In the days leading up to Hosni Mubarak’s resignation in February 2011, Tarek was in the heart of Cairo’s Tahrir Square. For the first time, he felt a sense of power over his and his country’s future. Since then, however, even with a bachelor’s degree in business, he has been unable to find a job. He now remains in Tahrir Square, not as a revolutionary, but as a street vendor.

Tarek is only one of millions of young Egyptians and Tunisians struggling to earn a living wage. The Egyptian and Tunisian revolutions brought hope and optimism to young adults frustrated with political and economic paralysis. While rampant unemployment was one of the primary catalysts of the Arab Spring, the unstable state of sweeping political reform has actually decreased their chances for employment in the near future.

Many see taaleem fanee — Vocational Education and Training (VET) — as the most realistic path toward employment for the region’s young adults. Though a member of what some see as the “old guard” of governance in the region, Queen Rania Al Abdullah of Jordan remains a leading advocate of education reform in the region. Referring to VET, she stated: “If we can provide quality education that leads to lasting employment, we will have done our part in shaping the future of the Arab World.” VET prepares trainees for mid-level jobs based on manual or practical activities, such as carpentry or hospitality. While VET has been present through public and private initiatives in both Egypt and Tunisia for more than two decades, neither country has established a viable or sustainable model. Following the revolutions in the early part of 2011, the economic and political challenges only became more formidable, making it increasingly difficult to establish VET centers.

While these new obstacles continue to exacerbate unemployment in Egypt and Tunisia, the revolutions also created an historic opportunity for the new regimes to prioritize the reform and facilitation of VET through public-private partnerships (PPPs). Now, more than ever, is the time for Arab governments to play a leading role in facilitating the provision of marketable skills to a jobless generation.

If implemented effectively, VET could become a key component for solving the prevailing quandary of human capital development in the Middle East.

The Unemployment Crisis

According to the International Labour Organization, since the 1990s the unemployment rate in the Arab world has been among the highest in the world, with an overall rate of 10.3% and a staggering 23.7% for those under age 25.

While the unemployment rate is alarming, it masks an even harsher phenomenon: A smaller percentage of people in the Arab world even seek employment. The region’s young-adult participation rate in the labor force stands at around 35% compared to the global average of 52%, according to McKinsey & Co. This reflects both a low participation rate among young women and extreme frustration with job prospects, but does not take into account ambiguities associated with employment in the informal sector. In Egypt, the World Bank estimates that the informal sector employs 37% of the workforce, although official unemployment numbers do not factor this in.

Vocational institutions provide trainees with the specific skills and knowledge needed to succeed in the labor market. These six-month to two-year programs fall both within and outside the traditional post-secondary education system. Because VET improves individual employability through a focus on specific skills aligned with market needs, it leads to higher worker productivity and is, therefore, vital to modernizing and increasing the competitiveness of developing economies. An upgraded workforce, for example, in manufacturing and construction would not only empower these high-potential sectors in Egyptian local markets, but also strengthen global competitiveness.

Similarly, a greater number of skilled workers will allow Tunisia to diversify its economy beyond low-skilled sectors. “We can no longer focus on providing ‘cheap labor’ [for developed markets]. We need other competitive advantages,” stated Mongi Amemmi, director of research at the Tunisian General Labor Union (UGTT). “Vocational training [is] one of the tools that makes the risk of forced mobility [and instability] of work in the current market environment into an opportunity.”

Currently, training for vocational professions — such as plumbing or automotive maintenance in the region — is limited to apprenticeships in the informal sector, work-readiness programs through employers and military-service training. According to a McKinsey report financed by the International Finance Corporation (IFC) and the Islamic Development Bank, titled “Education for Employment: Realizing Arab Youth Potential,” only 20% of post-secondary students in the region’s public education system attend VET schools.

Historical Challenges to VET Implementation

Long seen only as a limited component of education policy and, therefore, an exclusive prerogative of the government, the rampant corruption and political inertia of Egypt and Tunisia’s former regimes have infected VET initiatives for more than two decades. Considered a last-chance educational opportunity for under-performing students, hopeful students have also faced the social stigma attached to it.

A 2008 UNESCO report estimated that the Egyptian government directed a mere 3.76% of GDP to education, compared to 8% in Malaysia, for example. The vocational training programs that were created displayed the hallmarks of an underfunded system: poor facilities, a lack of qualified instructors, and, most importantly, insufficient strategic planning by 14 loosely coordinated government entities. Students graduated without marketable skills and without a sense of how to market those skills they did possess, forcing employers to either bear the cost of retraining or under-employing university graduates. Marie-Therese Nagy, head of commercial training at Mobinil, one of Egypt’s largest telecom providers, concurs. “Of course it is preferable to hire people with a vocational training background; it saves a lot of investment and time [rather] than developing [employees] who may be lacking these skills.”

In Tunisia, the same mismatch between market demand and the skills of VET graduates stemmed, not from a lack of funding, but from a mismanagement of educational policy. Faced with an overflow of young, unemployed university graduates, VET became a priority for Tunisia’s recently ousted regime as early as the 1990s. Referred to as takween mahani in local parlance, the government set up a centralized system, established the Ministry of Employment and Vocational Training in 1990, and later created four separate agencies under the Ministry’s control to administer training, funnel graduates into appropriate positions, and provide funding for those hoping to use these new skills in micro-enterprise. In 1999, a presidential decree established the Funds 21-21 program, which allocated significant resources to microfinance and SMEs, provided means for the “reconversion” of unemployed workers into new industries, and offered access to professional training programs to integrate unskilled or poverty-stricken workers into public-sector employment.

Nonetheless, according to Amemmi, “corruption and the revolving door of leadership [a result of appointments at the whim of a fickle dictator] meant that continuity in policy was impossible.” His colleague, Lamjed Jemli, current coordinator of private sector activities at the UGTT union — a former political prisoner and, after being fired from a government post, an unemployed graduate himself — agreed. Obligatory background checks by the Interior Ministry “eliminated any and all candidates who did not have connections to power or maintain ‘correct’ relations with the government.”

Post-revolution political and economic instability threatens the successful implementation of VET. The founder and CEO of one of Egypt’s largest professional training firms called the six months following the revolution the most difficult of his company’s history. In addition to a sharp decrease in revenue due to customer attrition, the company had to function without crucial government subsidies from the Industrial Training Council (ITC), a subsidiary of the Ministry of Trade and Industry. According to this CEO, “The entire system for financing training has been put on hold until the government has been stabilized. The reality is that the new regime is focused on larger, more public issues, and doesn’t view the subsidization of professional training as a priority at the moment.”

The timing of the revolution could not have been worse for his company, which was viewed as one of Egypt’s premier firms. Two large European buyers were at the table ready to write a check. Following news of a burgeoning revolution, however, one pulled its offer and the other opted to lessen its exposure through a strategic partnership. “We were also quite far along with a Saudi investor interested in funding a new vocational training program … focused on a few specific occupations,” the CEO added. “However, the instability of the revolution created too much additional risk to move forward.”

In addition to the lack of available public and private financing, the absence of government-approved standards for offering training certificates and accreditations presents a significant obstacle for VET providers. As the CEO noted, “Our company competes based upon the high quality of our services as certified by government administrators. Universal standards for accreditation are crucial for both the companies and trainees relying upon our services. We may be unable to launch new programs if there is no infrastructure for creating new standards.”

Relaunching VET: Conditions for Success

While political turmoil will likely burden the region in the coming years, it is crucial for governments to quickly establish proper infrastructure to support the development of VET. In McKinsey’s recent study, experts found four key pillars needed for a successful system: (1) close involvement with the industry in areas such as curriculum content, training provision and internship opportunities to ensure that courses are kept up-to-date and in line with industry requirements; (2) wide recognition of VET qualifications (e.g., diplomas) by businesses within the industry or industries at the national (or international) level; (3) assurance of employment with attractive wage levels, and (4) a business model with robust and diversified revenue streams. Of course, there is also the perpetual challenge of funding such initiatives.

Fortunately, the new Egyptian government has taken some initial steps toward reinvesting in VET. However, large-scale plans are on hold until some level of political stability has been attained. In May 2011, Planning and International Cooperation Minister Faiza Abu El-Naga announced a post-revolution development plan worth 230 billion pounds (about US$38.6 billion), of which 55% would come from the private sector and 45% from the public sector. “The hope is that the private sector — local, Arab and international investors — will contribute to this plan after security returns to the country,” she noted. The plan envisages adding 1.7 billion pounds (about US$285 billion) for extra spending on healthcare and education, including VET in particular.

Nagui Elyas, an Egyptian-American and co-founder of B&H Education, which operates more than 50 beauty training schools on the west coast of the U.S., is cautiously optimistic, but fears the mistakes of the past might be repeated. Convinced that Egypt was in dire need of VET to develop sustainable industries, particularly in the healthcare sector, Elyas financed and launched a pilot VET center focused on dental assistant and nurse training in Alexandria in the mid-1990s. All 30 of the first group of students completed the six-month course, and 29 found full-time positions immediately.

Despite the center’s success, funding was unavailable from public and private investors to launch a full-time comprehensive VET facility. “The government claimed it didn’t have any room in its budget, and private investors thought the opportunity was too risky,” said Elyas. “Without some sort of large initial investment, even the right VET managers and administrators are unable to move forward on exciting developments.”

Executives at Tunisia’s only privately run microfinance institution, Enda Inter-arabe, echoed Elyas’ concerns. With funding from European governmental sources and in partnership with the Ministry of Vocational Training and Employment and the Tunisian Agency for Professional Training, almost immediately after the revolution this microfinance institution began work on a vocational training program to equip young entrepreneurs with the financial and leadership skills needed to create successful start-ups. In recognition of Tunisia’s history with an ineffective VET, the program will not only educate, but also provide, follow-up coaching and mentoring and an introduction into Enda’s already substantial network of micro-entrepreneurs to create market linkages and facilitate the continuing development of professional skills for its graduates.

Despite the conviction of Enda’s leadership that “vocational training aimed at the creation of youth-run micro-enterprises” is the “only real short-term solution” as the new government struggles to create a long-term development policy channeling young unemployed university graduates into salaried employment, the initiative is impossible without ample and diversified funding. According to Mourad Hentati, director of research and marketing at Enda, “the additional risk of providing both capital and maintenance loans to inexperienced young graduates” is a departure from established principles of microfinance. “We cannot push these types of initiatives through without considerable financial support.”

“The government certainly shouldn’t expect the trainees to be able to pay for training by themselves, as most of them were unemployed adults and students in the first place,” Elyas noted. “Nor should they expect private investors to lead the way, as the risk is too high without more substantive financial and administrative support already in place.” Whether through subsidies, nonprofit trusts, grants, scholarships or the creation of dedicated international funds, the government is the key to creating greater private interest. “With the … government committed, along with the financial and rhetorical support of international allies and organizations, private investors will jump in,” Elyas added. “Herein lies the essence of the public-private partnership needed to sustain VET development.”

Ending the Vicious Cycle

A Catch-22 has historically characterized the relationship between education and economic development in the Middle East. In order to develop a sustainable and diversified economy, a country must have a skilled workforce, which requires an effective educational system. However, to develop an effective education system, a country requires a strong economy to provide adequate funding. Without prioritizing and investing in practical education, the Arab world will continue to find itself in perpetual economic decline.

Egypt and Tunisia should look, perhaps, to its successful global peers as models. Professional education in Brazil, for example, is now firmly on the national agenda. Since 2003, the annual budget for vocational institutes has increased from US$385 million to US$3.8 billion, with some 401,000 students now studying at federally financed technical institutes, up from 102,000 in 2002.

Mona Mourshed, Middle East office partner and co-leader of McKinsey’s global education practice, believes some Latin American countries have shown the rest of the emerging world how to create a viable model. However, private collaboration is also crucial. “Those VET programs that are large-scale and successful — i.e., large segments of students pursue VET tracks and find employment thereafter — around the world have similar attributes, [mainly] heavy employer involvement, [and] at least half of [the] curriculum is practicum-based.” In Brazil, for example, the availability of publicly funded VET centers has allowed private companies such as Vale SA, a multibillion dollar Brazilian mining company, to partner with companies in the region to create training programs in industry-specific disciplines. Such PPPs are exactly what Mobinil would love to participate in, according to Nagy, should the educational infrastructure exist.

Post-revolutionary fervor remains alive, but it is still unclear for how long. Reshaping and enhancing the provision of VET will help transform life in the Arab world, halting a Catch-22 that threatens to haunt the region for decades to come. Youth revolutions opened the door for transformation, but political and business leaders must provide them with the opportunity to help rebuild their countries.

This article was written by Kareem El Sawy, Christen Farr and Sarah Newera, members of the Lauder Class of 2013.