According to the Arab Human Development Report for 2016, conducted by the United Nations Development Programme, 87.6% of young Egyptians rank the economic situation—which stems from rising poverty, unemployment, and price hikes—as the most important challenge facing the country. Financial and administrative corruption ranked second at 6.5%.
The Arab region is one of the most urbanised areas in the world. Large proportions of young people are living in urban areas (for instance, 81.9% in Jordan, 67.4% in Tunisia, and 41.5% in Egypt), mostly in ashwa’yat (informal housing areas) and other informal settlements. According to the report, 28% of all urban residents in the region are living in ashwa’yat.
As a result of the lack of decent job opportunities, the declining value of wages, the rise of conflict, and the political instability in the region, many young Arabs are either temporarily or permanently immigrating.
According to the report, one of the main reasons behind the delay in human development in the region is due to the model of development that is dominated by the public sector and renders governments as the providers of first and last resorts—a model that adopted by most countries in the region post-independence.
This state-lead development model acts as a double-edged weapon. Although it has expanded access to key entitlements—whether public employment or food subsidies—which has lead to raising some levels of human development, such gains have rarely translated into increases in productivity and growth.
This is due to two main reasons: the first is the pyramid of privilege in which economic advantages are reserved for firms and individuals who are connected to the state and the ruling elites. The second is that a large proportion of human capital is trapped in unproductive public sector jobs—for which in Egypt registered at EGP 6.6m in the fiscal year of 2015/2016.
Furthermore, private sector contributions to growth in the region are considered to be the lowest in the world due to anticompetitive and discriminatory practices against small business and young entrepreneurs, in favour of larger firms. These practices are a result of the deep structural alliance between political and economic elites to secure and maintain their economic interests.
For example, firms linked to former regimes in Egypt and Tunisia were given privileges or business advantages—71% of politically connected firms in Egypt, and 64% in Tunisia were operating in sectors protected by at least three import barriers, while only 4% of unconnected firms in Egypt and 36% in Tunisia shared the same privileges.
Moreover, the region’s resources tend to be channelled into luxurious and conspicuous real estate projects, unproductive public sector spending, and military expenditures, with the benefits being distributed within just a small fraction of society. In Egypt, inequality is strongly influenced by richer households according to recent World Bank estimates. The top 1% of rich households contributes to inequality more than any other percentile in the distribution.
