Creating employment remains the challenge

A Tunisian's self-immolation in December set off a cascade of uprisings, all motivated in large measure by the disappointments and angst of a generation.

The week-long protests in Tunisia that toppled president Zine el Abidine Ben Ali from power was sparked by Mohamed Bouazizi.

What has been the salient factor in uprisings in the region? Authoritarian rule and a lack of accountability have clearly been uniting factors, as has the unchecked economic predation of political elites.

Yet, taken either separately or together, none seems a sufficient cause. Syria, for example, is marked by Freedom House and Transparency International as being both less free and less transparent than Tunisia or Egypt; yet Damascus has thus far remained relatively calm. The event that proved the unlikely starting point for the protests was the self-immolation of a 26-year-old Tunisian, Mohamed Bouazizi, last December.

Mr Bouazizi, as you may recall, was driven to selling fruits and vegetables in order to support his family. He was provoked to his desperate act when police confiscated his stall on the grounds that he was selling without a permit.

Why did Mr Bouazizi's act strike such a chord? Perhaps because, as commentators such as Olivier Roy have noted, Mr Bouazizi's act was not driven by any extreme ideological or religious fervour.

Rather, it was the act of an individual who had been first degraded and then crushed by the structural conditions of Tunisia's economy. He was denied even the ability to subsist on the only course available to him - selling fruits and vegetables.

To understand Mr Bouazizi's individual angst is to understand the angst of many young Arabs. Though few will have experienced a story quite so wretched as his, there are nonetheless hundreds of thousands, if not millions, who saw something of their own story in his.

What, precisely, has happened in the Mena region? First, it should be noted that the phenomenon to be related is by no means unique to the Arab world, although it is perhaps being felt most keenly there.

As the recent World Economic Forum meeting at Davos concluded, the most urgent challenge facing the leaders of the global economy now is reducing unemployment and - equally poisonous - underemployment, particularly among the young.

Indeed, the Organisation for Economic Co-operation and Development last July called for urgent measures to address youth unemployment among its member states, with seven countries (among them Denmark, Finland, Italy and Norway) registering unemployment in the 18-24 age category that was four times higher than their national averages.

It is clear that the recent financial crisis has had a global effect on job creation and that it is a particularly difficult time to be young and looking for work.

Nonetheless, in the midst of this global challenge, large parts of the Arab world share particular problems: structural challenges that are the direct inheritance of a common mode of development followed by many Mena countries in the 1950s, '60s and '70s.

Specifically, the import substitution model, whereby the state played the key role in determining the form and content of fixed capital investments, has endowed many Arab countries with a dysfunctional allocation of industrial capacity, and a skilled workforce specialising in dead-end, uncompetitive sectors.

Many efforts have been made in the past three and a half decades to overcome this legacy, beginning of course with the "infitah" policy of economic opening pursued by the former Egyptian president Anwar Sadat.

During this period, almost every Arab nation either implicitly or explicitly accepted the need to switch from import substitution to export promotion as an economic development model - a move that essentially involves accepting that integration into global markets is the only way of achieving sustained growth, and which implies the steady reduction of tariffs and improvement in business environment legislation to achieve that end.

Unfortunately, recognising the correct path and following it are entirely different things. One of the most problematic inheritances of the import substitution model is the system of vested interests that it creates in uncompetitive sectors, not to mention the drag effect these interests place on sectors that could well be competitive if properly restructured.

Moreover, the legacy of state ownership of major monopolies (specifically utilities such as energy and telecommunications) means that when these sectors came to be privatised, it was the political elites who tended to be in the best position to benefit.

What is most interesting though is that the countries that have made the least progress towards the so-called "Washington consensus" of economic liberalisation are those that seem to be experiencing the least unrest. A country such as Syria, where reforms have been haphazard and vested interests in many sectors still predominate, has experienced relatively little protest.

Rather, it is those countries that most impressed outside observers such as the World Bank and the IMF that have experienced revolt and revolution. Tunisia was the first Arab country to officially enter a free-trade agreement with the EU, while Egypt has been one of the top reformers in the World Bank's "Doing Business" report for four of the past seven years.

Arguably, what linked Tunisia and Egypt was an expectation among government reformers that once those economies had been liberalised, markets would prove sufficient of themselves to create the necessary jobs to employ their growing cadres of educated youths. They were wrong. Youth unemployment in Tunisia is unofficially estimated at about 30 per cent, while in Egypt it is thought to be 25 per cent.

At the same time as these young bread-winners have been unemployed or underemployed, they have also been hit hardest by the subsidy reductions that form the other pillar of market liberalisation. Much greater attention will need to be paid to creating opportunities for skilled work for young people.

How this will be achieved, however, remains an open question. Indeed, one need only look at the vast resources being poured into this endeavour by oil-rich countries such as Saudi Arabia to realise there are no short cuts.

Rather, interested partners such as the EU and the US must work arm in arm with governments in the region to develop policies that can address this key issue. For millions like Mohamed Bouazizi, failure is no longer an option.

Oliver Cornock is the regional editor of the Oxford Business Group