There is a range of initiatives that higher-education institutions (HEIs) in the Middle East, North Africa, and Pakistan (MENAP) can consider to help them sustainably meet the needs of a growing young population that is already confronted with high unemployment and limited job prospects.
On top of this growing demand, the COVID-19 pandemic has accelerated future-of-work trends such as digitization and automation, increasing the need for new skills and higher qualifications. At the same time, HEIs face pandemic-induced financial constraints, which are likely to persist for the foreseeable future.
In this article, we lay out the challenges that HEIs face and discuss three critical levers—education delivery models, financial-sustainability management, and support for innovation with basic research—that MENAP HEIs and education ministries can consider as they rethink the approach to higher education. By collaborating with the private sector, they can work to help HEIs respond to the increasing demand for postsecondary education, as well as the need to develop the skills required by the economy and to instill a culture of lifelong learning.
Job prospects are low, unemployment is high
The growing number of young people entering the labor market over the next two decades presents a job-creation challenge for MENAP governments, with average unemployment estimated at 9.2 percent in those regions—nearly four percentage points above the global average of 5.4 percent.1 At current labor-force participation rates and population growth estimates, 127 million young people are set to enter the region’s labor market by 2040.2
This is without taking into account the imperative to increase women’s participation in the MENAP labor market, which stands at only 26.7 percent—making it less than half of the rest of the world.3 While unemployment among men in the region is similar to the rest of the world—at 7.4 percent, compared with 6.3 percent—unemployment among women in the region is more than double that of the rest of the world, at 17 percent.4
Additionally, the next generation of youth in MENAP will likely enter employment at a time when the labor market is radically changing. The emergence of new technologies will likely change the skill sets needed to succeed at work: by 2030, a higher share of professions will require university degrees, and more work activities will require socio-emotional and technological skills.5 As a result of trends accelerated by the pandemic, more than half of low-wage workers in declining occupations globally may need to shift to occupations in higher wage brackets that require different skills. In MENAP countries, nearly 29 million jobs—about 17 percent of the current total—are at risk of being displaced by 2030 due to automation.6
However, growing populations and the resulting government fiscal burden could limit the ability of governments to create jobs for the next generation of workers. The International Monetary Fund (IMF) estimates that, with the current fiscal policies, the Gulf Cooperation Council’s (GCC) financial wealth could be depleted by 2034; it recommends significant downsizing of governments in the region.7 Therefore, young people may need to create more of these opportunities themselves, enabled by an ecosystem that facilitates innovation and entrepreneurship—the primary driving forces of growth and development worldwide.
The COVID-19 crisis has intensified challenges for HEIs—and created new ones
Many HEIs are struggling to sustain their current programs, particularly in the context of a new and highly digitized labor market. Regional economies faced an oil downturn as the COVID-19 health crisis and associated lockdowns, combined with a decrease in oil prices, resulted in regional GDP decreasing by an average of 3 percent across MENAP and Afghanistan in 2020—compounding the individual challenges that many of these countries are facing already.8 The impact of the pandemic and the oil price decrease varies widely across the region, however: between 2019 and 2020, the GDP of Libya and Lebanon contracted by approximately 59.7 percent and 25 percent, respectively, while Egypt and Iran achieved modest growth of 3.6 percent and 3.4 percent, respectively.9
As a result of the economic contraction, public and private funds for higher education are likely to be constrained for the foreseeable future.10 For example, four out of six GCC countries have decreased government spending on education between 2018 and 2020, both in absolute terms and as a percentage of total budgeted expenditure between 2018 and 2020—with Kuwait and Qatar being the exceptions.11 The pandemic-induced recession is also causing reduced expenditure by households. Almost 90 percent of Egyptian households, for example, indicated that they were feeling the financial impact, and about 80 percent agreed that they need to spend less and save more.12
How to transform higher-education institutions for the long term
In some countries in the region, HEIs were already struggling with a widening gap between supply and demand prior to the pandemic, with budgets frozen or decreasing and student numbers increasing. This is likely to be exacerbated by the recession, with negative impacts on the learning environment, teaching quality, and university functioning.
These financial constraints are likely to affect HEIs in developing countries more than in developed economies. Across Asia–Pacific, for example, 9 percent of business schools reduced program tuition.13 In contrast, business schools in Canada and Europe kept tuition constant, while those in the United States reduced it by 3 percent.14 Sixty-four percent of business schools in the Asia–Pacific region also reduced their travel budgets and 57 percent increased their online offerings.15
Loss of tuition and other income will likely affect private universities more than public universities. For example, an online student petition published in 2020 aimed at the American University in Beirut, Lebanon, demanded a discount in tuition fees due to the financial crisis. The students also argued that the quality of education was reduced in online learning.16 Furthermore, the recession is likely to reduce donor and endowment funding.
Higher education likely needs to adapt to survive—and then thrive
Given the job market challenges as well as the lingering pandemic-induced financial constraints described above, MENAP HEIs may need to change the way they do business to ensure that they are sustainable into the future. Rethinking the approach to higher education could ensure that HEIs respond to the increasing demand for postsecondary education, as well as the need to develop the skills required by the economy and instill a culture of lifelong learning.
We will focus here on three critical questions that MENAP HEIs and education ministries could ask themselves to help tackle these challenges: What delivery channels and models could we use to fulfill our core educational mission? What is our approach to financial sustainability management? How can we support innovation industries with our research agenda? We address each of these questions below.
What delivery channels and models could we use to fulfill our core educational mission?
HEIs were forced to adopt online course delivery in response to national lockdowns and campus closures in March 2020. Globally, universities that had invested in online or blended learning programs as a strategic choice prior to the COVID-19-related campus closures were better able to adapt. Those that had not made that choice had to rely on agility and immediately available technology to respond. For instance, the United Arab Emirates’ (UAE) Higher Colleges of Technology (HCT) launched a two-day virtual-learning pilot program within days of in-person classes being canceled in March 2020, with 20,000 students joining 272 online training sessions and 3,000 online lectures.17
Another example is the UAE’s Ministry of Education teaming up with the Abdulla Al Ghurair Foundation for Education to establish the University Consortium for Quality Online Learning. It aims to support several universities in the country to develop and implement accredited online learning programs by 2022.18
These institutions were able to leverage the growing investment in education technology start-ups—both globally and in the MENA region—in the years preceding the pandemic. Global private investment in learning-technology companies grew nearly tenfold between 2012 and 2019—from $2 billion to $19 billion—while venture capital investments in the region increased from only four deals to 29 deals, worth a total of about $20 million, between 2016 and 2019.19
As most universities in the region did not anticipate the transition to distance learning, online delivery started with only recorded lectures and communication with students via social media. However, universities have since adopted a range of online learning platforms to achieve scale. In Tunisia, for example, the number of teaching staff offering online courses increased from 1,600 to more than 13,000 between February and July 2020, while the number of courses offered increased from 2,400 to more than 34,000, and the number of students participating in online courses increased threefold—from 40,000 to more than 121,000.20
Many countries in the region, however, faced a lack of capability in technology-enabled approaches, as well as constrained internet access, quality, and reliability. In Egypt, a study among staff members at Zagazig University revealed that the top four barriers to e-learning during the pandemic were insufficient or unstable internet connectivity, inadequate computer labs, a lack of computers or laptops, and technical problems.21 In Abu Dhabi, the Department of Education and Knowledge (ADEK) faced connectivity challenges and partnered with satellite operator Yahsat to address the challenges by providing free satellite broadband services in remote areas. This initiative allowed all students to participate in distance learning.22
Despite the challenges, the forced experiment of the past 24 months offers a once-in-a-generation opportunity for HEIs to make various strategic choices about the mix of remote and in-person learning to optimize the quality and equity of their education, and reconfigure their use of physical and virtual space accordingly. Global best practice suggests that scaling online education requires a student-centered approach, substantial investment in marketing, early involvement of faculty and support for academic staff, an online organization with clear accountability, and standard operating procedures that are aligned to the needs of frequent online start options and shorter terms. The long-term benefits of successful digital learning—more individualized, adaptive learning paths and expanding higher-education access to traditionally underserved populations—could last beyond the COVID-19 pandemic.23
Another path to improve graduates’ job outcomes could be to ensure that students’ study choices align with labor market needs. In Saudi Arabia, approximately 30 percent of higher-education students are enrolled in business administration and law, and more than 20 percent of students are in arts and humanities,24 whereas the shift to a diversified economy would likely require an increase in STEM (science, technology, engineering, and mathematics) majors, which has been formulated as a national target.25 Countries could potentially achieve better alignment between labor market needs and university outputs through three measures: improving labor market transparency and career guidance, adopting enrollment limits for certain majors, and changing the financial incentives for students and universities—for example, by linking university funding to labor market outcomes or by linking student stipends and scholarships to labor market needs.
At the same time, HEIs could consider other alternative teaching models to improve graduates’ learning outcomes and job readiness. Victoria University in Australia recently implemented a block model, with courses taught in sequential blocks rather than in parallel, resulting in increased pass rates and academic achievements.26 In addition, HEIs with technical and vocational training programs could consider a dual training model to improve employment outcomes. An evaluation of the Philippines’ Dual Training System on labor market outcomes found that this model has a significantly higher rate of return on labor market earnings than traditional, classroom-only programs, especially for high-school graduates who underperform academically during basic education.27
How to manage financial sustainability?
With the financial squeeze on the public purse, HEIs may not be able to rely on increases in government appropriations to sustain them. A priority for education leaders in this context may be to evaluate their spending and consider reallocating existing resources. They could also think of new ways to operate—either on a stand-alone basis or through partnerships that accomplish the same goals at a lower cost.
One way to reduce expenditures could be to create synergies by merging several smaller universities into one bigger institution. In Abu Dhabi, for instance, the Petroleum Institute in 2017 merged with the Masdar Institute of Science and Technology to create the Khalifa University of Science, Technology, and Research. Besides creating savings through greater economies of scale—the combined institution has 4,600 students—this merger opened opportunities for multidisciplinary research in the fields of energy, renewables, and engineering.28
Third-stream revenues, from activities such as executive education or consulting, are currently extremely limited in MENAP. The Karachi School of Business and Leadership (KSBL), for example, opened the Engro Leadership Academy in partnership with the Engro Corporation—one of Pakistan’s largest conglomerates. Through this partnership, KSBL delivers executive education to the country’s top business leaders.29 While these sources may never be a major contributor to funding the cost base of HEIs, they may help mitigate financial pressures in times of shrinking government budgets.
One major barrier for public HEIs is that they are often constrained by public financial management regulations in their ability to earn revenue and undertake partnerships with other organizations. To enable revenue-generating activities, some universities have established separate organizations—an example of this is King Saud University in Saudi Arabia, which set up the King Abdullah Institute for Research and Consulting Studies.30
Another source of revenue that universities could pursue is donations and bequests. HEIs in MENAP receive fewer funds from donations or alumni contributions than their counterparts in the United States, although those with an American history are leading the way. The American University of Beirut earns 9 percent of its operating revenues from grants, contributions, and contracts.31 This excludes additional contributions to its endowment fund. Building a culture of lifelong support from alumni could support HEIs across the region in funding new undertakings, such as additional buildings, programs, and research equipment.
Finally, developing and charging for training offerings related to upskilling and reskilling is another potential source of revenue for HEIs. Upskilling and reskilling the workforce will likely become increasingly important as the impact of automation on the labor market deepens. Many countries have not yet established a proper reskilling and upskilling engine for their workforce, but HEIs are potentially in a position to fill this role.32
How can we support innovation industries with our research agenda?
R&D are key drivers for economic growth and sustained job creation. Countries that invest in research enjoy significant returns in the forms of new economic activity, new firm creation, and new jobs.
However, countries in the MENAP region spend an average of only 0.53 percent of GDP on R&D—around $16.44 billion—whereas countries ranked in the Global Innovation Index’s top five have an average gross R&D expenditure of approximately 3.22 percent of GDP (exhibit). The MENAP region also has very low commercialized R&D activity and, outside of state-affiliated entities, has produced few research-based firms with a global footprint. In 2018, the region had around seven patents for every million people—totaling about 3,900 patent applications—which is less than 2.5 percent of the global average.33
Beyond funding and R&D expenditure, talent is a critical enabler of research. While advanced countries such as Korea, Norway, or Singapore have between 6,000 and 8,000 researchers per one million inhabitants, MENAP countries have far fewer researchers. Even the country with the highest number of researchers in MENAP—the UAE—only has 2,400 researchers per one million inhabitants.34
To improve the regional ecosystem for innovation, governments could enable R&D ecosystems in emerging technologies. Because of the long-term process of commercializing basic research, government support would be critical to achieve breakthroughs in science and technology. Most of the innovation and advanced technology available today is a result of government-funded basic research—around 61 percent of patents registered in the United States between 1976 and 2015 can be linked directly to nonprofit, basic research.35
If this were to happen, the private sector could then further develop this basic research to produce innovative products. In the United States, for instance, the Bayh–Dole Act was passed in 1980, placing the intellectual property of government-funded research into the hands of the universities and research institutions that developed the studies.36 Technology-transfer offices established in universities act as channels between academia and industry.
Governments in the MENAP region could support breakthroughs in sectors critical to these countries by setting up government-funded research centers and partnering with academia. The region could focus its funding of basic research on specific strategic topics, either in areas where it can address critical challenges and mitigate risks or areas where it has competitive advantages, such as environmental topics, energy, water, and life sciences.
Successful R&D also requires a partnership between government, academic institutions, and regional private-sector champions.37 These champions could identify problems facing the private sector that need to be prioritized for government-funded basic research. The region underperforms in this regard, with an average ranking of 63rd in the World Bank Group’s university–industry collaboration in R&D index.38 Translating basic research into innovation and advanced technology, to the benefit of both companies and citizens in the region, also depends on having a long-term time horizon for potential returns from R&D, matching research efforts with unique regional challenges—such as water scarcity, energy supply, and the environment—and extending R&D support funding beyond the exclusive preserve of public research centers and universities.
Ministries of education and higher education institutions across the MENAP region have responded rapidly and innovatively during the pandemic to ensure that students could continue to study, and countries and universities have learned important lessons from their own experiences. By addressing the above three considerations—selecting the most appropriate delivery approach and channels, managing financial sustainability, and supporting innovation industries—they can potentially build a sustainable and successful postpandemic future for the institutions, the students who pass through them, and the region’s economy.
