النهار

"Political economy, considered as a branch of the science of a statesman or legislator, proposes two distinct objects: first, to provide a plentiful revenue or subsistence for the people, or more properly to enable them to provide such a revenue or subsistence for themselves; and secondly, to supply the state or commonwealth with a revenue sufficient for the public services." - Adam Smith. This definition, unfortunately, does not apply to the Arab region since the several shapes of economies are not in the advantage of people’s welfare, yet! One form of economic deficiency is the chronic youth unemployment.

Youth unemployment is a chronic problem displayed in the entire Arab region. For instance, unemployment rate in 2022 reached 29.6 % in Lebanon (ILO, 2022), and 12% in Iraq (Trading Economics, 2022), where it was 6.6 % in Europe (European commission, 2022) and 3.7% in USA (Bureau of Labor statistics, 2022). However, to conclude reforms and policy, this problem should be studied from it’s roots.

One cause of youth unemployment is the bundle of Arab laws of minimum wages. Taking Saudi Arabia as an example, in 2014, the minimum wage was SAR5,300 for Saudis and SAR2,500 for expatriates (Expatica, 2023; Al Arabiya, 2014). This explains why foreign employees constitute 85% of the Saudi private sector (Saudi ministry of Labor, 2014). In such conditions, the employer prefers to hire a foreigner rather than a local citizen to decrease costs. On the other hand, local employees stop applying to certain working position such as house maids, since the salary is lower than the minimum wage, while the foreigner accepts it. This example applies to many other Arab countries such as Lebanon, Emirates, and others.

Moreover, another common root between Arab countries, is the privilege given to firms that are politically connected in a way or another. Such connections were observed to create employment in Lebanon, where small firms that were subsidized by government, failed to remain in their industry, and closed in many cases. On the other hand, big firms, which are by most politically connected were scaling-up, expanding, and thus creating more employment (Harvard University & LCPS, 2020). However, if seen on the long-term, we can deduce that such connections create a lack or deficiency in market competition, thus, although such corporations are creating employment in the short-term, they are depriving the market of many employments on the long term. This case can also be seen in the GCC countries, Syria, Iraq, Morocco, Egypt, and almost all Arab countries.

Another common point between Arab countries is the privilege given to imported goods and services. In many countries, such as Lebanon, the local good is unable to compete with the imported good. Lebanon, from a main producer of silk and clothing in early 1900s, to a nearly null production of clothing. This is due to the high costs of production, that are accompanied with the absence of official action taken in this field. But instead, what we can observe in Lebanon is that big importers are politically connected and have a certain privilege. In such cases, many employment chances are being wasted, especially the youth opportunities, for the youth are the fresh graduates with the highest enthusiast! The youth are the innovators usually, and the absence of innovation in the Arab region is a main concern to be questioned.

Adding to this, the unavailability of funds, which is the structural problem in the Arab economies in general. When an economy contracts, unemployment and inflation increase, and vice-versa. Although many Arabic economies are in a prosperous state, but we must delve more into this topic on a micro-level and question the distribution of income process. It is true that many economies re prospering, but all Arab countries’ economies are structured to allow oligopolies and monopolies and make the rich richer leaving the poor households poor, if not poorer. It is not surprising, to see high inflation rates in Egypt in 2023, alongside with high expectation of growth of real GDP in 2024! Since this growth of GDP isn’t displayed in affecting the majority of population there, which are poor, but affecting the politically connected firms, investors, and oligarchs.

 

Causes can accumulate a lot, but debating the solutions is the necessary part of the solution’s formula. Starting with the minimum wages, if a country does have a minimum wage which is more for the local than the expat, then minimum wages should be unified. For example, an Ethiopian expat in Lebanon should have the same minimum wage as the Lebanese worker. Moreover, for some countries that doesn’t have official minimum wages set by law, then those countries should set the equilibrium wage W* as the minimum wage for all workers, without any discrimination between an expat or a local worker. For countries with no official minimum wage, are observed to have an unofficial one, where the local citizen prefers to stay unemployed rather than working to a lower amount of wages. The league of Arab states should take a main contribution in the coordination of these laws between countries, in addition to initiating labor trade treaties between countries, where the countries that have an excess of a certain specialty in a certain industry can offer them job contracts in another Arab country that has a deficiency in this specialty.

Another critical action to be taken, is the bundle of anti-corruption actions which are very subjective for each country. Since Lebanon has been taken as an example previously, the Lebanese political economy is ill from its’ structure. The Lebanese system should be a civil state regime immediately, with the removing of all sectarian-related laws and political work, in addition to the removing of all bank secrecy laws which have served nothing other than importing money laundering missions.

A civil state regime can be a common solution for all other Arab countries as well! Another step towards anti-corruption are the laws of competition enhancing bundle. For example, Local producers should be motivated by decreasing of taxes, and perhaps they could be sold public lands to produce at, with very low prices, especially for countries with big desert areas, such as Egypt! Moreover, in some cases, with taking international trade treaties into consideration, countries should forbid the import of goods that are produced locally. Besides, trading and import permit and licenses should be monitored on a higher level in the Arab countries, for many politically connected investors and firms are the only ones that have a license or permission to enter a certain industry or import/produce a certain good or service, which creates an monopolistic economy, or oligopolistic on a less level. This case is observed in the majority of Arab countries, where it could be solved by simple measures of laws and supervision. Enhancing the entry of competitors to a certain industry, not only boosts employability, but also lowers inflation, since it increases competition between producers, which is a necessity to decrease prices in free markets.

Unfortunately, most Arab regimes use political connections to buy the loyalty of business whales and sharks. Less privileged people loyalty is always bought by either a public sector employment, or a certain protection, or a certain ration! Less privileged segments have three choices to live, either to immigrate, or surrender, or fight! This is an important significance why is the civil state a necessity in all Arab countries, for it is the best regime that assures anti-corruption actions, economic growth, and welfare. On the other hand, the privileged segment of people loyalty cannot be bought with an employment offer or a certain ration, but with deals, and by this, rich get richer, poor get poorer, and the oligarchs turn out to be the other face of the corrupt regimes’ coin. It is not a coincidence to find that all elites in a certain business or industry are connected politically.

In a nutshell, facing such challenges, governments and regimes have the option to convert to civil states. Moreover, they should incentivize immediately local production, and stimulate competition. It is a necessity to remove all bureaucracy barriers, and enhance the entry levels to all industries. More international trade treaties should be done to supplement job offering with job needs between two countries. It could be critical to undergo United Nations and Arab League supervision. Moreover, all Arab countries should have minimum wages laws which do not discriminate between an expat and a local worker. Although such laws might increase unemployability on the short term, but they are definitely necessary and significantly beneficial on the long-term.