The Middle East is experiencing a pronounced youth bulge, with the largest proportion of youths to adults in the region’s history. With millions of young people poised to enter the workforce, this demographic boom is an economic asset, but also a significant challenge: youth unemployment already sits at 24%. The Middle East has traditionally relied on natural resources and services as economic drivers, but these sectors will be unable to create the growth and jobs necessary to accommodate the surging labor force.
The solution? Promoting a culture of entrepreneurship is the only realistic economic strategy going forward for many countries in the region, according to a new report from the Middle East Strategic Task Force.
The report, published as a guide to policymakers, emphasizes the well-documented benefits of start-ups that scale. Low costs upfront mean start-ups grow more and grow faster than other enterprises. Successful start-ups give rise to spin-off companies, inspire other start-ups, and reinvest in their environment, leading to a thriving economic ecosystem. The report highlights research from Wamda.com, which finds that for every 10 new successful enterprises, over $1.4 billion in new valuations and more than 2,500 jobs are directly created. This multiplier effect has the power to catalyze the job creation and economic growth that the Middle East needs.
Promoting entrepreneurship in Middle East will not be a complete pivot. The region has already demonstrated its ability to produce successful tech start-ups, like Maktoob—hailed as the Yahoo! of the Middle East. Itworx, an IT firm from Egypt, had two hundred former employees spin out to create new companies, according to the report. What’s more, the report notes that 25 percent of tech start-ups had female founders, a higher percentage than Silicon Valley.
Cairo, however, won’t become San Francisco overnight. The Middle East, scored poorly overall on the World Bank’s Doing Business report—notably in ease of starting a business. In order to cultivate a flourishing tech-enabled start-up industry, a number of ambitious reforms overhauling both the education system and the region’s regulatory environment need to be implemented. The report stresses that in enacting reforms to create an environment more hospitable to start-ups, all businesses in the region will reap the rewards.
Yale Economist Robert Shiller says: “Capitalism is culture. To sustain it, laws and institutions are important, but the more fundamental role is played by the basic human spirit of independence and initiative”. As the Middle East takes steps to reform their education system and business environment, entrepreneurs in the region have already demonstrated their initiative and capability by founding successful start-ups. If the Middle East can capitalize on its young workforce, increasing internet penetration, and nurture its entrepreneurs, the region will be on a course for growth and economic vitality.
To read the full report from the Middle East Strategic Task Force on economic recovery and revitalization in the Middle East, please click here.
Contributed by Saul Downie.