Posts Tagged ‘economic development’

The World Government Summit hosted annually in Dubai is emerging as a key forum to define the agenda for the next generation of governments. Tahseen Consulting is honored to have contributed its thoughts on how Arab governments can innovate to solve some of the most significant challenges facing the region.

In the following interview, Tahseen Consulting’s Chief operating Officer, Wes Schwalje, spoke with representatives from the World Government Summit regarding his thoughts on building entrepreneurial ecosystems in the UAE and Arab World.

World Government Summit: Why is entrepreneurship important for the UAE?

Schwalje: The UAE Vision 2021 establishes entrepreneurship as a vital enabler of the UAE’s transition to a knowledge-based, highly productive, and competitive economy. For this reason, entrepreneurship ecosystem development at the national and Emirate levels has been prioritized as a key economic development policy priority. The UAE views a vibrant entrepreneurship ecosystem as essential in order for startups and small and medium-sized enterprises (SMEs) to grow, thrive, and commercialize innovative ideas. To assist SMEs, UAE policymakers have primarily focused on cultivating a healthy risk-taking culture, easing access to finance, implementing better regulation, and enabling SMEs to reach international markets. As in other countries, the UAE is targeting small firms due to their potential to create jobs and grow into profitable companies that can serve as engines for employment and economic development. The UAE Ministry of Economy recently estimated that SMEs contribute more than 60% of the UAE’s GDP and provide 86% of all private sector employment. The immediate goal of the UAE’s entrepreneurship development policies is to establish assistance programs that support fledgling ventures in the early, vulnerable stages of their development so that they are able to grow and become engines that sustain growth for long-term development. Over the longer term, nurturing and supporting entrepreneurs is important to the UAE for creating jobs, encouraging nationals to join the private sector, economic diversification, boosting innovation, increasing productivity, and commercializing research.

World Government Summit: How can the government help to create a new generation of entrepreneurs?

Schwalje: Many entrepreneurs in the UAE still struggle with starting and growing their businesses because significant resources have been devoted to limited, singular interventions at either the national or Emirate levels rather than devoted to system wide change. Though it has expanded rapidly, the UAE entrepreneurial ecosystem, which includes upwards of 330 different public and private stakeholders, currently lacks critical institutions and cooperative platforms which could make it more effective. Some Emirates have been much more effective at developing vibrant entrepreneurship ecosystems than others. While there is no one-size-fits-all model for building a competitive entrepreneurship ecosystem, more work must be done to catalyze an inclusive dialogue where policymakers, entrepreneurs, and other stakeholders come together to discuss barriers and find solutions at the national and Emirate levels.

Institutions tasked with implementing entrepreneurship development policies must work in closer coordination to build a conducive culture for entrepreneurial risk taking, enhance access to new venture finance, ensure venture-friendly markets for products, and improve institutional and infrastructural support for entrepreneurs. While some progress has been made, entrepreneurship policies must also be more closely aligned with national technical and vocational education and training policies. This will require integrating entrepreneurship more effectively into the education system from an early age. There is also an urgent need for career guidance to accommodate entrepreneurship so that it might be possible for students to differentiate between choices after secondary schooling like starting a business, joining the armed forces, seeking a job immediately, attending a technical program, or continuing their studies at the higher education level. Based on the scarcity of initiatives which specifically target aspiring female entrepreneurs, more entrepreneurship education and training for women is needed in the GCC. While most GCC nations have supported entrepreneurship centers to improve the environment for entrepreneurship including providing funding and training, reducing bureaucracy, and establishing business incubators, very few of these centers specifically cater to women’s needs.

World Government Summit: Which other stakeholders can get involved too?

Schwalje: Policy frameworks and institutions play a particularly important role in entrepreneurship ecosystem development. Some Emirates have made significant progress in developing institutionally rich entrepreneurship ecosystems while other Emirates offer much less support for entrepreneurs. A key risk in designing national and Emirate level entrepreneurship development policies is proceeding without systematic input from entrepreneurs and other stakeholders. While identifying the particular needs of entrepreneurs in each Emirate is essential, international experience offers prescriptive guidance for developing entrepreneurial ecosystems and the key institutions and stakeholders that should be involved.

Policy makers must ensure the regulatory framework supports entrepreneurs. Public and private sector stakeholders must work to ensure the presence of early customers and, once fledgling business begin to grow, they can reach regional and global markets. Access to a full spectrum of financial services is critical to entrepreneurial success. This include the presence of financial institutions which provide SME finance, venture capital funds, corporate venture capital funds, government grants and loan programs, and angels and angel groups. A vast array of support organizations ranging from incubators and accelerators to competitions to export assistance centers is required for a competitive entrepreneurial ecosystem. These institutions must work together to help entrepreneurs turn an idea into a business, launch, and then grow by providing training, mentorship, networking, expert guidance, and inspiration. The private sector is important due to philanthropic giving and corporate social responsibility programs support entrepreneurship, identifying opportunities in their supply chains that can present opportunities for entrepreneurs, commercializing academic research, and in opening up exit opportunities for entrepreneurs. The institutions that govern the education and training system must work to ensure emerging skills needs are met and provide quality, entrepreneurial training. Finally, the media is important to ensure entrepreneurial successes are highlighted to inspire the next generation of entrepreneurs.

World Government Summit: Is there a need for different approaches in other Arab countries?

Schwalje: In many Arab countries, economic integration, the need for economic diversification, occupational preferences for public sector employment, and high youth unemployment rates have prompted the adoption of economic reforms to improve the enabling environment for entrepreneurship. However, understanding the determinants of self-employment and how they might differ across the region is critical if entrepreneurship is to be a solution for the region’s youth unemployment challenge and can ultimately lead to desired economic outcomes. Differing determinants of entrepreneurship across the region have significant implications for national policies and support programs that might be offered to regional entrepreneurs. The distinction between necessity and opportunity entrepreneurship is becoming increasingly relevant as countries in the region are largely pursuing undifferentiated entrepreneurship policies that are primarily aimed at opportunity entrepreneurs.

World Government Summit: How are the needs of entrepreneurs different across the Arab region?

Schwalje: An emerging body of international empirical literature suggests that necessity and opportunity entrepreneurs differ significantly in socio-economic characteristics; motivation and the types of opportunities pursued; and the potential for their entrepreneurial endeavors to create jobs and motivate private investment.

Category of Comparison Opportunity EntrepreneursNecessity Entrepreneurs
AgeOn average approximately 5 years younger according to empirical studies based on international dataUp to 5 years older than opportunity entrepreneurs in empirical studies based on international data
EducationTend to be more highly educated with education and general labor market experience having a positive impact on earnings and reducing exit ratesTend to be less educated and benefit more from specific vocationally oriented education found to be related positively to earnings
Industry ExperienceMore likely to have working experience from regular employment in the same industry they are enteringLess likely to have experience from regular employment in their focus industry
MotivationVoluntarily attracted into self-employment by the identification of opportunities; They often leave wage employment or pursue opportunities alongside full time employmentOften driven into self-employment after involuntary job loss or scarcity of employment opportunities
CyclicalityMore likely to create ventures when economic conditions are good and unemployment is low; They also choose to create businesses regardless of their employment statusNegative economic shocks that are more likely to affect small firms or increase unemployment push individuals to create businesses
Quality of Opportunities PursuedCreate larger businesses in knowledge-based industries which require significant amounts of invested capital and employees generate higher earningsLess likely to have business ideas with significant growth prospects and more likely to exploit entrepreneurial opportunities in low-income, low knowledge-content sectors
Potential for Job CreationHigher probability of creating additional jobs Job creation, Investment, and Survival
Primarily focused on employing themselves and have lower probability of creating additional jobs
Firm Survival Higher survival and lower failure and closure ratesFace a higher risk of failure, or, if they survive, they may produce only marginal businesses,
invest insignificant amounts of capital, fail to create further jobs, and earn minimal incomes
Capital Investment and Risk ToleranceInvest higher amounts of capital into their venture and are more risk tolerantLower amounts of invested capital and lower tolerance for risk
Tendency to Seek External SupportMore likely to have built their network to include people valuable in the process of venture creation such as potential customers, cofounders or financiersLess likely to seek support in the form of professional or personal assistance during venture creation

These findings present strong evidence that national training and support programs for entrepreneurship require significant tailoring to meet the needs of both necessity and opportunity-driven entrepreneurs. By not accounting for particular needs of different types of entrepreneurs, some national entrepreneurship policies in the region are designed around a one size fits all approach which is particularly lacking in regards to serving necessity-driven entrepreneurs.

International evidence suggests a strong case for more tailored national entrepreneurship policies in the Arab region which reflect the mix of necessity versus opportunity-driven entrepreneurs operating in particular countries. Entrepreneurship in countries at a high opportunity entrepreneurship equilibrium, which includes all of the Gulf countries, is presumably much different entrepreneurship in countries like Egypt, Palestine, and Yemen in a low opportunity entrepreneurship equilibrium. Necessity and opportunity entrepreneurs differ in socio-economic characteristics; motivation and the types of opportunities pursued; and the potential for their entrepreneurial endeavors to create jobs and motivate private investment. These differences are potentially unexploited policy levers which might serve as guidance for more targeted national entrepreneurship policies. Instead of classifying all entrepreneurs as a homogeneous group driven by opportunity and offering undifferentiated support, regional governments can introduce targeted training programs and support, contingent financing, and subsidies which might better serve both necessity and opportunity entrepreneurs. If entrepreneurship is to continue to be championed as a panacea for the region’s youth unemployment challenge and resolving structural economic and labor market issues, then such tailored policy measures appear long overdue. The table below presents a summary of potential components of regional entrepreneurship policy which may need to be reconsidered to more effectively meet the needs of both opportunity and necessity entrepreneurs.

Components of Entrepreneurship PolicyTypical Opportunity Entrepreneur Approach in the Arab RegionWhat Might be Needed to More Effectively Reach Necessity Entrepreneurs in the Arab Region
Entrepreneurship Policy ApproachPolicies view entrepreneurs as a segment of the national economy who can take advantage of all programs and may not distinguish between small business support and policies which support entrepreneurial venturesDefined policies and programs to meet the specific needs of necessity entrepreneurs and other country specific challenges
Entrepreneurship EducationEarly and post-secondary entrepreneurship education and business skills training at university and non-university based business incubatorsSupport for training in specific technical and vocational areas potentially below the post-secondary level in addition to early and post-secondary entrepreneurship education and business skills training
Access to FinanceIncreasing the supply of capital through direct loans and venture fundsPublic financing programs that may target a broader range of industries along with a stronger focus on helping entrepreneurs access capital by focusing more on business issues such as management skills and evidence of a solid business plan
Optimizing the Regulatory EnvironmentMacroeconomic approach to tax and regulatory policy focused on changes in laws (e.g., general tax reductions) and regulations that affect everyone doing business Policy impact analysis to determine if regulatory changes are sufficiently focused on the needs of necessity entrepreneurs; Policies that most benefit these businesses are those that defer expenses, allow companies to convert tax incentives into cash, and lower development costs
Technology Exchange and InnovationCluster development and leveraging public funds that encourage university-private sector collaborationBenchmarking and evaluating the benefits associated with state investments on necessity entrepreneurs and whether they are adequately served by such initiatives

When it comes to news on economic trends and policies in the UAE, government and business leaders turn to the Abu Dhabi Council for Economic Development’s Economic Review. Tahseen Consulting is honored to have its work on developing a knowledge economy in the UAE highlighted in the publication’s November issue. We have posted the full article below.

Tahseen Consulting’s Chief Operating Officer, Wes Schwalje, spoke with representatives from the Abu Dhabi Council for Economic Development regarding his thoughts on how Abu Dhabi can build a knowledge economy. In a wide-ranging discussion, Schwalje discusses the link between the UAE’s knowledge-based economic development strategy and high skill, high wage job creation.

Abu Dhabi Council for Economic Development: How Can Abu Dhabi Build a Knowledge Economy?

Schwalje: The development goal of transitioning to knowledge-based economies emerged in many countries in the Arab World in the late Nineties due to the commonality of several factors related to culture, the economic environment, and socio-political developments. Across the region, knowledge-based economic development has become closely intertwined with national competitiveness and economic policies that support innovation, technology development, entrepreneurship, workforce skills development, adoption of high performance organizational structures, and information and communications technology infrastructure development. It has also become associated with environmental sustainability, identity, language, gender equality, and political participation and democratic reform in some countries. Five common economic development justifications, job creation, economic integration, economic diversification, environmental sustainability, and social development, are often cited as the underlying rational for pursuing knowledge-based economic development strategies. Research conducted by Tahseen Consulting shows that seventeen of the twenty-two countries in the Arab World have the development of a knowledge-based economy specifically stated as a medium to long-term development policy objective.

Abu Dhabi Council for Economic Development: How Can Knowledge-based Economic Development Strategies Lead to High Skill, High Wage Job Creation?

Schwalje: The causal relationship between knowledge-based economic development and ensuing job creation which will create the need for increased supplies of high skill workers has been particularly appealing to GCC policymakers. For Arab governments, the heavy reliance of the concept of knowledge-based economy on human capital development provides a useful means to achieve a number of attributed social and economic objectives, such as higher levels of educational attainment ; increased health; efficiency of consumer choices; higher levels of savings and charitable giving; social cohesion; increased self-reliance and economic independence; reduced crime; growth and competitiveness; increased productivity; domestic innovation.

However, with the emergence of low wage, high skills workers in developing countries, knowledge is becoming commoditized. With increasing cost competition in knowledge-based industries from emerging countries, the less resource wealthy Arab countries could feasibly follow a development trajectory grounded in selective participation in knowledge-based and manufacturing industries in which they have a cost advantage and have or can develop quickly sufficient workforce skills to compete against emerging country rivals. The Gulf countries, which employ many of their citizens in high wage roles in parastatals operating in knowledge-based industries and government institutions, may be particularly threatened by competition from low wage knowledge workers and be subject to significant margin compression which challenges the economics of their entry into knowledge-based industries.

Abu Dhabi Council for Economic Development: In Which Strategic Subsectors can Abu Dhabi be Globally Competitive in the Face of the Emergence of Low Wage, High Skill Knowledge Workers?

Schwalje: The Abu Dhabi Economic Vision 2030 outlines several economic sectors for growth and diversification.

  • Energy – Oil & Gas
  • Petrochemicals
  • Metals
  • Aviation, Aerospace, and Defense
  • Pharmaceuticals, Biotechnology, & Life Sciences
  • Tourism
  • Healthcare Equipment & Services
  • Transportation, Trade, & Logistics
  • Education
  • Media
  • Financial Services
  • Telecommunication Services

An extremely important next step in moving towards a knowledge based economy will be closely scrutinizing the industries identified in the Abu Dhabi Economic Vision 2030 for particular industry subsectors that are economically viable given the emergence of low wage, high skill knowledge workers in emerging economies, have the potential to offer wages that are attractive relative to reservation wages established by the public sector, present the possibility of developing a sustainable cost advantage, and which national workforce skills can be developed to provide the human capital required to grow the industry.

For example, research on the emerging renewable energy industry in the UAE found that the majority of firms which operate in the industry are concentrated in lower value added, downstream activities like installation, maintenance, and trading. Very few firms currently operate in higher value added, knowledge intensive industry segments like manufacturing, consulting, and finance. While such industries are in an emergent stage, it is unclear, if they remain concentrated in lower value added segments, whether their impact on economic development will be as significant as planned.

Abu Dhabi Council for Economic Development: What are Some of the Challenges Faced by Countries in Developing Knowledge Economies?

A historical example from the Arab World of the perils of inadequate skills development paralleling foreign and domestic investment is Muhammad Ali’s attempt to industrialize Egypt through the establishment of a textile industry in the 1800s. In 1819, Muhammad Ali began an industrialization drive using imported foreign technicians and investment which led to the establishment of 30 modern factories for textile manufacturing. By 1830, these factories employed 30,000 but within a decade all the factories had failed due to lack of technical skills, European competition, and increased production quality in Europe. At the time, French and English technical superiority and lower labor and raw material costs allowed the Europeans to displace Egyptian imports to Europe. Egypt also faced skills shortages related to engineers and mechanics who could operate, repair, or make innovative improvements to imported technologies which led to obsolescence of Egyptian textile equipment. English free trade concessions further led to industry decline, and by the 1840s Egypt was relegated to a supplier of raw materials to the European textile industry and a net importer of finished textile products from Europe. Despite significant investment in the sector, 87% of cotton in Egypt continued to be processed with manual, time consuming, inefficient methods until 1860 when state of the art steam technologies were introduced due to favorable competitive opportunities for Egyptian cotton resulting from decreased global supply from the US during the American Civil War.

One of the key challenges we have identified in our work with Arab countries pursuing knowledge-based development strategies in the region is the lack of effectiveness of skills formation systems. Our research shows that lack of effectiveness of Arab skills formation systems influences Arab firms to contest lower-skilled, non-knowledge intensive industries at the detriment to regional competitiveness and knowledge-based economic development. Adaptability and congruence of skills formation systems and constituent actors in response to factors such as economic development, skill demands of employers, technological progress and industrial strengthening, and macroeconomic trends is critical to knowledge-based development in the Arab World. Thus, the movement of many Arab countries towards knowledge- based economic development inevitably requires the transition to more effective skills formation systems.

Our research on the region has shown four primary requirements to develop skills formation systems for knowledge economy:

Governments must link economic development with education and training

Key roles

  • Coordination: Ensuring effective institutions to prevent market failure, underinvestment in skills, provide adequate regulation, and coordinate stakeholders
  • Aligning macroeconomic policy with skills formation: Educational and industrial policy interventions must be set in place so that education and training systems co-evolve with industry development.
  • Broad-based, inclusive skills formation: National skills formation systems must support the workforce presently employed in or entering the formal sector as well as individuals who are self-employed, working in informal sectors, or unemployed.

Education and training systems must produce human capital in the quantity and quality required by the labor market

Key roles

  • Ensuring relevancy and employability: Governance, policy, and coordination mechanisms that link educational systems to specific labor market outcomes avoid supply-demand informational gaps regarding skills trends and ensure skill alignment with the needs of employers
  • Quality Assurance: Adoption of performance-oriented, rather than expansion focused, approaches to improving quality, increasing performance, and assuring student marketability
  • Expanding Access: Programs to develop skills amongst those disadvantaged by inadequate investment

Employers need to take a longer term approach to skills formation for knowledge-based development

Key roles

  • Workforce Investment: Employers must be committed to continuous, regular on the job training and knowledge transfer in response to high-performance workplace organization and skills relevancy but also remediating inadequate pre-employment general skills
  • Workforce Development: Cooperation of education and training institutions, the business community, and governments to provide individuals with gainful, rewarding employment as well as firms obtaining the skills in the quantity and quality required

Individuals must be able to make informed choices about their investments in particular skills sets and continuously upgrade their skills

Key roles

  • Investment optimization: Individuals must seek out information on the future trajectory of industries and emergent skills needs, the returns to investing in particular skills sets, returns of education and training investments when calibrating their education and training decisions
  • Lifelong-learning: Individuals must be committed to continuous learning throughout all stages of life for the purposes of community engagement, the workplace, development, and well-being

When it comes to news on economic trends and policies in the UAE, government and business leaders turn to the Abu Dhabi Council for Economic Development’s Economic Review. Tahseen Consulting is honored to have its work on building sustainable economies in the Arab World highlighted in the publication’s April issue. We have posted the full article below.

Tahseen Consulting’s Chief operating Officer, Wes Schwalje, spoke with representatives from the Abu Dhabi Council for Economic Development regarding his thoughts on the how the concepts of sustainability and knowledge-based economy are evolving into economic policies in the UAE. In a wide-ranging discussion, Schwalje discusses the UAE’s aspirations, its achievements thus far, and potential barriers to progress.

Abu Dhabi Council for Economic Development: What are the key factors to consider when creating a ‘sustainable economy’ that will support many generations to come?

Schwalje: The concept of sustainability as a policy goal is attractive to countries precisely because the concept lacks specificity and means different things to different stakeholders. As it applies to economic development, many countries have further equated the concept of sustainability with the equally imprecise concept of knowledge-based economy. The ambiguity of such terms have been used globally by governments to gain political consensus on large-scale economic reforms. In the Arab countries such concepts have become integrated into national visions and development strategies, such as the UAE’s Vision 2021, National Agenda, and Abu Dhabi Economic Vision 2030, to provide a shared overarching vision for economic development. Debates surrounding such policy objectives have highlighted and promoted policy dialogue on key development challenges that the Arab World faces and brought coherence to a variety of socioeconomic development discourses.

Because concepts such as sustainability and knowledge-based economy have become gradually contextualized to the case of the Arab World, the region has converged on several consistent themes that are closely associated with the term “sustainable economy.” While there is some country to country variation in the region, generally, sustainable economic development in the GCC countries concerns a variety of socio-economic factors: economic diversification to reduce dependence on commodities through entry into new and complementary industries; private sector development to improve the performance of small and medium sized businesses and encourage entrepreneurship; integration of nationals into the private sector workforce; strengthening the link between education systems and the labor market to reduce youth unemployment; increasing female labor market participation; strengthening innovation systems; attracting foreign direct investment; integration into the global economy; addressing national development imbalances and income disparities; environmental sustainability, protection of identity and language; and increasingly political participation and democratic reform.

Abu Dhabi Council for Economic Development: How far do you feel Abu Dhabi has come in this respect to date?

Schwalje: After a country has defined what they mean by sustainable economic development, the next challenge a country like the UAE faces in determining progress is devising appropriate indicators to measure progress. In advancing a set of National Key Performance Indicators associated with the National Agenda, the UAE has made an initial attempt at assessing progress towards sustainable economic development. National key performance indicators related to economic progress track measures such as non-oil GDP growth, GNI per capita, FDI inflows, global competiveness, national labor market participation and Emiratization rates, ease of doing business, SME contribution to GDP, entrepreneurship levels, innovation, R&D expenditure, and employment in knowledge-based industries. A key challenge remains whether a disparate range of objective measures can really provide a coherent overall picture of national well-being and progress. It will be essential for the UAE to increasingly complement outcome-based objective indicators of national progress with subjective well-being data that measure well-being across a variety of other dimensions such as education, health, income and wealth, and the environment. This will require the regular collection of nationwide data from large and representative samples to provide a coherent overall picture of well-being.

Abu Dhabi Council for Economic Development: What pitfalls must Abu Dhabi avoid when attempting to build a sustainable economy?

Schwalje: Many of the countries from which normative economic policy guidance has come from surrounding knowledge-based economic development now face unforeseen economic challenges. In many of the countries which the Abu Dhabi Economic Vision 2030 benchmarked, more education, more innovation, and policy and institutional reform have not necessarily led to higher levels of national well-being. For example, economic policy in Ireland has not ultimately produced high skills, high wage jobs for youth or adequately addressed socioeconomic development challenges. In fact, Ireland’s economic policies have led to record high youth unemployment and numerous social challenges for the country’s youth. Cases like Ireland suggest that a regional discussion on whether the economic prescription of the transition to knowledge-based economies remains the right course.

A key question is whether Arab economic development strategies based on the transition to knowledge economies have sufficiently taken into account the changing economic environment where knowledge is becoming cheaper and commoditized by emerging economies. Decreasing pressure on wages due the globalization of knowledge industries and growth in high skill, low cost talent in emerging countries challenges the assumption that more education, higher levels of skills, and national labor markets can provide prosperity to nations. Because competition for dominance in knowledge-based industries is now global and emerging countries are moving up the value chain to perform increasingly more sophisticated activities, plans to enter knowledge-based industries are susceptible to the globalization of low cost, high skill competition from beyond the region’s borders. What may look like a sector that can generate high skill, high wage jobs today may tomorrow be an industry that can be outsourced and performed by high skill, low cost knowledge workers elsewhere.

Abu Dhabi Council for Economic Development: How can Abu Dhabi encourage more entrepreneurship?

Schwalje: Many countries have geared their entrepreneurship policy interventions around international studies such as the Global Entrepreneurship Monitor, Ease of Doing Business Index, and Global Entrepreneurship and Development Index. However, while these frameworks are useful, they may not adequately capture the difficulties faced in the UAE. Much more qualitative research of existing entrepreneurs is required to advance this dialogue further. This dialogue must not be confined to emirate-level challenges but be broadened to involve country level policy interventions. The focus must be on UAE-wide policy interventions that are consistent across all emirates rather than emirate-level interventions that create a different playing field across the country.

Abu Dhabi Council for Economic Development: Which sectors do you feel offer the most potential for economic diversification in Abu Dhabi? And how can Abu Dhabi fast-track these?

Schwalje: The Abu Dhabi Economic Vision 2030’s focus on horizontal and vertical diversification into capital-intensive, export-oriented sectors sufficiently balances risk with the uncertainty created by globalization of knowledge industries. Recent declines in global commodity prices further support this relatively cautious approach to diversification and industrial development.

Abu Dhabi Council for Economic Development: Which countries might Abu Dhabi try to emulate when pursuing its ambitious economic sustainability program?

Schwalje: Abu Dhabi would be wise to broaden its current benchmarking strategy to define its economic sustainability program to include two types of countries: countries which generate a significant portion of their GDP from oil exports and countries which have economies that are reliant upon workforces imported from abroad. Normative economic policy should not just be drawn from rich, developed countries which have purportedly transitioned to knowledge-based economies but also incorporate developing country peer benchmarks in South America, Asia, and Africa. Non OECD peer benchmark countries may provide successful practices of economic development strategies that have focused on the export of low-cost, high-end knowledge-based services or the more traditional low-cost export-oriented manufacturing strategies while making incremental, evolutionary advances up the value chain. The experiences of countries such as Brunei, Equatorial Guinea, Trinidad and Tobago, Russia, Venezuela, Gabon, Kazakhstan, and Mexico could provide a more well-rounded rounded set of benchmarks of oil exporting countries from which to derive learnings. Looking at practices from labor importing countries such as Hong Kong, Switzerland, and Australia could also expand upon the analysis in the Economic Vision 2030.

Abu Dhabi Council for Economic Development: Is two decades enough time to build a fully diversified economy? If yes, why?.. and if no, why not?

Schwalje: It is difficult to establish what the end goal should be. In the GCC, economic diversification means reducing heavy dependence on the oil sector by developing a non-oil economy, non-oil exports, and non-oil revenue sources. It will also require reducing the role of the public sector by promoting private sector development. Based on rather sparse evidence, it seems likely that GCC economies will have significant difficulties in their diversification efforts. In the Arab World the gross value added of knowledge-based industries is the lowest in the world making up 39% of regional gross domestic product as compared to 74% in OECD countries. The contribution of value added to regional gross domestic product from knowledge-based industries has remained virtually constant over the last decade. From 2000 to 2009, the percentage share of employees in knowledge-based industries in the Arab World has increased by a compound annual growth rate of .8% in OECD countries with knowledge-based industries employing 77% of workers. Based on sparse data from 2000 to 2009 from 14 countries in the Arab World representing 70% of the region’s population, 61% of the population is employed in knowledge-based industries. Employment in knowledge-based industries has increased only negligibly over the last decade. These few crude measures provide evidence that economic diversification efforts have not necessarily produced meaningful sectoral shifts in gross domestic product attributed to knowledge-based industries or led to employment in knowledge-based sectors.

Beginning in the late Nineties, Qatar launched a comprehensive set of education reforms to more effectively align its education and training system with its macroeconomic policies aimed at advancing towards a knowledge-based economy. However, technical vocational education and training (TVET) has not been a significant focus of educational reforms.

Though the need for more effective TVET systems emerged as early as the 1940s when Qatar started producing and exporting oil, the government has primarily focused on supply side, expansionary educational policies aimed at establishing new TVET institutions. However, many of the TVET governance institutions that prevent underinvestment in skills, provide adequate regulation, and coordinate stakeholders are still in a nascent state.

TVET policies in Qatar have largely proceeded without a clear conceptualization of the scope of TVET and which types of institutions should be included in the TVET policy and which ones should be excluded. TVET faces an identity crisis in which people are unhappy with the name, the image, and reputation. It remains unclear how technological TVET can be, what fields it encompasses, and whether TVET leads to jobs which are considered acceptable to Qataris.

In the presentation below, we highlight some of the issues Qatar will need to address to develop a national TVET strategy which overcomes existing gender issues.

Tahseen Consulting is honored to have its work on skills gaps in the Arab World cited by the Gulf News. We have posted a snippet from the article below. While we agree that more occupation-specific assessments and certifications are needed, there are likely larger employer-level interventions required before such initiatives can really have an impact. We view increasing the resources regional firms devote to workforce investment and development as systemic problems that must be addressed first.

Workforce Investment

While firms tend to focus on paying higher wages for highly demanded skills, macroeconomic trends and rampant market failures of education and training systems suggest longer term approaches to skills formation through continuous, regular on the job training and knowledge transfer are needed (Hall & Lansbury, 2006). Market failures in human capital formation are rampant as education and training institutions struggle to keep pace with economic growth (Lall, 1999). The workforce investment mandate of employers in the 21st century has expanded to include not only training in response to high-performance workplace organization and maintaining skills relevancy in light of competitiveness, but it now also includes the burden of remediating inadequate pre-employment general skills formation due to formal education and training system market and institutional failures. Despite widespread skills shortages and gaps observed in the Arab World, training rates are generally lower as compared to developed knowledge economies with more effective skills formation systems as well as other developing economies such as Brazil, China, and Russia (World Bank, 2010).

Lall (1999) suggests that basic skills, personal attitudes, and competencies developed through formal education and training must be complemented with specific technology-based experience to develop technical skills. Industrial sophistication and competitiveness are derived not from formal education and training but the “practical experience of mastering, adapting, and improving specific technologies” (Lall, 2000, p. 22). Industrialization and skill accumulation are achieved by expansion of the education system alongside the upgrading of the skill intensity of economic activities. For developing countries, this approach reduces the technology gap with advanced countries while raising the demand for higher levels of human capital and concurrently providing the education and training required for economic development (Mayer, 2000). To avoid insufficient individual incentives to engage in skill upgrading, improved performance and productivity gains from skills acquisition are linked with pay when firms exercise wage flexibility (Ashton & Sung, 2002).

The willingness and ability of firms to provide enterprise-based training is rooted in a number of factors. The educational attainment of the workforce and firm managers can serve to reduce investments in firm-level training. Low levels of education amongst a firm’s workforce can raise doubts surrounding the absorption capacity of training while managers with lower levels of education may not perceive a value in providing training. Managerial calculations of the returns to training may be further complicated by informational gaps surrounding technology, future skill requirements, and benefits of training (Lall, 1999). Firms which operate in less competitive, low skill production economies in which short-term strategic planning, little technological upgrading, low rates of capital spending, and an unfavorable economic policy environment for growth are rampant may prevent structured firm-based training.

Lack of internal capacity to provide training can obligate firms to rely upon external private training provision. In cases where the external training sector is underdeveloped and firm sizes are generally small, the inability to achieve scale to minimize training costs and budgetary constraints can serve to reduce the prevalence of firm-based training (Lall, 2000; Ziderman, 2003). This situation is particularly applicable in the Arab World where firm sizes are comparatively small relative to other regions (Schwalje, 2013c). Employee poaching, the tendency of firms to recruit employees with transferrable skills from other firms, may serve to limit firm-based training since training firms incur the cost of employee training only to lose the employee and resulting benefits of the training to another firm. In an environment with high levels of poaching, training firms will reduce training or only offer highly, specific training that is not transferrable to other firms (Acemoglu & Pischke, 1998).

Due to the variety of causes of inadequate enterprise training, policy solutions must be tailored to the root cause. In cases of market failure which deter workforce investment, joint approaches that share the responsibility of skills development between government and business have been effective. Training subsidies allow companies to develop training capacity, but more sustainable, longer-term approaches such as government provided training advisory and technical assistance funded through national training funds and levy-grant schemes are preferred. A notable initiative of this type is the Waqf Fund in Bahrain which trains employees for the Islamic banking sector based on contributions from private financial institutions which are invested in money market instruments and the returns invested in training initiatives. The Human Resources development Fund in Saudi Arabia also works in a similar way. Where the private training sector is weak, the government may fulfill a transitional role to build the capacity of private training providers complemented with public sector provided training. Payroll levy-grant schemes which do not require government financing are effective in limiting poaching. Under such schemes, firms which provide training receive subsidies to fund training initiatives while firms that do not train do not have access to funds since they are more likely to poach employees (Ziderman, 2003).

Tahseen Consulting is honored to have its work on skills gaps in the Arab World cited by the Gulf News.

Workforce Development

Jacobs (2002) identifies workforce development as the cooperation of education and training institutions, the business community, and governments to provide individuals with rewarding employment as well as firms obtaining skills in the quantity and quality they require. High youth unemployment rates and market failures of education and training systems to create general skills suggest an expanded role for the Arab business community towards ensuring alignment between the skills imparted in formal education and training systems and those demanded in the workplace. Apprenticeships or work experience, often compensated at below the market wage rate, in which work experience is integrated into the formal educational structure and classroom learning can ease the school-to-work transition and ensure employability of young graduates (Quintini et al., 2007).

Including employers in curricula design, identifying the skill sets needed by graduates, standards setting, and accreditation can ensure education and training systems evolve alongside changing labor market needs. Through membership in industrial trade associations, businesses can also serve a governance role in the skills formation system (Ackroyd, Batt, Thompson, & Tolbert, 2005). However, in developing countries the oversight role typically played by scholarly, scientific, and professional organizations may be limited due to lack of capacity. Workforce development ensures that the relevance and employability mandate of education and training systems is fulfilled by minimizing informational asymmetries which reduce individual investment in skills acquisition. Early employer involvement in articulating future skills needs also serves to reduce the need for workforce training investment to backfill general skill deficiencies resulting from poor quality education and training systems.

At Tahseen Consulting our core values reflect our organizational culture and guide our decision-making and interactions. One of our fundamental values is sharing our research with funders, businesses, educational institutions, community organizations, governments, and others through agenda-setting applied research so that we all learn and work together. Our research and insights have been featured in 40+ prominent publications and cited by several international organizations such as the New York Times, Forbes, World Bank. UN, OECD, European Investment Bank, and the Sheikh Saud bin Saqr Al Qasimi Foundation.

Occasionally we publish articles that are so compelling that others “borrow” word-for-word from our work without proper citation or attribution. This was the case with a recent article that appeared in a prominent academic journal that “borrowed” largely upon the findings of Tahseen Consulting’s research on knowledge economy transitions in the Arab World but failed to acknowledge our work. The article, which can be viewed here: http://onlinelibrary.wiley.com/doi/10.1111/rsp3.12034/abstract, has since been retracted.

While imitation may be the highest form of praise, even if some people neglect proper attribution, it is clear we have reached an important milestone of success. You can read our article The Knowledge-based Economy and the Arab Dream: What Happened? below as well as explore our cutting-edge work on Arab knowledge economies by following the links below. However, if you find our work useful, please ensure you give us credit where credit is due.

Rethinking Arab Knowledge-based Economies

Knowledge Economy in the Arab World: The Arabization of the Concept of Knowledge Economy

Arab Knowledge Economies Require More Effective Skills Formation Systems to Generate High Skill, High Wage Employment

While some Arab institutions have robust tools for ascertaining the effectiveness of programming and post-graduation employment of students, the majority of institutions have informal processes that are insufficient for measuring success and adapting services

Tahseen Consulting, one of the Arab Region’s fastest growing education and public policy consulting firms, hosted a workshop on strengthening the monitoring and evaluation capabilities of national employment and university career centers. The one-day workshop gathered national employment and university career center managers to improve the ability of institutions to internally review and adapt career programming to better meet the needs of Arab youth and employers.

Representatives from 20 leading institutions advocating more effective methods of evaluating student participation in career services, employer participation, and student career outcomes discussed cooperating to address regional youth employment. The goal of the workshop was to enhance the capabilities of participating institutions to implement formal monitoring and evaluation processes.

“Many institutions in Arab countries which serve youth and the unemployed do not provide sufficient career counseling to help beneficiaries make informed decisions about their education and employment paths. In the region, career counseling has proceeded as an unregulated field,” said Walid Aradi, Chief Executive Officer of Tahseen Consulting. “Career counselors need to understand the dynamics of the labor market and labor market trends to successfully advise students. This will require both better trained career counselors as well as institutional adoption of more rigorous monitoring and evaluation approaches.”

The role of career counseling in the Arab region has evolved significantly in recent years. However, Tahseen Consulting’s research has found that career guidance in Arab institutions is often not distinguished from psychological counseling, is occasionally provided by teachers alongside teaching duties, and is primarily focused on college admissions rather than career guidance. At the high school level, career counselors are critical in helping students discover their interests and workplace values, research potential careers, and outline the necessary steps to pursuing certain careers. In universities, career centers help students make contacts with potential employers and access experiential training opportunities that lead to employment. Across the region, national employment centers are vital to enabling the unemployed to take ownership of their future through their own efforts.

“Based on international experience in OECD countries, all secondary and post-secondary institutions should have career guidance services to help Arab youth access information and explore career options,” said Wes Schwalje, Chief Operating Officer of Tahseen Consulting. “Across the region, career counselors often lack detailed information on labor market forecasts to suggest emerging career tracks which are in line with economic growth and government development plans.”

The workshop addressed five key topics related to monitoring and evaluating national employment and university career centers:

The Role of Monitoring and Evaluation in Employment and Career Centers. The workshop brought together experts to discuss how monitoring and evaluation can allow institutions to manage programs more effectively, promote institutional learning, communicate impact, and build credibility with employers.

How Employment and Career Centers Can Help Youth Overcome Typical Employment Challenges: In recent years, research on defining particular labor market issues that confront Arab youth has increased. This research allows national employment and university career centers to adopt more tailored approaches to address youth unemployment challenges in the region.

The Role of National Employment Centers and Career Advisory in Supporting Economic Development: Providing accessible information on educational requirements and career pathways can track students into in-demand fields associated with national economic development ambitions. Good quality information about opportunities for scholarships and career options can also help change attitudes towards private sector employment and increase the image of particular industries outside the public sector.

Defining Appropriate Indicators to Assess Services and Outcomes: Employment and career center administrators must move beyond assessments that focus exclusively on student placement information for marketing and PR purposes to more formally and rigorously assess the quality of service provision.

Data Collection Instruments for Institutional Learning: Improved quantitative and qualitative approaches can help national employment and university career centers better understand how their activities affect employment outcomes and employer engagement.

A presentation on the main topics addressed in the workshop is available at:
http://www.tahseen.ae/r&imonitoringcareercenters.html#header

The King Abdulaziz Center for World Culture, an initiative of Saudi Aramco, invited Tahseen Consulting’s Wes Schwalje to Saudi Arabia to host a panel on global best practices in the transition to knowledge societies. The panel, which was held at the Global Knowledge Society Forum, featured:

Dr. Hun Joo Park
Executive Director, Korea Development Institute

Dr. Indrajit Banerjee
Director, Knowledge Societies Division, UNESCO

H.E. Professor Dr. Nasser David Khalili
UNESCO Goodwill Ambassador

Dear Readers,

As 2013 draws to a close, here is a look at our most popular content of the year. We hope you are enjoying Tahseen Consulting’s Research and Insights, and we look forward to continuing to engage with you in 2014.

Best wishes for a happy and productive new year,

The Tahseen Consulting Team

Tahseen Consulting’s Walid Aradi Interviewed on Dubai TV’s Money Map

Tahseen Consulting’s CEO Walid Aradi appeared on Dubai TV’s Money Map to discuss the role of entrepreneurship policy in economic development and meeting the region’s youth unemployment challenge.
 
Women Wanted: Attracting Women to Technical Fields in Qatar

In this article, we discuss the difficulties Qatar faces in terms of promoting technical and vocational education amongst females. Over the past several decades Qatar has dramatically reformed its education and training system to align it with macroeconomic policies aimed at advancing towards a knowledge-based economy. However, technical vocational education and training (TVET) has not been a significant focus of educational reform.

   
Promoting Entrepreneurship in the Arab World: The Need for Tailored National Approaches

Understanding the determinants of self-employment and how they might differ across the region is critical to meet the region’s youth unemployment challenge

   
An Arab Open Government Maturity Model for Social Media Engagement

While embrace of social media as a component of open government initiatives is still in its infancy in the Arab World, there is much expectation that public sector social media use will have a transformative impact on citizen participation in government, policy formation, and the way public sector entities conduct business. However, existing evolutionary models of e-government and open government maturity based on the experiences of Western democracies offer little support to Arab entities that operate in an institutional environment characterized by much different governance traditions.

   
Arab Knowledge Economies Require More Effective Skills Formation Systems to Generate High Skill, High Wage Employment

As Arab countries pursue knowledge-based economic development, national skills formation policies require significant rethinking says this report from Tahseen Consulting in collaboration with the Sheikh Saud bin Saqr Al Qasimi Foundation for Policy Research.

   
Skills Shortages and Gaps May Limit the UAE’s Islamic Finance Hub ambitions

Based on our projections that a another $87 to $124 billion could potentially enter the Islamic banking system in the UAE by 2015, approximately 7,800 new jobs will be created at Islamic banks in the UAE assuming current asset concentration ratios remain similar.

   
Arab Corporate Social Responsibility Rapid Appraisal Diagnostic

Given the scattered use of Global Reporting Initiative standards in the region, Tahseen Consulting has developed an Arab Corporate Social Responsibility Rapid Appraisal Diagnostic based on analysis of a representative sample of 128 regional CSR initiatives and previous literature.

   
The Arab World’s Most Generous Philanthropists Could Mobilize $24 billion by Signing the Giving Pledge

If the Arab World’s billionaires signed a pledge to donate their wealth to philanthropy, an estimated $24 billion would be mobilized.

   
Arab Students Studying Abroad Contribute $77 Billion to Other Economies

Arab students studying abroad have generated $77 billion in income for other countries over the last decade without even considering other economic externalities.

   
Only 11% of Arab Educators Regularly Use Educational Technologies in their Classrooms a Tahseen Consulting Study Finds

Due to the region’s youthful demographics and widespread use of mobile technologies, Arab educators face the challenge of meeting new expectations of learners who want engaging, interactive, and individualized learning experiences.

 

Tahseen Consulting’s CEO Walid Aradi appeared on Dubai TV’s Money Map to discuss the role of entrepreneurship policy in economic development and meeting the region’s youth unemployment challenge. Aradi sat down with Zeina Soufan, host of Money Map, to discuss Tahseen Consulting’s work on entrepreneurship policies and programs in the Arab World.