Employment: SMEs, a Solution to Unemployment Among Young Graduates
19 March 2012
Read by 2023 persons
The world's population mainly consists of young people, who are severely affected by unemployment.
In 2009, 91 million young people were unemployed (40% of total unemployment worldwide), according to the International Labour Office (ILO).
According to Dr. Mohamed Lamine Dhaoui, Director of the Private Sector Development, Investment and Technology Support Service at UNIDO in Vienna, cited by the econostrum.info portal, youth unemployment is critical, even worse in Arab countries. The average youth unemployment rate is around 23% in most Arab countries and is about 50% higher for women than for men. He estimates the workforce in this region at around 104 million jobs but reaching 185 million in 2020. Hence the need to create at least 80 million jobs by 2020.
Dr. Dhaoui points out that two facts characterize the current global situation of young people. First, working poverty (for the ILO, more than 150 million young workers in developing countries earn less than $1.25 a day). Second, there is the structural nature of unemployment.
"These figures are worrying and speak for themselves, and if we ignore them, it will be at our own risk and peril for our countries. Pushing an entire generation to the margins, leaving them discouraged and excluded, offering poor quality jobs or none at all, creates a threat to economies and societies as a whole," he warns.
Poverty eradication is possible
Analyzing recent and ongoing events in many North African and Middle Eastern countries, Dr. Dhaoui believes that "... these movements are the work of educated Arab youth who demand democracy, but also jobs and a decent life." He agrees that "the traditional public sector employer in Arab countries will not be able to absorb all young graduates, that attempts to redistribute job offers in the private sector have not borne fruit, and that all strategies implemented to support the development of the private sector have not succeeded in significantly changing the trend."
So, from this diagnosis, the director of the private sector support service at UNIDO believes that "the solution can largely come from developing an entrepreneurial culture and creating Micro, Small and Medium Enterprises (or MSMEs).
To be convinced, he recalls the situation in Western Europe in the 1980s, a period during which the SME development policy was the panacea for job creation at a time when large companies were laying off staff and the public sector had become closed to any recruitment.
Today, MSMEs represent approximately 99% of the total number of businesses in the European Union countries, and provide more than 65 million jobs. The same is true for Japan, where SMEs provide 81% of total employment.
From this, Dr. Dhaoui draws a first conclusion: "MSMEs play an important role in eradicating poverty and creating growth in developing countries," because they "contribute to equitable income distribution, revitalizing competitiveness and assimilating technological changes."
This being said, MSMEs face a huge obstacle: access to resources and credit. Indeed, the highest percentage of SME credit in total credit allocated in the MENA region is 24% in Morocco compared to only 5% in Egypt. Lack of access to finance is one of the biggest obstacles to the creation of MSMEs by young people in Arab countries.
However, "the importance of SMEs and the entrepreneurial solution are no longer up for debate," given that "several efforts have been and continue to be deployed to highlight this solution..."
But analyzing the situation, everything suggests that the approach is not right. Yes, replies the director of the private sector support service at UNIDO, who gives his explanation. "The programs and policies implemented have focused on traditional tools of assistance and support. The involvement of financial and non-financial actors has been fragmented and isolated. Technical assistance and advice without financial resources for the real implementation of the business project remain without impact. Financial assistance without advice is just as insufficient."
Today, he notes that "SME development banks are starting to integrate this new thinking." And he cites the example of the Turkish Economic Bank (TEB): "TEB provides non-financial services alongside financial services," including the establishment of a support center to support the competitiveness of MSMEs in the local and international markets, providing support and advice on strategy, marketing, and management, supporting SMEs in organizing purchases and ensuring links with large companies, setting up free 24/7 telephone assistance for MSMEs...
Holistic and integrated approach
From there, Dr. Dhaoui proposes adopting a holistic and integrated approach that "aims to create an environment conducive to the creation and development of MSMEs and improving their competitiveness at national and international levels."
This approach covers three levels, namely:
- macroeconomic level: making the macroeconomic and regulatory framework favorable and conducive to the creation, development and improvement of the competitiveness of MSMEs at the national and especially regional level;
- institutional level: strengthening the capacities of technical support and financing structures, particularly those supporting entrepreneurship and job creation in disadvantaged regions;
- business creation level: supporting the development of entrepreneurial culture and skills at universities and vocational training centers, particularly in disadvantaged regions.
Adopted by UNIDO, "this approach goes beyond the provision of non-financial services," emphasizes the UNIDO expert, who believes that "without access to finance, all efforts deployed in the form of training and the establishment of support structures will be in vain when it comes to business creation or expansion. Financial and non-financial support must therefore be carried out in a parallel, complementary and integrated manner."
Continuing his analysis of the situation of youth unemployment, in particular, Dr. Dhaoui points out that "the holistic and strategic approach must also be based on and promote the development of sectors and value chains with great potential for added value, employment and exports." And to support his remarks, he gives the example of countries that have been able to develop sectors that are very intensive in job creation, including Malaysia, where the palm oil sector employs more than 1.4 million people and contributes more than 57% of this country's export revenues; the Damietta region in Egypt has specialized in the wood and furniture sector, which employs more than 500,000 people (it is the region least affected by unemployment in Egypt); In India, the Bangalore region has specialized in the Information and Communication Technology (ICT) industry, which employs more than 500,000 people...
The director of UNIDO's private sector support service points out that in Tunisia "several products and value chains can be developed and contribute in the medium term to reducing unemployment in the regions." The Japanese "One village, one product" or "one region, one product or sector" approach may be a medium-term solution. He goes further to estimate that "the efforts made for the development of olive oil and date sectors are necessary but not sufficient."
He therefore considers it essential to develop studies and strategies to develop sectors and value chains in the different regions of Tunisia. Among these promising products, there are apples in the Kasserine region, essential oils in the Nabeul and Zaghouan regions, pistachios in the Gafsa region, and value chains in the agri-food sector in general, automotive components, information and communication technologies...
In conclusion, arguing that the creation and development of MSMEs, particularly innovative and competitive ones, constitute the solution to the employment problems of young graduates in the Southern Mediterranean countries, Dr. Dhaoui calls for the establishment and implementation of an environment favorable and conducive to the entrepreneurial spirit, the strengthening of entrepreneurial skills, and the facilitation of the globalization of SMEs. The banking system must develop and implement financing mechanisms appropriate to MSMEs and facilitate their access to credit. Non-financial services must also be generalized and accessible to young and future entrepreneurs in the different regions. Synergy and coordination between the various regional, national and international actors must be truly explored and used to advantage. It is in this environment and favorable business climate that the Tunisian private sector and foreign investors can invest, create and develop businesses and contribute significantly to the enhancement of resources, job creation and growth.
Webmanagercenter.com
Published on March 19, 2012.
Posted online on March 19, 2012.
In 2009, 91 million young people were unemployed (40% of total unemployment worldwide), according to the International Labour Office (ILO).
According to Dr. Mohamed Lamine Dhaoui, Director of the Private Sector Development, Investment and Technology Support Service at UNIDO in Vienna, cited by the econostrum.info portal, youth unemployment is critical, even worse in Arab countries. The average youth unemployment rate is around 23% in most Arab countries and is about 50% higher for women than for men. He estimates the workforce in this region at around 104 million jobs but reaching 185 million in 2020. Hence the need to create at least 80 million jobs by 2020.
Dr. Dhaoui points out that two facts characterize the current global situation of young people. First, working poverty (for the ILO, more than 150 million young workers in developing countries earn less than $1.25 a day). Second, there is the structural nature of unemployment.
"These figures are worrying and speak for themselves, and if we ignore them, it will be at our own risk and peril for our countries. Pushing an entire generation to the margins, leaving them discouraged and excluded, offering poor quality jobs or none at all, creates a threat to economies and societies as a whole," he warns.
Poverty eradication is possible
Analyzing recent and ongoing events in many North African and Middle Eastern countries, Dr. Dhaoui believes that "... these movements are the work of educated Arab youth who demand democracy, but also jobs and a decent life." He agrees that "the traditional public sector employer in Arab countries will not be able to absorb all young graduates, that attempts to redistribute job offers in the private sector have not borne fruit, and that all strategies implemented to support the development of the private sector have not succeeded in significantly changing the trend."
So, from this diagnosis, the director of the private sector support service at UNIDO believes that "the solution can largely come from developing an entrepreneurial culture and creating Micro, Small and Medium Enterprises (or MSMEs).
To be convinced, he recalls the situation in Western Europe in the 1980s, a period during which the SME development policy was the panacea for job creation at a time when large companies were laying off staff and the public sector had become closed to any recruitment.
Today, MSMEs represent approximately 99% of the total number of businesses in the European Union countries, and provide more than 65 million jobs. The same is true for Japan, where SMEs provide 81% of total employment.
From this, Dr. Dhaoui draws a first conclusion: "MSMEs play an important role in eradicating poverty and creating growth in developing countries," because they "contribute to equitable income distribution, revitalizing competitiveness and assimilating technological changes."
This being said, MSMEs face a huge obstacle: access to resources and credit. Indeed, the highest percentage of SME credit in total credit allocated in the MENA region is 24% in Morocco compared to only 5% in Egypt. Lack of access to finance is one of the biggest obstacles to the creation of MSMEs by young people in Arab countries.
However, "the importance of SMEs and the entrepreneurial solution are no longer up for debate," given that "several efforts have been and continue to be deployed to highlight this solution..."
But analyzing the situation, everything suggests that the approach is not right. Yes, replies the director of the private sector support service at UNIDO, who gives his explanation. "The programs and policies implemented have focused on traditional tools of assistance and support. The involvement of financial and non-financial actors has been fragmented and isolated. Technical assistance and advice without financial resources for the real implementation of the business project remain without impact. Financial assistance without advice is just as insufficient."
Today, he notes that "SME development banks are starting to integrate this new thinking." And he cites the example of the Turkish Economic Bank (TEB): "TEB provides non-financial services alongside financial services," including the establishment of a support center to support the competitiveness of MSMEs in the local and international markets, providing support and advice on strategy, marketing, and management, supporting SMEs in organizing purchases and ensuring links with large companies, setting up free 24/7 telephone assistance for MSMEs...
Holistic and integrated approach
From there, Dr. Dhaoui proposes adopting a holistic and integrated approach that "aims to create an environment conducive to the creation and development of MSMEs and improving their competitiveness at national and international levels."
This approach covers three levels, namely:
- macroeconomic level: making the macroeconomic and regulatory framework favorable and conducive to the creation, development and improvement of the competitiveness of MSMEs at the national and especially regional level;
- institutional level: strengthening the capacities of technical support and financing structures, particularly those supporting entrepreneurship and job creation in disadvantaged regions;
- business creation level: supporting the development of entrepreneurial culture and skills at universities and vocational training centers, particularly in disadvantaged regions.
Adopted by UNIDO, "this approach goes beyond the provision of non-financial services," emphasizes the UNIDO expert, who believes that "without access to finance, all efforts deployed in the form of training and the establishment of support structures will be in vain when it comes to business creation or expansion. Financial and non-financial support must therefore be carried out in a parallel, complementary and integrated manner."
Continuing his analysis of the situation of youth unemployment, in particular, Dr. Dhaoui points out that "the holistic and strategic approach must also be based on and promote the development of sectors and value chains with great potential for added value, employment and exports." And to support his remarks, he gives the example of countries that have been able to develop sectors that are very intensive in job creation, including Malaysia, where the palm oil sector employs more than 1.4 million people and contributes more than 57% of this country's export revenues; the Damietta region in Egypt has specialized in the wood and furniture sector, which employs more than 500,000 people (it is the region least affected by unemployment in Egypt); In India, the Bangalore region has specialized in the Information and Communication Technology (ICT) industry, which employs more than 500,000 people...
The director of UNIDO's private sector support service points out that in Tunisia "several products and value chains can be developed and contribute in the medium term to reducing unemployment in the regions." The Japanese "One village, one product" or "one region, one product or sector" approach may be a medium-term solution. He goes further to estimate that "the efforts made for the development of olive oil and date sectors are necessary but not sufficient."
He therefore considers it essential to develop studies and strategies to develop sectors and value chains in the different regions of Tunisia. Among these promising products, there are apples in the Kasserine region, essential oils in the Nabeul and Zaghouan regions, pistachios in the Gafsa region, and value chains in the agri-food sector in general, automotive components, information and communication technologies...
In conclusion, arguing that the creation and development of MSMEs, particularly innovative and competitive ones, constitute the solution to the employment problems of young graduates in the Southern Mediterranean countries, Dr. Dhaoui calls for the establishment and implementation of an environment favorable and conducive to the entrepreneurial spirit, the strengthening of entrepreneurial skills, and the facilitation of the globalization of SMEs. The banking system must develop and implement financing mechanisms appropriate to MSMEs and facilitate their access to credit. Non-financial services must also be generalized and accessible to young and future entrepreneurs in the different regions. Synergy and coordination between the various regional, national and international actors must be truly explored and used to advantage. It is in this environment and favorable business climate that the Tunisian private sector and foreign investors can invest, create and develop businesses and contribute significantly to the enhancement of resources, job creation and growth.
Webmanagercenter.com
Published on March 19, 2012.
Posted online on March 19, 2012.
