Tarek Megerisi
Tunisia needs assistance to meet this complex set of challenges. The European Union should offer technical and financial support to the country’s government, helping it renew Tunisia’s economy and surmount the obstacles thrown up by domestic or foreign blockers.
PART (III)
Despite high expectations in 2011 for a redistribution of wealth between Tunisia’s regions and sectors, inequalities have become more entrenched over the past ten years.
Today, there are fewer opportunities for a larger workforce that is increasingly well educated and includes a greater proportion of women.
Tunisia struggles to stimulate its economy because of widespread doubts over its political stability and the security of its rule of law, preventing the country from attracting significant levels of foreign direct investment (FDI).
Indeed, FDI has remained flat over the past few years and remains focused on areas of interest for existing elite networks based in and around the capital city.
Tunisia’s malaise has also impeded efforts to improve key pieces of infrastructure. The port of Radès, which plays a central role in Tunisia’s foreign trade, is a case in point. Since 2012, there have been plans to invite tenders for construction projects to increase the efficiency of the port’s operations. But a parliamentary hearing in June 2020 found that the continued failings of the port cost the Tunisian economy around one billion dinars a year.
Private companies and others attempting to invest in Tunisia encounter a common problem of unclear lines of responsibility and accountability, leaving them confusedly dealing with multiple Tunisian counterparties at the same time.
Despite sporadic initiatives to address glaring issues such as Radès, no Tunisian government since the revolution has attempted to formulate a comprehensive economic strategy.
Tunisia’s economy is faltering on a macro level from a host of deficiencies that demand an integrated, broad response. Simply put, the country is in dire need of an industrial strategy.
Only through such action will it be possible to raise the state’s revenues and drive down public debt, which is dangerously close to exceeding 100 per cent of GDP.
If Tunisia can institute measures such as improving administrative efficiency with digitalisation, following through on long-promised decentralisation, rebuilding and expanding infrastructure, and introducing more progressive forms of taxation, it will be able both to cut costs and raise revenues independent of the IMF. But implementing this agenda will not be easy.
Given that Tunisia’s economy remains focused on the public sector, any strategy to create economic growth will require the cultivation of the private sector.
This, in turn, means that Tunisia must create new reasons for outsiders to invest in and enhance the value of what Tunisia adds to the globalised economy.
Currently, Tunisia’s role in the global supply chain is to import goods, largely from China, and assemble them for export to Europe, creating limited added value in the process. To make investment in Tunisia more attractive, the state should use public spending to develop new industries.
This involves looking beyond the industries that are currently central to Tunisia’s private sector, such as automobiles and textiles, and identifying emerging industries into which Tunisia can channel investment to leverage its educated workforce and add more value to the global supply chain.
This would also involve improving legal and regulatory frameworks, and enforcing greater transparency. A more transparent system would minimise the space for corruption and make Tunisia’s system easier for potential investors to engage with.
Despite the fatalism that currently lingers over Tunisian politics, there are opportunities for progress in the economic sphere. The approach that led to Tunisia’s revised investment law of 2017-2018, which comprehensively rewrote a series of earlier laws and codes, highlights a route to effective policymaking that should serve as a model for managing reform in Tunisia.
This programme leveraged new policy vehicles such as task forces and brought the private sector into the process. A similar approach lay behind parliament’s decision to pass the 2018 Startup Act and a three-year action plan to simplify regulatory and administrative procedures, which helped improve Tunisia’s position in the World Bank’s Ease of Doing Business Index.
Tunisia’s current crisis has finally forced much of the political class to recognise that it needs another loan from the IMF. However, following ten years of steady decline in which a disproportionate burden has been placed on the sections of society least able to bear it, Tunisia will require more than just a loan if it is to escape its vicious cycle of debt and decline.
Tunisia needs a new economic strategy, a stronger regulatory framework, support for the country’s administrative capacity, and an upgraded governance process. But, given Tunisia’s ever-deepening political rivalries and record of avoiding real reform, it will require outside assistance to meet these goals.
Europe – through the EU and key member states such as France, Italy, Germany, and Spain – remains best placed to provide that highly technical assistance.
Europeans have an interest in shoring up Tunisia’s position because the country is the only democracy in their southern neighbourhood, and because their ties in multiple sectors create many opportunities for further development.
Europe’s renewed interest and opportunity
Europe has been a keen and consistent partner of post-revolutionary Tunisia. Since 2011, it has provided over €2 billion in grants and €800m in macro-financial assistance to back up its proclaimed commitment to the country’s transition to democracy.
However, much like Tunisia’s democratisation process, Europe’s Tunisia policy has grown stagnant, doctrinal, and incapable of stimulating mutually beneficial developments.
Tunisia’s status as the poster child of the Arab uprisings, and its rapid initial progress towards democracy, fast-tracked its privileged partnership with the EU.
The relationship quickly evolved into a five-year action plan to facilitate deeper engagement with a range of EU programmes, frameworks, and partner institutions.
Tunisia also became the southern neighbourhood’s main beneficiary of ‘umbrella funds’, a supposed incentive mechanism that rewards successful reforms with funding to support progress.
But Tunisia’s institutional incoherence meant that it struggled to absorb and make use of the considerable development assistance flowing its way.
As crises started to rack up – with Syria’s catastrophic implosion, the war in Libya, migration emergencies across the Mediterranean, and the rise of the Islamic State group – Tunisia’s low-profile ‘success story’ received a decreasing share of European attention.
Other than counter-terrorism and border-management partnerships with Tunisian security services, Tunisia hardly figured in the regional policies of EU member states other than France and Italy, which have colonial-era ties to the country.
Nevertheless, Tunisia’s stagnation, its inability to raise its governance standards, and its failure to improve its economic management remained causes for concern among European programmes and diplomatic missions. These missions pushed the EU to deepen its support for Tunisian state-building, a traditional European area of focus.
Attempts were made to jump-start the relationship with a joint communication in 2016, and in the framework of the European Neighbourhood Policy with a new set of strategic priorities in 2018.
However, these were not much more than expensive reformulations of the same approach that had failed to make an impact previously. The EU created a comprehensive framework that articulated Tunisian and European interests, and that identified key problem areas. But the bloc was unable to translate that framework into solutions that Tunisia was able to implement.
The Deep and Comprehensive Free Trade Agreement (DCFTA) is a perfect example of how the textbook approach applied by the EU did not fit with Tunisia’s needs.
Negotiations for this agreement were first launched in 2015, with the intention of extending free trade beyond a few industrial goods and agricultural products, and of harmonising Tunisian regulation with EU standards to reduce non-tariff barriers.
For the EU, this initiative was the centrepiece of its Tunisia policy – which it hoped would be a shot in the arm for the country’s economy by enabling immediate duty-free access to EU markets while allowing Tunisia to open itself gradually to the EU.
However, four years and four rounds of negotiations later, the DCFTA has barely moved closer to completion. European policymakers are exasperated by what they see as constantly shifting goalposts and concerns expressed by an ever-changing cast of their Tunisian counterparts.
Most Tunisians have not even heard of the DCFTA, and those that have are either sceptical or fearful of it. The unions and many on the left of the political spectrum are concerned that a broad-based free trade agreement would lead to local enterprises being taken over by European corporate giants.
The agricultural sector was supposed to be one of the areas where the DCFTA would have the most impact, but 90 per cent of Tunisians in that sector were not even aware of it. More than anything else, this shows how the initiative has failed to connect with ordinary Tunisians’ concerns.
The dominant opinion among Tunisian experts is that the DCFTA is too complex and unwieldy to be a useful instrument in promoting innovation and equipping Tunisian enterprises to seize opportunities in particular sectors.
Moreover, they argue that high-level negotiations unaccompanied by improvements in public administration are not capable of instigating genuine reform in today’s Tunisia.
Nevertheless, European policymakers have recently started to devote more attention to their southern neighbourhood – which could help generate the political capital necessary to revolutionise the EU’s approach to Tunisia.
North Africa is increasingly viewed by key EU capitals as a region where Europe should develop greater strategic autonomy, as well as a place that can contribute to European economic growth.
Although the driving forces behind these shifting perspectives are not Tunisian, Tunisia still reflects key European aspirations for political reform and represents an opportunity for Europe to help establish a successful model of accountable and responsive governance that could, in time, encourage further progress elsewhere in North Africa.
In turn, Tunisia could help the EU take the first step towards a sustainable model for migration policy – one of the most sensitive issues in the EU.
Over the past year, Tunisia has become North Africa’s main staging point for external migration, as increasing numbers of Tunisians flee the country and third-country nationals use it as their preferred departure point.
Migration has not only increased because of the economic crisis caused by covid-19 but has also taken on new forms, as ‘self-smuggling’ and local networks increasingly replace established groups of transnational people smugglers.
The shift towards more local and informal methods of migration means that the securitised approaches that Europe has favoured in the last half-decade are becoming less and less effective.
On a geopolitical and economic level, the same logic that fast-tracked Tunisia to a privileged partnership with the EU ten years ago remains valid today.
Democracies are simply better allies than authoritarian states, which suppress domestic problems in a way that stores up future crises, as well as pursuing destabilising actions in their region.
Democratic states that are able to overcome vested interests and respond to popular economic aspirations are more attractive partners for Europe’s developed economies.
Given Tunisia’s geographical and economic proximity, Europe will be the main external beneficiary if the country’s economy evolves. In 2020 the EU accounted for 70.9 per cent of Tunisia’s exports and 48.3 per cent of its imports. If Europe were to help stimulate Tunisia’s private sector, the two would only grow closer.
Europe has a clear geostrategic interest in supporting Tunisia, as a way to counteract the activities of global actors such as China, Russia, Turkey, and the Gulf states, which often lead with economic promises. This support also gives European countries the opportunity to expand in the Maghreb.
As Europeans look to the southern neighbourhood once more to defend against threats, seize opportunities, and establish their strategic autonomy in what is becoming an increasingly contested part of the world, they should make Tunisia the focus of their efforts.
Such an agenda would be consistent with the EU’s recent joint communication on a renewed partnership with its southern neighbourhood.
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Tarek Megerisi is a senior policy fellow with the Middle East and North Africa programme at the European Council on Foreign Relations. He has worked with a range of stakeholders over the past ten years, assisting with state transitions following the Arab uprisings.
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