Getting emerging markets working
Although policy-makers from around the world are united by their desire to boost employment, the question of how to do this remains challenging. EY’s Rohan Malik says it’s time to pick up the pace.
Governments everywhere, like too many of their citizens, need to get down to work.
– Rohan Malik, EY
The issue of high unemployment is a prime challenge in emerging markets, particularly affecting many countries’ youth.
According to the United Nations Development Program, 50 million jobs need to be created in the Middle East and North Africa (MENA) region over the next decade — based on its current employment level of about 106 million jobs. This translates into approximately 8.5% GDP growth — far in excess of what is currently being achieved.
According to the World Bank’s 2013 World Development report, around 600 million new jobs will be required over the next 15 years to support a growing workforce, mostly in Asia and sub-Saharan Africa.
The hunt for sustainable solutions
We believe that in emerging markets, governments need to focus their attention on attracting investment into their country’s private sectors. In most emerging economies, 9 out of 10 jobs are created by the private sector, which is the foundation for any thriving economy.
With approximately one billion people and 28 different provincial governments, India is a strong example of how programs must be tailored to different governments — even in the same country.
In India, each region is assessed on the competitiveness of the market and how conducive to business it is. When a team of colleagues from EY and I started work in Madhya Pradesh, a state in central India, setting up a business took 40 days.
Reducing this length of time is the kind of change that one looks at on a macro level, focusing on how to make an area more open for business and better able to attract investors. Each region demands a bespoke approach that addresses their specific needs and requirements.
When examining how to create the environment for businesses to grow and create jobs, it is important to focus on addressing three barriers to growth:
- Access to capital
- Access to best practice
- Access to markets
With job creation, governments are able to dissipate social unrest by getting unemployed into work and the capital raised from investment can be channeled into training and education.
Risk vs. reward
Governments who are able to offer subsidies, tax breaks or simplified approval processes are likely to prove more attractive to investors.
Large oil and gas companies, for example, may need to enter conflict zones, but the cost of doing business is higher due to insurance risks and human mobility factors.
These are the type of assessments that private sector companies have to make before they embark on an investment decision, which impacts where they put their money and hence, creates jobs. Governments that fail to prioritize job creation will lose out.
Simplifying procedures and reducing red tape are key ways to lure such job-creating investors.
Looking ahead, competition for investment and capital is likely to continue to be prevalent, and those countries with the most streamlined processes will be the ones to win business.