International Youth Day Feature Service Articles

As part of celebrating such individuals on International Youth Day, two recent CIPE-Atlas Corps Think Tank LINKS alumnus – Fayyaz Yaseen from Pakistan and Iryna Fedets from Ukraine – analyzed two issues young people care about in their communities: youth unemployment and anti-corruption. In these CIPE Feature Service articles, the two authors explore how to bring about democratic and economic reform changes in their respective countries.

Youth Unemployment in Pakistan : An Account of Issues and Possible Solutions

Article at a glance

  • Almost half of Pakistan’s labor force is unemployed. The situation is particularly dire for youth. A number of government programs have been introduced to address unemployment but they have not yielded the required results.
  • Various factors are contributing to youth unemployment, including a lack of education, skills, and experience. Security challenges, a stagnating economy with low growth, and lack of foreign investment also contribute to the poor job market.
  • A multi-pronged approach that addresses the social, political, security, and economic issues is required to increase employment opportunities for youth in Pakistan.

Introduction

Pakistan, the 44th largest economy in the world,1 has the world’s ninth largest workforce with 57.24 million workers.2 According to the Labor Force Survey 2012, about half of this workforce is unemployed. With the joblessness rate rising by 6 percent in 2012 alone, the employment to population ratio stands at 50.4 percent. Faced with an acute energy crisis and a challenging security scenario, the national economy remains far from stabilization3. As inflation slips into double digits, the mounting challenge of ever increasing unemployment could translate into a deep rooted social and political crisis.

At the beginning of this century, Pakistan entered into a demographic bonus phase where child dependency started to decline and the youth share of total population started to increase. Currently, two-thirds of Pakistan’s total population is below 23 years of age; this demographic dividend is expected to last until 2030. However, without proper education, vocational training, and a knowledge-based growing economy, this dividend cannot be utilized to its fullest extent.

Government programs

Realizing this, successive governments since the 1990s have taken several measures to increase the employability of the country’s workforce – particularly educated youth. However, almost all of these measures were cosmetic in nature and intended for securing quick political mileage. From the Yellow Cab Employment Scheme, to the Benazir Income Support Program (BISP), to the Prime Minister Youth Loan Business Program, all lacked evidence-based policy and a well thought out implementation plan.4 As a result, even after throwing billions of rupees at the programs, the result of these unsustainable schemes approached naught.

Among all these employment schemes, the Prime Minister Youth Loan Business Program initially seemed to be a panacea for the employment and entrepreneurship problems facing the country. In a country where business and enterprise is discouraged, and youth mostly vies for public sector jobs that give them a sense of power and status in society, a business mindset takes a back seat. In such an environment, it is through incentivizing business by initiatives like these that policy makers could promote a business mindset in the country.

However, an ideal employment and business generation scheme fell prey to poor planning and implementation. A 100 billion rupee fund, that was supposed to finance roughly 100,000 business ideas by providing average funding of up to two million rupees to youth, did not take into account the capacity of the government to evaluate millions of applications on merit in order to select the best 100,000 candidates. Moreover, given its political handling and branding, right from the beginning, there were fears it would promote nepotism and be used as a bribe for amassing political support. The program completely lacked a training component to extend professional guidance and advice to the youth investing public money into their business ventures. Thus, it may too end in vain like other such politically motivated employment schemes.

Employment trends and factors

Analysis of data suggests that unemployment trends in Pakistan have consistently moved upwards – except for a brief bout in the two years between 2004-06, which was mainly attributed to greater inflow of foreign aid and investment during former President Pervez Musharraf’s time. In fiscal year 2002, unemployment was recorded at 8.3 percent; it fell to 7.7 per cent by 2004, and fell further to 6.2 percent by 2006. However, in fiscal year 2007, it was again up to 7.8 percent, manifesting serious inconsistencies and weaknesses in policy formulation and implementation.5 During all these years and among all age groups, the unemployment rate for females was almost double that of their male counterparts.6

An account of reasons for the high (youth) unemployment in Pakistan suggests a long list of issues. Youth lack the (required) education, skills, and experience, and thus face a structural mismatch of supply and demand in the job market. Moreover, there are regional, provincial, and gender biases and discriminations in the provision of job opportunities.7 In addition to all these issues is the fact that the population growth rate is greater than the economic growth rate and major sectors of the economy, like industry and agriculture, experience low productivity.

While unemployment is generally rampant in Pakistan, it is particularly high among youth. In addition to the general conditions affecting youth employability, there are specific reasons that lead to their loss of work. According to a research study, one factor affecting the high unemployment rate among youth is the change in their outlook that occurs between when they are in school and when they graduate and commence their working life.

The young are found to have greater aspirations for careers and economic freedom when they are still in school but after graduating, when they face the practicalities of life and the job market, they get frustrated and tend to quit their jobs in the initial phase of their professional careers; their desire to seek the best render them workless. For obvious reasons, unemployment is higher among educated youth than those who are less or uneducated. Unlike in developed countries, there is a severe shortage of investment in human capital in Pakistan. With poor quality education and a lack of training opportunities, a large part of the labor force lacks the acumen to understand and adopt new technologies.

Forces driving negative economic growth

In addition to these factors that cause or contribute to youth unemployment, there are issues that are responsible for overall stagnation or negative economic growth, which, directly or indirectly, increases unemployment in the country. For instance, in the acute energy shortage that Pakistan faces today, no industry can survive, let alone make profits, through competing nationally and internationally. Pakistan’s economy is also paying a heavy price for being a frontline state in the war against terrorism. For being an ally in this war, Pakistan has received military and civilian aid of about $ 27 billion in the last decade or so, but the war has inflicted a financial loss of over $75 billion dollars to the economy, and on top of that there are the nearly 50,000 deaths that the country has born so far, and the war seems far from being over.

An immediate effect of the global war on terrorism was that it completely halted foreign direct investment in Pakistan and caused a great number of local investors to abandon the country and move their factories and production plants overseas. This has also massively contributed to the increased unemployment in Pakistan. Low economic activity in the country is causing job losses, which result in social chaos, increased crime rates, and destabilized law and order. The chaos in turn causes more industries to close. There seems no end to this downward spiral for now.

Economies around the world, including in Pakistan, are fast moving towards sophistication and enhanced efficiencies. In such economies, a workforce with little or no skills is redundant. A big reason behind unemployment in Pakistan is this mismatch between the supply and demand of education and skills. The public policy makers often do not take into account the future workforce requirements of the industrial, agricultural and services sectors, and have therefore largely failed to devise the right policies that may produce the desired result.

Impacts of urbanization

Pakistan is one of the most rapidly urbanizing countries in the world. This excessive urbanization and the rate at which the labor force moves into urban areas is mainly culpable for high unemployment rates in the urban areas. Thus, contrary to the common perception, unemployment is far higher in the urban areas as compared to the rural areas of Pakistan. This is due to the structural mismatch between the skills provided and demanded in the more sophisticated services and industry sectors in the cities. The rural regions have got their own set of issues.

In rural areas, the labor force is usually concentrated in small firms and small scale industries that mostly operate with primitive methods. While working in such environments, there is usually little opportunity for the young to undergo training, have greater exposure, and to enhance their skills. When this labor force with limited skills and lower education moves to the larger cities and the economies of urban areas, they have very little probability of finding a job.

Conclusion and policy suggestions

A solution to all these problems lies in a multipronged approach to address the causes of unemployment at all levels and in all manifestations. With the host of social, political, and security issues that Pakistan faces today, economic stagnation and youth unemployment is not only an economic function and will not be corrected by economic measures and policies alone. In order to tackle it, a comprehensive package of policies needs to be introduced.

Some policy suggestions are given below:

  • Even in today’s advanced world, Pakistan does not have exact data of its unemployed and underemployed. The last time the country had a census was sixteen years ago in 1998. The government needs to ensure timely collection of comprehensive data to facilitate better policy making. ,/li>
  • The Government of Pakistan needs to give voice, visibility, a sense of involvement, and a feeling of ownership to young men and women in national, provincial, and local policy making and implementation. The more inclusive, transparent, and representative such policies will be, the better results they will be able to produce.
  • Pakistan is a labor intensive country. Thus job rich investment programs need to be promoted. Such programs should boost more and better job creation through inclusive economic growth.
  • Improved and better employment opportunities can be used as a tool for social integration. When used as a leverage to prevent social disintegration, employment opportunities for youth can convert social and political threats into opportunities.
  • Improve the availability, access, and quality of education. The world is fast moving from a goods economy to a knowledge and innovation economy. Without sufficient investment in human capital through quality education programs, Pakistan cannot compete given the changing economic needs and trends in the world.
  • Through an improved educational curriculum and improved coordination between schools and business firms, a smooth transition from school to work can be made possible.
  • Through career counseling and vocational guidance programs, youth should be trained and sensitized about respect for employment contracts.
  • In order to staunch rapid and ever increasing urbanization, devolution of power needs to be extended to the district level. Through devolution of political power to the lowest administrative tier, the federal government will empower local authorities to better plan their development, economic growth, and job creation needs
  • Rule of law and peace are the prerequisites for an investment friendly environment. Unless peace prevails, foreign direct investment will continue to shy away from Pakistan and employment opportunities will continue to be few and far between
  • The state authorities need to devise an inclusive employment model where division and discrimination on the basis of sex, language, religion, ethnicity, etc., can be removed and institutions may reach out to the most excluded and destitute groups on a priority basis.
  • Instead of individual entrepreneurship schemes, the government needs to support and promote collective entrepreneurship programs. This can be done through providing good infrastructure, education, investment in science and research, and by creating mechanisms for people to collectively create organizations.
  • Finally, a sustained high interest rate is also an impediment to job creation in Pakistan. In order to promote pro-employment businesses, interest rates need to be significantly lowered. Business ideas that capitalize on labor intensive production mechanisms can also be incentivized through tax cuts.

Will Ukraine Use its Chance to Battle Corruption?

Article at a glance

  • Anti-corruption campaigners in Ukraine have made momentous progress toward battling corruption during a period of major social and political change in the country.
  • Business in Ukraine suffers significant losses in costs, time, and opportunity due to widespread corruption. International research has studied the scope of the problem. Dishonest competition in public procurement is a major area of concern.
  • Limited access to information, lack of press freedom, and flawed election procedures impede the fight against corruption. Business and civil society need to remain focused on the implementation of anti-corruption measures to ensure continued progress.

Introduction

Anti-corruption campaigners in Ukraine achieved a momentous victory in July this year after a long period of battling corruption in the country: the Ukrainian government has submitted an Anti-Corruption Strategy for Years 2014 to 2017 to the Ukrainian Parliament.1 If passed into law, this strategy – which was drafted and debated by the Ukrainian office of Transparency International, a global movement against corruption – will serve as a comprehensive plan for implementation and monitoring of anti-corruption measures.

This achievement has been largely possible due to the major social and political changes that have occurred in the country over recent months. Massive protests in Kiev in 2013, which occurred when Ukraine's former government decided to move away from an anticipated trade agreement with the European Union, had a strong anti-corruption element. This “Euromaidan” movement led to the ousting of the former president, who created “a centralized hierarchy of corruption” when occupying the position, and now Ukraine has a newly elected president and a new cabinet.2 Supporters of the Euromaidan, including small and mid-sized businesses, stood up for greater economic freedom and opportunity and to this day share a common sentiment that they cannot give up their vision of a better country, particularly after such a high price has been paid in many lives lost.

Therefore, with a new government in place and a willingness in society for change, Ukraine now has a unique chance to tackle the corruption that has been inhibiting business activity in the country and has paralyzed major investment projects. But with corrupt practices that run so deeply and when many previous attempts have mostly failed, will Ukraine be able to achieve more transparency and justice?

Corruption is a threat for business and economic freedom in Ukraine

Business in Ukraine suffers significant losses in costs, time, and opportunity because of widespread corruption. A survey of small and medium-sized businesses undertaken in Ukraine in 2013 by the Center for International Private Enterprise (CIPE) Ukraine and the Center for Social and Economic Research (CASE) Ukraine showed that Ukrainian entrepreneurs face challenges such as bribes and “presents,” corruption fees, non-transparent tenders, and civil servants' malpractice in their daily operations.3 It is not uncommon for an entrepreneur to have registration or permit procedures extended deliberately as pressure to pay a bribe for a more swift process, or to be forced to purchase extra merchandise or to engage with certain “partners” or contractors.

Dealing with official agencies is one of the most widespread sources of corruption for small and middle sized businesses in Ukraine. There are 71 controlling agencies in Ukraine, including quality control agencies, safety, labor and environmental inspections, architecture and licensing offices, the pension fund, and others. Entrepreneurs surveyed by CIPE and CASE experience pressure from such agencies, which takes place as a result of arbitrary interpretation of unclear laws and unavailability of effective protection in courts. Official control goes hand in hand with heavy financial sanctions, which business claims is “not proportionate” with its income and the nature of violations.

When their businesses cannot work legally and securely and suffer from dishonest competition and money loss, Ukrainian entrepreneurs often resort to corruption using bribes and personal contacts to get the necessary permits and documentation, access information, and avoid responsibility for breaking the laws. It was estimated that an average business spends around 30 to 40 thousand hryvnyas (USD$2,500-3,300) for bribes to such agencies during a year.4 Very few companies introduce anti-corruption compliance policies in the workplace.5 These are normally international corporations operating in Ukraine.

Dishonest competition in public procurement

While small and mid-sized businesses engage in corruption as an adaptation strategy, big business often benefits. Major privately and publicly owned firms in Ukraine use loopholes in public procurement legislation to unfairly secure high-cost government contracts.

The Anti-Corruption Action Center (ANTAC), a Ukrainian anti-corruption watchdog, lists hundreds of high-cost public tenders and deals that contain corruption schemes. More than a billion hryvnyas have been saved by this organization over the last two years by monitoring public tenders and reporting suspicious cases. In a recent case, the ANTAC saved 95 million hryvnyas ($7.9 million) by identifying a corruption scheme that public company Luhansk Coal used to procure equipment and services.6 All the companies that were chosen as suppliers for a public tender, as well as their competitors, were associated with one member of the Ukrainian parliament.

Currently ANTAC is investigating a 19 million hryvnyas ($1.5 million) contract between publicly-owned railway equipment company Ukrzaliznychpostach and a firm that was founded only a month after its only other competitor for this tender and with which it shares the same contact information. Other companies were banned from participating in the tender.7

Shady companies that win multimillion hryvnyas government tenders, overpriced procurement, and nominal demands that cut off competition are reported in practically all ministries and other official structures of Ukrainian government. This limits honest competition and makes political power a resource for securing business interests.

After such illegal deals gain publicity, some of these questionable contracts are canceled by the involved companies – to avoid investigation and public interest. Still, many cases filed by anti-corruption activists have not been examined by law enforcement, and unfair public procurement deals have not been stopped.

Lack of press freedom and democracy reinforce corruption

Limited access to information, lack of press freedom, and flawed election procedures make the struggle with corruption even harder for Ukraine. In 2006, Ukraine became a member of the Group of States against Corruption (GRECO), the international organization established by the Council of Europe to “monitor States’ compliance with the organization’s anti-corruption standards.”8 In 2014, eight years after GRECO made an evaluation of the perception of corruption and anti-corruption measures and suggested 25 recommendations, only 13 of them were implemented. The GRECO evaluation shows that opportunities for malpractice and corruption are present in legislation, public administration, political parties and other areas in Ukraine, which has a significant impact on society and business.

Unclear regulations regarding financing of political parties make it possible for elected officials to abuse their authority in order to protect certain business interests. A review of GRECO recommendations by Transparency International Ukraine notes that while declaring income and property is obligatory for government officials, there are no efficient legal sanctions for those who do not disclose full information. There is also a lack of regulations covering conflicts of interest for government officials.9 While general guidelines for avoiding and reporting conflicts of interest are given, specific norms about the procedures for informing, control, and sanctions, and instruments for prevention of conflicts of interest need to be developed.

Access to information is also discussed among the GRECO recommendations as an instrument for increasing transparency in public sector activities. Ukraine has adopted a law “On the Access to Public Information” that determines that all information is by definition open except confidential, secret, and service-related information. However, since the law “On Protection of the Personal Data” has been passed, governmental agencies and local authorities that are required to provide citizens with free access to information have been using it to block access to certain publicly significant information, such as officials’ income declarations and city plans. This complicates access to data in areas prone to corruption.

Lack of press freedom in Ukraine also hinders efforts to tackle corruption. Freedom House’s 2014 Freedom of the Press publication gives Ukraine 63 out of 100 points on the press freedom scale, with the higher the number of points representing less free media.10 For the last 10 years, press freedom in Ukraine has been slowly deteriorating: the score has grown from its lowest recorded point of 53 in 2005. This negative tendency is mirrored in Freedom House’s Nations in Transit research. While in 2006 Ukraine scored 4.21 points on the democratic progress scale - where 1 means the highest and 7 the lowest level of democratic progress - by 2014, its score has grown to 4.93.11 At 6.25 points, corruption is Ukraine’s weakest indicator.

The Ukrainian judiciary is too dependent on the political climate in the country to guarantee unbiased rulings. However, laws, court decisions, and law enforcement are the institutions that maintain the framework of public life in a country. If they are corrupted, free and fair conditions for business and the society cannot be provided.

International research summarizes the scope of corruption

The pervasive problem of corruption in Ukraine is demonstrated by numerous comparative studies. With a total score of 49.3, Ukraine fell into the category of “repressed” countries in the 2014 Index of Economic Freedom scoring only 21.9 points on “Freedom from Corruption”, among other criteria.12 A 2013 survey of investors undertaken by the Institute for Economic Research Policy Consulting in Ukraine shows that corruption is one of the biggest threats to the investment climate in the country (the average level is 5.26 points, with 1 meaning strong impact and 9 meaning no impact).13

According to the Ukrainian chapter of Transparency International, corruption “destroys honest business” in Ukraine.14 The effects of corruption can be seen in the monopolies that force out competition, the inability to plan long-term business development, and public officials benefiting from their control over business regulation. In 2013, Ukraine was placed 144th in Transparency International’s annual ranking of 177 countries based on its “corruption perception.”15

Conclusion: Action to fight corruption in Ukraine

Lack of political will to tackle corruption has been identified as the main reason why official anti-corruption plans and laws were not successful in Ukraine. As noted by Transparency International, the authorities were not willing to introduce new anti-corruption legislation or to apply existing instruments.16 The office of the Government Agent for Anti-Corruption Policy nominally exists in Ukraine, though it has virtually no influence on public institutions since its authority and level of independence need to be legally delineated.17

The Euromaidan demonstrations that began in Kiev in 2013 set elimination of corruption in Ukraine as a major goal.18 The small and mid-sized business community in Ukraine actively joined the movement that started out as a protest against the former government's decision not to proceed with a trade agreement between Ukraine and the European Union but eventually demanded wider political changes, transparency, and economic freedom.19 After the protests resulted in a change of government in Ukraine, several grassroots civic groups and non-governmental organizations that participated in the Euromaidan joined a coalition called the Reanimation Reforms Package. They are now working together to promote reforms including anti-corruption reform, judicial reform, administrative reform, and others.

The Anti-Corruption Strategy for Years 2014 to 2017 lays out a comprehensive plan of action for decreasing corruption in various areas. The strategy recommends requiring political parties to publish their funding reports, introducing mechanisms to prevent conflicts of interest for civil servants, introducing lobbying regulations, and providing unlimited access to information about public procurement tenders and elected officials. Other anti-corruption measures include reorganization of law enforcement and prosecution authorities, de-regulation of business, and promotion of a negative attitude towards corruption in society. This strategy essentially follows and specifies the GRECO recommendations and should be a convenient instrument to implement and monitor anti-corruption policy.

For these measures to be effective though, business and civil society need to remain focused on their implementation and exert pressure on the government. Ukraine can use the current momentum to mobilize its fight against the long lasting problem of corruption.

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