Meeting the global unemployment challenge
A report earlier this month from the International Finance Corporation (IFC) offered some staggering measures of worldwide unemployment. IFC said there are currently 200 million people unemployed around the world – a number roughly equivalent to the population of Brazil — and that the developing world will need to create some 600 million new jobs by the year 2020, just to keep up with young people entering the workforce.
While unemployment data is often viewed on a country-by-country basis, IFC’s report highlighted the severe jobs shortage as a major worldwide problem. It put the focus on the developing world, where high rates of unemployment – especially among youth and women – contribute to poverty and economic and social instability. “Joblessness is a global crisis that is especially urgent in the poorest countries,” IFC’s Executive Vice President and Chief Executive Officer, Jin-Yong Cai, said in a statement.
OPIC was one of 28 international finance institutions, including the African Development Bank, the Development Bank of Latin America and the Multilateral Investment Guarantee Agency, which met on Jan. 14 to discuss the findings of the jobs study and the best ways to create more jobs. The group issued a joint communiqué, committing to work to promote a friendlier investment climate, improve access to finance and take other steps to support job creation.
Many of the actions that these groups agreed would contribute to job creation involved supporting private sector investment. The IFC report showed that the private sector creates nine out of every 10 jobs in developing countries, and outlined some of the hurdles private sector businesses often face when doing business in less developed regions of the world.
As the U.S. Government’s development finance institution, OPIC works closely with the private sector to address development challenges. The agency has supported projects that address many of the key obstacles to doing business in the developing world that were identified in the IFC report, including:
Access to Finance: The IFC report notes that micro, and small and medium-sized enterprises are especially likely to face financing constraints. In addition to providing loans and guaranties to businesses that are unable to obtain private sector financing for their projects in the developing world OPIC has increased its focus on SME and micro lending with innovative deal structures. For example, loan guaranties to major banks can in turn support microfinance lending to poor and remote populations in Sub-Saharan Africa and Asia.
Skills and Training: OPIC conducts an analysis of every potential project’s developmental impact and the expected job creation and training provided for higher-skilled jobs is one of the key ways it measures impact. One 2012 project the agency supported to provide clean drinking water to remote communities of India, is expected to create 600 local jobs in those communities.
Infrastructure: IFC notes that lack of infrastructure – especially a reliable power supply – has a significant impact on creating jobs and reducing poverty. OPIC has a long track record of creating a range of infrastructure projects from roads and power plants to office buildings, schools and housing. The agency recognizes that investments in projects that improve infrastructure bring both direct and indirect benefits, and can have a major impact on poverty, hunger, access to education and finance.