The Middle East and North Africa are sitting on a demographic time bomb. The region presides over the lowest employment rate in the world. One in four people under the age of 25 is out of work. Yet over the next decade or so, the region is likely to experience growth in population of 150m people, the equivalent of two Egypts. What is to be done?

In this special report, the Financial Times hopes to offer some answers to one of the most pressing questions of the new century. Our experts, led by Roula Khalaf, Middle East editor, provide first-hand reportage and analysis of the problem of youth and employment in the Arab world. The FT is also co-hosting a two-day conference that opened yesterday in Doha under the auspices of Her Highness Sheikha Mozah of Qatar.

How to create jobs for a restive youth is not merely a matter for policymakers in the west and east worried about the security of energy supplies. It is – or ought to be – a matter of vital national security in the region, where autocratic rulers have held sway over subservient populations.

The demographic curve challenges the assumption that the status quo can hold. The World Bank estimates that the Middle East and North Africa (Mena) region will need to create up to 80m new jobs by 2020. This requires an economic transformation far greater than, say, the Industrial Revolution in late 18th century England or its successor in the US more than a century later, which was accompanied by mass immigration, social upheaval and, crucially, political reform.

Such historic parallels inevitably invite objection. The Arab world is, after all, experiencing an economic boom on the back of sky-high oil prices. A visitor to Dubai or Abu Dhabi, wide-eyed at a landscape packed with industrial cranes and five-star hotels, would be hard-pressed to spot trouble ahead. Yet underneath the glittering surface, the picture looks very different.

Marcus Noland of the Peterson Institute for International Economics and Howard Pack of the Wharton School, University of Pennsylvania, note in their January 2008 paper “Arab Economies at a Tipping Point” that the economic boom is being felt unevenly across the region. Two-thirds of Arabs do not live in big oil-producing countries. And in many states there is an unhealthy reliance on cheap foreign labour at the expense of the local population.

According to Messrs Noland and Pack, “the region faces a contest between two opposing forces – the demographic pressure to create jobs and the capacity of the economy to absorb new entrants productively – and it is an open issue as to which will prevail”.

Managing these two opposing forces will require enlightened leadership and political skill. There are some promising signs. In Qatar, the government has launched Education City on the outskirts of Doha, an impressive effort aimed at importing top-notch academic talent, starting with Carnegie Mellon, the Pittsburgh-based university. In Abu Dhabi, a programme called Tawteen (localisation) has brought together government, business and academia to create a series of training programmes to instil the entrepreneurial spirit.

Overall, however, there is a need for root-and-branch reform of the education system in the Arab world. Too often, schools rely on rote learning rather than equipping young people with the breadth of thinking required to survive and thrive in the global market place. This will require better qualified teachers – but it should also include a hard look at school curricula, a politically sensitive subject.

The second issue is the so-called hydrocarbons curse. Diversifying economies away from oil is doubly difficult when energy prices are rocketing. But creating new sources of employment is vital. The Gulf states have made some progress, particularly in financial services. For states such as Saudi Arabia with large populations, there is an even greater need to create jobs in the productive sectors, notably manufacturing.

This in turn will require far closer attention to the structure of the private sector which remains geared to a model of low cost and low productivity. This is hardly surprising given the degree to which many private sector companies are still outgrowths of the bureaucracy. Unleashing an entrepreneurial work ethic will demand greater vocational training; but above all, it requires incentives for aspiring business people, particularly those seeking to establish small and medium-sized businesses which are the real engines of job creation.

Which brings us to politics. It has become fashionable to criticise the US for its persistent calls for democracy in the region.

Yet incumbent governments have too often encouraged religious fundamentalism as a means of weakening moderate secular dissent.

Elections in Egypt and the Palestinian territories, for example, have subsequently strengthened the hand of the Islamist opposition.

The spectre of disaffected youth with no prospect of gainful employment should haunt all of us. Therein lies the path of the suicide bomber. The best means to head off frustration, to ease the transition to a modern economy capable of managing globalisation is to give more power to the individual.

The private sector has a key role to play, but political reform through institution-building must follow.

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