 455.111 433.360 455.294 418.212 480.830 403.657 Total
Population
T 1.387.747 855.333 1.402.280 826.083 1.475.563 798.156
Kuwait, therefore, has eased its visa regulations for foreigners who want to transfer from one employer to another. The foreign workers can be charged up to the cost of a round trip airfare to their country of origin, making the cost of changing employers higher for Asian than for Arab workers. Under new rules, Kuwaiti employers using foreign workers on government contracts must provide them suitable housing. Kuwait's imported work force makes up more than 55 percent of the country's total population of 1.6 million. There are about 180,000 Egyptians in Kuwait, followed by Indians, Bangladeshis and Sri Lankans.
6. An Overall Evaluation of the Problem of Unemployment in the GCC
The current climate of deepening socio-economic crisis in the region gives unemployment a sinister makeup. Insofar as it affects especially the poor, and often educated, youth in a context marked by initially low levels of social welfare, virtually no unemployment compensation and worsening distribution of income, wealth and power, unemployment is bound to have far-reaching social and political consequences. Like in other countries, unemployment jumped upwards with each negative shock like the two oil price shocks or changes in monetary policy towards a more restrictive, anti-inflationary course, as well as other economic -social reforms that have affected the crisis of unemployment.
The challenge of job creation is bound to become even more serious with time. If we add to the present pool of the openly unemployed future labour market entrants at a modest annual growth rate of 2-3 percent of the labour force, the huge level of required job creation poses an awesome challenge for Arab economies, especially against the backdrop of stagnant growth.
By 2010, jobs will have to be created for more than 40 million new entrants into the work force. If the current rates of unemployment persist, the size of unemployment would almost double by then, to about 25 million. If unemployment is to be
reduced to a manageable level by the year 2010, a minimum of five million jobs will have to be created every year. Further, if the recent trends in productivity and real wages persist, the spectre of even deeper underemployment and more massive poverty is sure to haunt the region in the near future.
Institutions beyond the labor market such as those on the goods and the capital market and their interaction with the changing economic environment are also considered. It is too simple to argue that persistently high unemployment in the GCC states is due to the fact that labor costs are too high, real wages too rigid and the wage structure too compressed. Although all three factors are of course crucial, these are transmission mechanisms rather than the actual causes of the ongoing economic malaise of the GCC states. The actual causes must be found in the complex web of institutions which have made the GCC economy sclerotic and which are not appropriate for creating employment opportunities for less qualified workers and for coping with the challenges created by the new economic environment thus giving rise to the slow economic performance of the GCC states.
Only an encompassing and bold set of institutional reforms including not only the labor market, but also the goods and the capital market can enable GCC countries to overcome its persistent unemployment problem and to meet successfully the challenges posed by the onset of the new economy. Such a broad package of structural reforms is the only way for GCC states to get rid of its current position as being among the most sclerotic Arab countries which is reflected in its dismal record concerning especially economic and employment growth. However, complacency and political inertia are very high in GCC countries making determined institutional reforms, which would hurt large part of the electorate in the short run, a risky undertaking.
There are three basic axes to a full employment policy package that have to be adopted, in an integrated fashion, and led, by the Arab states so as to tackle the problem of unemployment whether
structural or disguised in the GCC states from a social welfare perspective:
1) Monitoring of employment and poverty
1.a) Effective safety nets: The social safety net systems in place in Arab countries are evidently lacking in coverage and effectiveness.
Two requirements of effective safety nets are clear: safety net schemes should provide for income transfers sufficient to guarantee a minimum of decent human existence to all in need, and be indexed to inflation. These systems should provide, in particular, for adequate unemployment compensation.
1.b) Poor-enabling, employment-creating, development: Working towards full employment has to be anchored in a pro-poor process of development that generates labour-intensive growth providing for productive and gainful employment opportunities for all individuals available for work.
1.c) Accumulation of human capital. Education and training: A full- employment development policy should have the objective of universalizing high quality, development relevant, basic education while ensuring that the poor are not excluded on account of poverty.
In some cases this means going beyond truly free education.
For the poorest of the poor, some form of affirmative action in the form of scholarships that provide for the direct and opportunity cost of education, will be necessary. Children of poor background should not be excluded from higher stages of education on account of material means. New job creation should be expanded based on growth in investment, a labour intensive growth structure, and employment-intensive technology.
Enhancing productivity requires, in addition to improving human capital accumulation, instituting a favourable social incentive system with positive rewards to education and high productivity.
Moreover, a synergistic technological duality should be established,
which entails raising the productivity of labour-intensive technologie s in Small home-based businesses, strengthening modern technologies, and reinforcing the linkages between the two types of technologies.
Special consideration should be given to the gainful employment of women.
1.d) Support for Small home-based businesses: Development of informal-small enterprise can contribute effectively to the strategic path of poverty eradication through employment generation.
Informal-small enterprise is labour-intensive and capital-light- conditions that are perfectly suited to the national economies accommodating the vast majority of Arabs. Surely, however, its productivity needs to be enhanced.
The effort needed to revitalize informal-small enterprise should amount to a (serious) national campaign. Public policy formulation and implementation should take into consideration the multifarious nature of informal economic activity as well as current constraints to its development. Unemployment and poverty are increasingly acquiring a rural character in Arab countries.
In stimulating development within the agricultural sector, a key role for the government will centre on improving rural infrastructure and farm to market linkages. Little of this potential can be captured without a rationalization of irrigation systems. Extension services must be improved.
There is also need to develop off farm employment opportunities for the land-poor and landless through industrial decentralization, micro-enterprises and through public works. Being an important mainstay of agricultural communities, women should figure prominently in the design and implementation of rural development policies and programmes.
1.e) Institutional reform: Competitive markets: Competitive market mechanisms need to be reinforced. This calls for more government
action to regulate markets in order to ensure competitiveness through free access to information and markets. This is the fundamental guarantee of efficiency and minimization of the harmful social impact of “savage capitalism”.
2) Development of civil society: Civil society institutions provide a window of opportunity for a significant contribution to the job creation and eradication of poverty. However, for this potential to materialize, civil society institutions need to develop into a social movement that is broader based, and hopefully more efficient, than the state. The purpose is not to replace the state, or even absolve it from its basic responsibility. Rather, the objective is to complement the faltering state. The ultimate value of such a movement lies in fostering collective social action, the surest way of overcoming powerlessness: the core of poverty. Governance reform: Governance is the critical link in the persistence and reproduction of unemployment and poverty. The poor are, by definition, powerless.
As indicated before, they lack all forms of conventional capital, physical, financial and human. But, above all, they have no voice in the affairs of societies ruled over by unrepresentative and unaccountable governments. The powerlessness of the poor is in addition being exacerbated by savage capitalism unleashed through unregulated “capitalist restructuring” for markets invariably favour the rich and penalize the poor. The reform list in this domain is daunting. Laws, and administrative procedures, need to be reformed to guarantee the rights of citizenship and consistency with basic human rights, particularly the rights of free expression and organization, for all citizens
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