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Post-Revolution Tunisia: Still Waiting for Economic Recovery
Published on EGF: 08.03.2012
by Naim Ameur
by Naim Ameur
One year after the Jasmine Revolution of January 14, 2011, Tunisia has successfully advanced in its democratic transition and political reform process. The election of the National Constituent Assembly (NCA) held on October 23, 2011 was well organised, and for the first time in history, it was fair. Al-Nahdha (which means "renaissance" in Arabic), a moderate Islamic party, won 41 per cent of the NCA seats.
Hammadi Jbali, the second in command of Al Nahdha, was elected by the NCA members as Prime Minister with broad powers. However, Jbali needs to come up with quick solutions for the social and economic issues which arose after the revolution, even as the NCA drafts a new constitution. The economic situation in Tunisia has become difficult in spite of the peaceful character of the revolution as many factors have disrupted economic recovery. Therefore, the aim of this short text is to describe the challenges facing the Tunisian economy in this critical period as well as the policies that should be adopted by the new government to revitalize economic activities.
In the wake of the Tunisian revolution, there have been protests and sit-ins. Many trade unions have been formed and their strike calls have kept the government under pressure. In Gafsa in west central Tunisia, a large number of young, unemployed people blocked the carriage of phosphate destined for export. Consequently, the losses of the phosphate exports reached approximately $300 million in 2011. In fact, on January 22, Jbali announced that total losses amounted to $2 billion.
These problems have deterred foreign investors. Foreign investment declined substantially in 2011 and 82 enterprises left the country. In parallel, the number of tourist arrivals fell sharply in 2011, from approximately seven million in 2010 to less than two million. This appears to be a direct consequence of 'Tunisia's revolution'.
Source: National Institute of statistics
As a result, many companies and hotels have dismissed employees, fuelling unemployment. The number of unemployed in Tunisia has subsequently exceeded 800,000, which is an alarming figure in a country whose population is about 11 million. The unemployment rate reached 18 percent in 2011, compared to 14 percent in 2010. The growing number of jobless people has worsened the economic situation in Tunisia and exacerbated societal pressures.
Not surprisingly, Tunisia has dropped by 8 places in recent Global Competitiveness Report rankings (Tunisia is ranked 40th) published by the World Economic Forum - the country's position has fallen in 2011. In other words, the business and investment climate has been affected by the events of last year and the rather unclear economic policy of the government.
Tunisia's economy was also hit by the Libyan war. Foreign trade was dramatically affected since Tunisian exports rely on Libya. In addition, hundreds of Tunisian workers were forced to return from Libya after losing jobs and approached the government for financial support. Further, thousands of refugees of different nationalities fled to Tunisia due to the civil war in Libya, which imposed a huge humanitarian cost on the Tunisian government.
The Euro crisis represented an additional problem for the Tunisian economy since 80 percent of its exports go to the European Union - Tunisia's foremost trading partner. The recession in Europe has also reduced the remittances from Tunisian migrants back into the Tunisian economy. As a consequence, the annual growth rate fell to 1.9 per cent from around 4 per cent in previous years.
Source: ERS International Macroeconomic Data Set
The Jbali government, therefore, has sought financial aid and loans from rich countries to promote economic activities through infrastructure projects and the recruitment of thousands of civil servants. In other words, the government has adopted the Keynesian fiscal stimulus model to boost the economy as such a policy is appropriate when unemployment is high. Tunisia has already received donations and loans; accordingly, the government expects to realize a growth rate of 4 per cent in 2012. In addition, the end of the corrupt regime of President Zine El-Abideen Ben Ali could improve the economic situation since Tunisia has been losing 3 percentage points of growth rate every year due to corruption.
However, Tunisia has not seen significant changes as of yet as many of the old problems remain. The state institutions became weak after the revolution as people enjoyed unlimited freedom. The security forces have failed to ensure stability and public order. The civil servants, for example, sometimes feel insecure in their offices due to the use of violence by protestors, which means that the government is still not in firm control of the country.
Tunisia's economic recovery has not started yet for two main reasons. First, the political discourse of the current government has not been able to orient Tunisians to work for its economic goals. This is essentially a problem of communication between the government and its citizens, who have high expectations after the revolution. The silence of the government has increased the fears of citizens as well as foreign investors. People are unaware of the real challenges and difficulties of this transitional phase. Some observers attribute this communication gap to the lack of experience of the ministers who were in opposition for many years. Meanwhile, Tunisia's minister of finance has argued that the government cannot present any plan before the budget in March 2012.
Second, the current political reform process remains rather week. No significant administrative measures, nor legislation further facilitating reform have been adopted. The government should present and implement a clear plan of action and respect good governance norms, particularly the rule of law. In fact, the state needs to vigorously tackle the economic obstacles such as anarchy, smuggling and tax evasion. The implementation of the planned public and private projects depends on the security situation.
The government needs to reassure citizens, investors and organizations that the situation is improving and under control. It should also effectively publicize its efforts and achievements. Even if the current government is working hard, nothing will change without promotional efforts. While work cannot be provided for the legions of unemployed, tensions can be reduced if the plans for cutting unemployment are conveyed to the people.
One could say, in essence, that Tunisia's current economic problems seem to be related to the lack of the political will necessary to overcome them. Although human and financial resources are available, the government needs to come up with projects that will create more jobs. The success of democratic reform in Tunisia depends on accelerating the economic recovery, which in turn will translate into political stability, good governance and social harmony.
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