At the end of the summer holidays, children and young people across the Middle East and North  Africa (MENA) once again donned uniforms, packed satchels and headed to school, as more than a quarter of the region returned to class.

In Syria, a quarter of the country’s population, some 5.3 million people, are enrolled in schools, while 38 percent of Saudis, 46 percent of Yemenis, 31 percent of Jordanians and 31 percent of Egyptians are below 14 years of age. Altogether, half of the MENA’s (including Iran) 300-million-plus people are under 24 years old.

While all these kids are enrolled in school, there is no pressing socio-economic problem. But over the next decade as students graduate and want to enter the workplace, finding employment for them all will be difficult. Already the Middle East and North Africa have the highest unemployment rates in the world, at 9.4 percent and 10.3 percent, respectively, with unemployment expected to rise further this year, according to an International Labor Organization report.

According to UN projections, the MENA’s population will reach 430 million by 2020, of which 280 million are expected to be urbanites — already the three mega-cities of Tehran, Cairo and Baghdad are home to 25 percent of the region’s population. This rapid urbanization stresses infrastructure and exacerbates not only the employment problem, but other issues afflicting the MENA region to varying degrees, including political instability, food insufficiency, drought and energy shortfalls. Furthermore, a main pressure valve that used to keep some of these woes at bay — finding work abroad — has led to remittance reliance, a revenue stream that cannot be taken as a certainty.

The Gulf was once considered an employment paradise for the rest of the region, taking in millions of white and blue-collar workers. But given the economic contraction of the past year, the Gulf gold rush is not as robust as it once was, with workers laid off and remittances down. Moreover, the majority of expatriate workers in the Gulf are not Arabs but Asians. Some 1.5 million Egyptians, for instance, work in the Gulf, compared to 4.8 million Indians. Unless there is a pro-Arab employment policy, the Gulf cannot create enough jobs for the MENA’s burgeoning youth.

The viability of migrating outside the MENA region for employment is also questionable. Europe’s rapidly aging population will increasingly be leaving the workforce, but it is far from a given that this will lead Europeans to be more accommodating to large numbers of Arab job-seekers, whether they are ‘guest workers’ or given full citizenship. While many Europeans acknowledge that there will be a need for migrants to pick up the slack, there is also jingoistic concern about a ‘Eurabia’ developing.

The onus has to be on the MENA region’s public and private sectors to come up with viable solutions and programs. But what kind of model should they follow? Promoting more of the same 1970s-style American capitalism flaunted in the Gulf and elsewhere in the region, with its rampant consumption, large cars and excess is as undesirable as it is unattainable — and unsustainable.

Moreover, the Chicago school of economic theory, championed by the World Bank and the International Monetary Fund, has taken a serious battering, evidenced by rising unemployed in the West and the billions of dollars of taxpayers’ money used to bail out the financial sector. Economic growth is all well and good, but when surging growth is then followed by a staggering collapse, it’s two steps forwards and one step back.

Economic reform in the region is clearly needed, but the crux is in the implementation. For places like Syria, which has been reshaping its economy for the past decade, reforms have created jobs and opportunities, but the main beneficiaries have been the already well off — those able to invest funds into the new stock market and establish holding companies. Reforms benefit Syria’s elite, while the vast majority of the population has seen salaries remain stagnant as real estate prices and food costs have soared. It is a similar story throughout the MENA region, particularly in Egypt, Lebanon, Jordan, Saudi Arabia and Yemen.

One of the ways to shrink this widening disparity in income is through bolstering small and medium-sized enterprises, coupled with the micro financing that enables such ventures to happen. Improving education levels — to create ‘knowledge-based societies’ — implementing more progressive taxation regimes and population control are other components.

It has long been debated whether a more democratic MENA would be better able to surmount its sociological and political hurdles — an equally pressing issue, however, is how to defuse the demographic time-bomb the region is sitting on.

PAUL COCHRANE is the Middle East correspondent for the International News Service

“Since wars begin in the minds of men, it is in the minds of men that the defenses of peace must be constructed” — thus is the noble aim of the United Nations Educational, Scientific and Cultural Organization (UNESCO). Unfortunately, here too strife and wars of words have been the order of the day, as was recently demonstrated by the election of UNESCO’s director general, a process that had all the characteristics of a dog fight.

Nine candidates were in the race to take over from Japan’s Koichiro Matsuura, who ruled for 10 years, despite having no track record whatsoever in terms of education, science or culture. The same could not be said for the Arab candidate, Farouk Hosni, who has been Egypt’s Minister of Culture for more than 20 years and is a relatively successful painter.

Hosni not only had the credentials. For once, thanks to intense lobbying by Egyptian President Hosni Mubarak, the Arab world stood as one behind Hosni. Add to that the promised support of the African Union and several European countries, and it should not come as a surprise that Hosni was the bookies’ favorite. Yet, it all went desperately wrong. The 58 members of UNESCO’s Executive Council in the final voting round opted for Irina Bokova, a relatively unknown 57-year-old diplomat, who, until last month, served as Bulgaria’s ambassador to France.  Interestingly, she had picked up only a handful of votes in the first voting rounds. It appears that intense lobbying took place between rounds, not in the least by David Killion, the American ambassador to UNESCO. Bokova finally won thanks to European and American support, as well as the sudden withdrawal — after three rounds of voting — of the main European and South American candidates. 

“It was clear that there was a conspiracy against me,” Hosni told reporters upon his return to Cairo. “There is a group of the world’s Jews who had a major influence in the elections and who were a serious threat to Egypt taking this position.” Those are harsh words by a no doubt very disappointed man, and Egypt’s media followed suit.  “America, Europe and the Jewish lobby brought down Farouk Hosni,” wrote Almasry Alyoum. “Farouk Hosni’s campaign was met with an uncivilized attack by Jewish intellectuals in France,” wrote Al-Ahram.

Now, there is an element of truth in these hotheaded comments. On May 22, a group of Jewish intellectuals led by the French pseudo-philosopher Bernard-Henri Levy and the American Nazi hunter Elie Wiesel, both well known for their unconditional love for Israel, published a letter in Le Monde, in which they called Hosni a dangerous man and a disgrace for the international community were he to be appointed.  The letter summed up a series of remarks Hosni made over the years, which are quite unfriendly towards Egypt’s Israeli neighbors and could be labeled anti-Semitic. For example, Hosni said on numerous occasions that Jews infiltrate the international media, and he once claimed that, if he ever found Israeli books on Egyptian shelves, he would burn them himself. He also called Israeli culture “inhuman and aggressive.” Seeing these remarks, and the media’s heightened attention, French and American diplomats simply could not be seen supporting Hosni.

However, if the Egyptian media had just a grain of independence left in them, they could have been a bit more critical. If Hosni truly believes there is an almighty Jewish media and lobby, could he not have been an inch more diplomatic? What’s more, the media could have partly blamed Hosni’s defeat on the schizophrenic state Egypt finds itself in.

It is common knowledge that Egyptian politicians make certain remarks for inner consumption only. Faced with a powerful Muslim-led opposition, a vast majority of the population opposed to normalized ties with Israel, as well as the country’s links to the United States; Mubarak & Co excel in speaking in two tongues, if only to ensure the billions of dollars in American aid coming their way.

Finally, one could wonder if Hosni, who as a long-serving member of the Egyptian regime is partly responsible for the country’s appalling human rights record and its severe censorship laws, is the right candidate for UNESCO’s top job.

On the other hand, if in a slightly cynical mood, the Egyptian media could for the same reasons argue that Hosni is in fact just perfect for the job, for UNESCO has been a mess for quite some years. In 1984, the US withdrew from the organization, quickly followed by its loyal lapdog Britain, which slashed the organization’s funds by about a third.

The US and the UK claimed the organization had been politicized. Or, as the ultra-conservative Heritage Foundation put it: UNESCO had become a communist hotbed. With US support, Japan’s Matsuura had the task to “restructure” the organization, which he did, only to leave behind an awful stench of deep-rooted corruption. Irina Bokova: good luck in the snake pit of world culture!

PETER SPEETJENS is a Beirut-based journalist

Rich in culture, history and resources, the Kurdistan region of Iraq, long brutalized by the Baath government, enjoyed peace, stability and economic development in the aftermath of the 2003 invasion of Iraq. Known as the state within a state, or the “other” Iraq, the region holds an estimated 45 billion barrels of oil and equally colossal levels of gas.

Currently, however, there is no oil law that determines control and management over the country’s resources because of differences between the Kurdistan Regional Government (KRG) and the Baghdad government. The KRG opposes the yet-to-be passed draft oil law because it would require it to cede too much control to Baghdad. As a result, Iraq lacks the necessary regulatory and legal framework to instill confidence in foreign investors. The country desperately needs to upgrade its energy infrastructure and to ensure the country’s oil wealth is tapped to its full potential (Iraq currently exports little more than 2 million barrels of oil per day — less than what it was prior to 2003).

In accordance with what it considers its constitutional rights (under the Iraqi constitution, oil and gas ownership are not within the exclusive powers of Baghdad), the KRG has enacted its own oil law as disputes with Baghdad persist; it has signed — independently — more than 30 exploration and development deals. The federal government deems these illegal and void since they are enshrined in production-sharing agreements that give companies a stake in the crude they produce. Baghdad has, as a result, blacklisted those companies that independently enter agreements with the KRG. The oil ministry instead prefers to give a fee to companies; this, however, has discouraged investment since it gives oil companies no incentive to maximize output or compensation for the risks taken, and the Iraqi parliament itself has voiced its dissatisfaction with what it considers an unproductive model. Iraq’s Oil Minister, Hussain al-Shahristani, it should be noted, has been called to account for this by the Iraqi parliament and faces an interpolation in the coming weeks.

Back in June, however, Baghdad did allow the KRG to export oil from two fields in the Kurdish north (Tawke and Taq Taq), with all revenues being deposited and distributed on a per capita basis by the Baghdad government.

Although this might have seemed like a breakthrough at the time, it is now clear that the two governments are still at a standstill. Neither the KRG nor Baghdad have paid the foreign oil companies that operate those two fields.

To make matters worse, the KRG was recently embroiled in a dispute with the Oslo Stock Exchange and the Norwegian oil company DNO International (which operates the Tawke field).

DNO is one of many foreign oil companies that have signed contracts with the KRG to develop oil fields. However, DNO operations were suspended last month by the KRG as a result of a Norwegian regulatory investigation into the sale of $30 million-worth of DNO shares. Material published by the Oslo stock exchange suggested at the time that the KRG acted as a middleman for the transaction of those shares to Turkish oil firm Genel Enerji (which operates the Taq Taq field), through the use of a clearing account registered to KRG Natural Resources Minister Ashti Hawrami.

At the time, it was suggested that a personal account was used, and this led to intense media speculation that illicit personal gain may have been involved in the transaction. The KRG abruptly suspended DNO operations. Indeed, Baghdad was quick to jump on the opportunity and an Iraqi MP called for a committee to investigate the possibility of unlawful involvement by the resources minister.

It was, however, all too quick and opportunistic. The KRG and, specifically, Hawrami, were vindicated entirely after the Oslo Stock Exchange and HSBC released statements that made clear neither the KRG nor Hawrami were being investigated and that there was no wrongdoing on their part.

Although DNO operations were eventually restored, the damage was done. The tit-for-tat rhetoric and heated exchanges between the KRG and a corrupt and underperforming oil ministry in Baghdad, resulted in the suspension of all operations in the Kurdish north.

The Tawke and Taq Taq oilfields produced around 60,000 and 40,000 barrels per day, respectively. Even at $50 per barrel, these fields could jointly generate $5 million per day, and this is revenue Iraq desperately needs. Iraq has already had to slash its budget on countless occasions because of falling oil prices.

A recent oil auction saw only one bid being awarded to a foreign oil company, while the second bidding round has just been postponed; like everything else, the energy sector is currently in a state of stagnation. Perhaps once the national elections in January 2010 are out of the way, focus will turn on the outstanding disputes — oil being one of many — including Kirkuk and the centralisation and decentralisation of power. But based on past performance, the only certainty in Iraq is uncertainty.

Ranj Alaaldin is a Ph.D. candidate at the London School of Economics focusing on post-invasion Iraq

The summer months are usually quiet in the Arabian Gulf, the searing heat prompting expats and locals to pack their bags and head for greener, cooler pastures. But to those paying attention, a war has been raging since August. For several months now, the Yemeni army and rebel Huthi fighters, belonging to the Zaidi offshoot of Shiite Islam, have been engaged in a pitched battle with government forces, leaving tens of thousands displaced and hundreds more dead.

On October 14, Yemeni President Ali Abdullah Saleh pronounced to supporters that the northern rebels would be crushed “in the next few days.” Saleh, perhaps tongue in cheek, was careful to attach the archetypal Arab suffix “God willing” to the end of his statement.

This may prove a wise move given that the regime has little control over the mountainous north, where fighters with “conventional weapons” have already taken down a number of Yemeni air force planes. The offensive in the north, coined Operation Scorched Earth by the regime in Sanaa, leaves little to the imagination as to how Saleh intends to deal with his opponents.

Fighting has also broken out in the south, where separatist groups continue to prove a thorn in Sanaa’s eye. Also lurking in Yemen’s underworld are various “al Qaeda types” credited with the USS Cole attack in 2000, before the group became a household name. (Luckily for Saleh, the United States has been more than willing to assist him with the latter problem.)

Pouring fuel on the fire, there are those who are keen to portray the northern conflict as yet another manifestation of the increasing regional tensions between Sunnis and Shiites. In Yemen, this translates into a “proxy war” between Iran and Saudi Arabia, the latter backed by the US. However, the notion that the problem is merely religious is about as accurate as saying that the Lebanese Civil War was a simple Muslims-versus-Christians conflict.

The Zaidi sect is in practice surprisingly close to Sunni Islam, so much that it does not deem the Imam Ali or his descendants as quasi-divine entities. In fact, without the support of one of Yemen’s top Zaidi tribal chiefs, Sadiq al-Ahmar, the regime could hardly maintain its offensive in the north.

To comprehend the conflict’s root causes, one needn’t look further than the walls of Old Sanaa, where homeless, bare-chested men reside in unsanitary squalor, just a stones throw away from the central bank.

One of the world’s poorest countries, Yemen is without a doubt the economic black sheep of the Gulf. One-third of the country is unemployed and 40 percent live in poverty, which has doubled since the country’s unification in 1990.

Sanaa’s answer to these problems so far has been to cling to power by maintaining control over profitable economic sectors through patronage networks or direct ownership. Oil, gas, transport, finance, cement and foodstuffs are either government-owned or controlled, keeping a tight leash on the portion of the population that does have a job.

By 2018, however, Yemen’s oil revenue, from which it paid more than 75 percent of government expenditures last year, is expected to run dry. As a result, its ability to exercise this system of patronage over its economy will weaken. Even if liquid natural gas production, which began last month, does see exponential growth, the prospects for economic disaster are still in the cards.

To sidestep this outcome, Saleh’s regime will have to reverse its “scorched earth” policy, begin to negotiate, release its grappling hold on profitable sectors and enact an inclusive and progressive economic policy.

The US and Saudi Arabia could easily force Saleh in this direction given that the Yemeni government is now begging the Saudis for $2 billion to make up for a 75 percent drop in oil revenue in the first half of this year. For Saleh to change course, however, Iran will also have to cease its meddling and make good on its promise to mediate between the Yemeni president and the Huthis, albeit with a wink and a nudge from Washington and Riyadh. 

It all seems like a tall order. The alternative, however, is to let a country with a large and volatile array of extremist groups, situated on one of the world’s most strategic shipping routes, tear itself apart and become the Gulf’s only failed state. If that happens, the implications for the region would be far worse than the present crisis. In short, its time to stop fanning the flames of conflict and to start pouring water on a country that is ablaze.

Sami Halabi is a deputy editor at Executive Magazine

The annual meetings of the International Monetary Fund and World Bank offer a relatively informal atmosphere for finance ministers, central bank governors and private sector executives to discuss the previous year and set a direction for the next. In Istanbul last month, the meetings reviewed a year of economic turmoil and vast change in government policies. Representatives from the Middle East recalled that the 2008 annual meetings in Washington occurred in a week when crude oil prices dropped 17 percent, the United Arab Emirates federal government guaranteed bank deposits and intra-bank lending and the Saudi stock exchange dropped to their lowest level in four years.

This year’s affair was far calmer. The broad consensus in Istanbul was that the worst was over and that the Middle East had survived the global crisis better than most of the world. Lebanon and Saudi Arabia were praised by many, including Mohsin Khan, the former regional IMF chief, for their conservative banking policies. “Both countries didn’t allow their banks to hold structured products, and this was a very smart move,” he told me. But whatever the successes they may claim for the past year, representatives in Istanbul acknowledged that major challenges remain, especially over unemployment and poverty.

The region already has relatively high jobless figures. The World Bank projects unemployment will rise by 25 percent in 2009 and 2010 in the Middle East and by 13 percent in North Africa, despite regional growth second only to Asia.

“The message, globally, is that, yes, there are signs of recovery, but it [the situation] hasn’t settled deeply,” said Shamshad Akhtar, the World Bank vice-president for the Middle East and North Africa (MENA). “We already had 20 million people unemployed [in MENA], and we have new entrants to the labor force [due to high population growth], so we have a problem.” The IMF’s Regional Economic Outlook, launched in Dubai on October 11, projects regional growth will fall from 5.4 percent in 2008 to 2 percent in 2009, before rebounding to 4.2 percent in 2010. A particular danger is that a disproportionate number of people, especially in Egypt and Morocco, live just above the $2-per-day income threshold for poverty, meaning the region cannot afford complacency over joblessness. This has been the major factor behind the World Bank’s increased lending in MENA from $1.8 billion in 2008 and 2009 to over $3 billion in 2009 to 2010. “Demand is steep,” said Akhtar. “Our clients need [to finance] reforms – and not just at the macro-level. Countries want to strengthen their financial structures, they want more microfinance. They want affordable mortgages and pension reform. They want to restructure social safety nets.”

The World Bank’s 2009: Economic Developments and Prospects, launched in Istanbul, drew attention to the opportunity presented by the economic crisis for governments to “ease infrastructure bottlenecks and restructure ineffective — yet expensive — subsidies programs.”

Iran is the clearest case, with around 30 percent of GDP going into subsidies. Egypt’s food and energy subsidies are around 30 percent of government spending and 10 percent of GDP, while in Morocco 90 percent of subsidies go to groups other than the poor.

At the macro-management level, the annual meetings generally endorsed the region’s approach to the economic crisis, although there was also a clear sense that governments had much left to assess in their performance.

The region’s monetary reaction to the crisis was “unprecedented,” especially in guarantees to banks, explained Khan, now senior fellow at the Peterson Institute for International Economics in Washington. “Back in 2007, there was a lot of worry about the inflation rate. There was talk of reining in monetary expansion, the revaluation of exchange rates…that has changed.”

Governments, much like in developed countries, have lowered interest rates as inflationary pressures have eased. Although inflation is considered a danger in Egypt — where the IMF projects a rise to 16.2 percent in 2009 from 11.7 percent in 2008 — representatives at Istanbul agreed it would not become a regional issue in the near future. Their greater fear is that the global economic recovery could falter and depress the price of oil.

In the Gulf Cooperation Council, fiscal policies — especially with the vast reserves of Abu Dhabi and Saudi Arabia — have been at the forefront of the response to the downturn. But many in Istanbul pointed out that fiscal stimuli have been less innovative than monetary changes, as several state infrastructure projects in the Gulf are already in the pipeline.

The shadow of politics, as ever, loomed over discussion at the annual meetings of the regional outlook. Both Saudi Arabia and the UAE moved quickly to squash a poorly-sourced story in The Independent that secret meetings were underway to abandon the dollar as the currency in which oil contracts are made.

But their anger at the report reflected a sense that the region can ill afford any further disruption — and that any serious sharpening of tensions, especially over Iran, could quickly upset a mood of cautious optimism.

GARETH SMYTH has reported from the Middle East since 1992, mainly for The Financial Times

Two mysterious explosions in suspected Hezbollah arms caches in the space of three months, and the discovery of Israeli electronic wire-tapping devices, provide rare glimpses into the covert intelligence war waged between Israel and Hezbollah. It is still unclear what caused the small explosion in a home in the southern village of Tayr Filsay on October 12, but the aftermath provided an opportunity for a propaganda skirmish between two masters of the art.

With the Lebanese media still buzzing about the source of the explosion and the number of casualties, the Israeli military released video footage shot by a pilotless drone, which it said showed Hezbollah men loading rockets into the backs of trucks.

Hezbollah then produced its own footage, claiming that the long rocket-shaped object seen in the Israeli video was nothing more than a rolled up steel shutter. In the absence of evidence either way, the outcome was inconclusive, with both sides accusing each other of violating United Nations Security Council Resolution 1701.

Still, the explosion in Tayr Filsay, coupled with the series of blasts that destroyed a building in Khirbet Selim in July, has Hezbollah’s cadres gossiping over the possibility that Israel is waging a sabotage campaign against the party’s facilities. No evidence has publicly emerged that Israel is conducting such a campaign, but that will not stop the speculation, especially if more buildings are blown up. Hezbollah and Israel have fought a clandestine intelligence war against each other for over two decades. Lebanese and Syrian military intelligence worked closely with Hezbollah in building spy rings inside Israel’s occupation zone in South Lebanon in the 1990s, even penetrating the upper ranks of the Israeli-backed South Lebanon Army militia.

One of the most celebrated intelligence stings involved Ramzi Nohra, a Christian drug smuggler from Ibl es-Saqi and an agent for Israeli intelligence until he switched sides in 1994. Nohra and his confederates helped abduct Ahmad Hallaq, who fought with the Syrian-backed Palestinian group As-Saiqa in the civil war, before being recruited by Israeli intelligence in the early 1990s. In 1994, Hallaq, on Israeli instructions, assassinated Fuad Mughniyah, the brother of the late Hezbollah military commander Imad Mughniyah. A year later Nohra, coordinating with Lebanese military intelligence, kidnapped Hallaq and handed him over to the Lebanese authorities.

From 2000, Nohra helped establish Hezbollah’s network of spies in northern Israel, using his old cross-border drug smuggling links. Lebanese hashish and heroin crossed into Israel in exchange for cash for Nohra and intelligence information, such as photographs of military positions, detailed maps of northern Israel and Israeli mobile phones for Hezbollah. The Israelis stepped up their own covert war against Hezbollah in 2002 when Meir Dagan was appointed head of the Mossad intelligence agency. Dagan was once described as “the old [Ariel] Sharon, less a few centimeters,” a reference to his gung-ho spirit and ruthlessness. Dagan’s appointment coincided with a string of assassinations in Lebanon. Four months after Dagan arrived at Mossad, Nohra was killed in a roadside bomb explosion in south Lebanon. In August 2003, Ali Saleh, a veteran Hezbollah militant, was killed in a car bomb explosion in southern Beirut. A year later, Ghaleb Awali, another senior Hezbollah combatant, was also killed in a car bomb assassination. The (probable) pinnacle of the Mossad assassination campaign was the killing of Imad Mughniyah in February 2008.

In the past three years, Israel appears to have redoubled its efforts to penetrate Hezbollah’s traditionally air-tight security, to compensate for its woeful intelligence failures during the July 2006 war. But Hezbollah’s counter-espionage branch and Lebanese security agencies have had some success, judging from the busting of multiple spy rings in Lebanon over the past year. The recent discoveries were reportedly due, mainly, to the efforts of the Internal Security Forces (ISF), which received hi-tech phone tapping equipment and advanced data processing computer programs from France. The equipment, according to a report in Le Figaro in October, was intended to assist the ISF in apprehending the killers of former premier Rafiq Hariri, but was used also to round up, according to the latest count, some 70 suspected agents working for Israel.

The latest development in this clandestine war came on October 18, when two explosions were heard in a wadi between the border villages of Houla and Meiss Al-Jabal. The two blasts reportedly destroyed two of three Israeli eavesdropping devices buried beside Hezbollah’s fiber-optic telecommunications cables. The Israelis blew them up by remote control after Hezbollah discovered the devices.

Hezbollah claimed a “major accomplishment” in discovering the Israeli devices, but it is reasonable to assume that where there is one (or three actually), there will be more. The covert war continues.

Nicholas Blanford is the Beirut-based correspondent for The Christian Science Monitor and The Times of London