Generating Employment Opportunities Beyond Conferences

04/13/2015 10:39 am ET | Updated Jun 13, 2015

On April 6th, another conference to generate employment in the Arab world took place: The National U.S.-Arab Chamber of Commerce (NUSACC) partnered with the Arab Maghreb Union and the Union of Arab Maghreb Economic Chambers to host about 50 North African government officials and private sector executives for one week of public conferences from April 6-10 in Washington, D.C. and Texas. Since the Arab Spring, the West has focused on individual entrepreneurship in MENA. Not surprisingly, both Arab transitioning countries (Tunisia and Egypt), and non transitioning (the UAE, Qatar, Jordan, Morocco and Saudi Arabia) are pursuing the industry-government coordination model to promote entrepreneurship by sponsoring large industry conferences. What's the impact of these large industrial conferences on Arab world unemployment? Are we seeing local Arabs employed, or "diverted" on to the more romantic path of entrepreneurship? Encouraging entrepreneurship in the Middle East and North African region morphs into generating employment opportunities, when in fact, implementing this approach requires more time, skills and resources that compete with large industry forums catering to bigger (often foreign) firms.

Ironically, through the industry-government coordination model, many of the development-related conferences attempt to generate local employment by advocating for entrepreneurship and attracting foreign investment through multi-national corporations (MNCs). Yet such conferences, like the Global Entrepreneurship Summit (GES), have largely occurred in Arab countries that have not experienced their own "Arab Spring," such as Morocco and the United Arab Emirates. Furthermore, the focus on individual entrepreneurship in MENA is misleading; MNCs are the actors with more access to financial capital -- not individuals.

Promoting entrepreneurship and employment do not need to be mutually exclusive. However, in both Arab countries undergoing political transition (Egypt, Tunisia, Libya, and Yemen), as well as those that are not (Morocco), both categories approach these two issues with the uniform approach of hosting investment forums while, maybe, hopefully, getting companies to promise that they'll hire locals.

Where Does Industrial-Government Model Succeed?

With respect to the industry-government model, Israel attests to how technology investment breeds entrepreneurship and wide-scale employment strategy as it produced over 90 NASDAQ listed companies. Saudi Arabia is trying to emulate this approach with its coordinated technology university projects.

But conflating entrepreneurship, innovation and technology with development and employment misleads one to believe that lone entrepreneurs will harness the power of entrepreneurship. In fact, the emphasis on entrepreneurship in the Arab world overlooks the premise that larger companies, most likely from abroad, will launch innovative technology projects to scale in Morocco and its neighbors -- not lone entrepreneurial ventures.

Under the industry-government model, there is an added benefit of MNCs: they may play a larger role in expanding and building infrastructure beyond their operating needs. Among the MNC partners at the recent GES forum, Kosmos Energy stood apart from other information technology MNCs due to its interest in Morocco. Kosmos focuses on oil and gas exploration for emerging and frontier markets that represent even higher risk for capital investment, but serve as a frontier for less regulation. According to their Corporate Social Responsibility (CSR) Plan, Kosmos promises to conduct social and environmental impact studies as they drill in Morocco. Beyond their CSR Plan, however, it remains uncertain as to how they will give back to the local community via employment opportunities.

Transitioning Arab economies are also taking their chances with lumping entrepreneurship opportunities within large-scale MNC forums. By lumping the goals for facilitating entrepreneurship, attracting investment and targeting MNCs within government initiated forums, Egypt and Tunisia are hoping that saying "synergy" at these fora will create employment.

As recently as March 13th to 15th, Egypt hosted a two-day economic summit to present its business case as THE emerging economy among Arab transitioning countries and invited several multi-national corporations (MNCs).  Egypt's March summit invited global multi-national companies, like General Electric and Siemens. Held at a luxurious Red Sea resort, current Egyptian President Abdel Fattah Al-Sisi wants the world to know that Egypt is not just a transitional nation since its 2011 ouster of two ex-presidents, Hosni Mubarak and Mohammed Morsi -- coupled with security and budgetary hiccups. Sisi's Economic Summit procured investment deals with more than $138 billion, according to the Wall Street Journal.

One could make the argument that, ultimately the Arab countries could care less about promoting entrepreneurship -- or trying to formalize the informal sector -- so long as current governments create employment opportunities and a better standard of living to stave off civil unrest as seen in Arab transitioning countries. Countries, like Jordan, follow various strategies at the same time to stem civil discontent. For example, Jordan passed over 14 legislative reforms, namely the Creation of the Social Entrepreneurship Fund for Democracy, to respond to protests since the Arab Awakening bloomed to success in 2010 -- this is more than any two-year period in Jordan's modern history.

One could also take this reasoning one step further and add that MENA countries do not care whether they attract foreign companies and promote local hiring. However, I argue that MENA countries prefer the MNC route over the entrepreneurship/SME route because they know MNCs will contribute tax revenue. Maybe they will create jobs for local hires. Maybe they will not. The flaw in this plan, though, is that MNCSs are not incentivized to invest in local hiring if skills upgrades are costly. MENA countries are not investing in revamping curricula, or retraining adults for technical skills, which are key recommendations offered in the Stimson Report. These areas are being shouldered by the donor development communities. The bottomline: Although MNCs are more likely to generate more employment opportunities than sole-source or small-scale entrepreneurial ventures, MNCs are not transparent about how they will invest in local host countries to promise local hiring and remedy both Arab "awakened" and "non-awakened" countries.

While Arab governments grapple with their employment challenges, MNCs are weighing their options in expanding into an Arab transition country (experienced uprisings) versus Arab non-transitioning. Morocco may be excited that the U.S.-based technology mega firm, Dell, Inc., picked them over Tunisia to capitalize on its Spanish and French speaking markets by setting up in the Mediterranean south. A multi-national corporation establishing itself in a MENA country may be the vehicle to grapple with double-digit unemployment among millennials: 4 out of 5 Moroccans between ages 15 to 34 are unemployed. Given that three of the five Arab Spring countries are located in North Africa, one might have guessed that Tunisia would have been the likely candidate.

Dell is not the only large employer looking at transitioning North African countries. According to The Growth Dialogue: an Economist survey of 220 firms are looking to expand into 25 African cities, which also include those in Arab countries in transition: Tripoli, Tunis and Algiers. Aside from bringing in foreign capital, the host country hopes that MNCs might absorb some of its unemployed labor, which would add more jobs than a handful of local sole proprietorships. The latter category would have to compete among each other for domestic capital investment.

Despite the entry of MNCs with their capital into MENA countries ("transitioning" or not), generating large-scale "inclusive" employment requires MNCs to take responsibility in facilitating local hire opportunities -- including on-the-job training. In this vein, tech startup accelerators provide the capital and a form of on-the-job training.

Creating Entrepreneurs or Employees?

Lebanon has not undergone the "Arab Spring" transition. For that matter, Lebanon operates at a political standstill as it has been without a president since May 2014, due to a lack of consensus between parliamentary blocs. Yet, Lebanon has emerged as a startup hub in the Arab world. How did this happen?

For decades, a large cohort within the Lebanese diaspora opted to invest in Lebanon by organizing as an entrepreneurial community rather than focusing on the political process of trade investment or on how to push government for assistance. Most recently, the Lebanon For Entrepreneurs initiative (LFE) operates as a conglomerate of Lebanese-American finance executives and Silicon Valley professionals that work to invest in Lebanese entrepreneurs through its startup accelerator. Accelerators provide both the financial capital and the technical-business training. Ironically, MNCs already have the financial capital and could provide on-the-job training programs for host country hiring. But without a localized push, or bilateral agreements outlining preconditions for local hiring, MNCs lack the incentive to hire from within the host country.

Entrepreneurs, or more likely, bigger firms, that want to participate in the innovation and technology aspects of development will profit. At the same time, if the goal is to create employment -- rather than entrepreneurs -- then it makes sense to for a partner like Education For Employment to engage host countries and MNCs to drive a plan for preparing potential employees, not entrepreneurs. The technology and innovation platform targets larger companies to attract FDI rather than promoting nascent entrepreneurs. Hopefully, these MNCs would import financial capital and hire local human capital rather than importing human capital too.