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 (IV)
While IMF funding is Tunisia’s only hope of economic survival this year, Europeans can help the country make the most of the breathing space that a bailout from the organisation would provide. Through bilateral partnerships and the EU, Europeans can apply targeted assistance to promote economic diversification and offer their own incentives to restart the democratisation process.
If Europe can spur progress in the right areas, it could provide enough momentum for Tunisia to escape its debt trap, reverse destabilising political and economic trends, and deliver the reforms its people are crying out for. This is the most direct route to making Tunisia a democratic example for the region.
If Europe is to be effective, it will have to learn from the past ten years and adapt its approach accordingly. One key lesson would be to avoid trying to negotiate a comprehensive package such as the DCFTA, and opt instead for targeted assistance that can quickly have an impact.
Another would be to offer Tunisia grants and other assistance packages as incentives to ensure reform happens. Given the country’s debt repayment issues, further loans would cause more problems.
The past six months have shown that, despite the worsening malaise, the prime minister (with the help of Ennahda and some savvy politicking) can secure parliamentary majorities when he is able to demonstrate that the state is under existential pressure either from the markets or the public.
Europeans have a role to play in helping bring the president on board and allowing him to feel ownership of reforms so that he does not turn against them.
Communicating any assistance effectively to the wider population will also be important, so that they perceive Europe as an ally rather than a predator.
Economic diversification
One of the key challenges of the coming year will be to reduce Tunisian dependence on state-owned companies, which have become too bloated to be effective assets for the state.
Instead, they are a liability that could destabilise the entire country, given the impoverishing effects that restructuring them will have on their many employees.
To successfully diversify away from this harmful dependence, Europeans should help Tunisia make itself a more attractive investment location, assist its development of future-proofed industries in line with the new agenda for the Mediterranean, and help create more jobs for young people.
Europeans should target their reforms at Tunisia’s economic alignment with Europe’s internal market on a sector-by-sector basis. This will involve taking small steps where feasible to gradually reach alignment, in place of the all-or-nothing approach of the DCFTA.
Even a slow but steady harmonisation of Tunisian standards and procedures with those of the EU would help to attract private European investment and facilitate closer partnership and further support.
A necessary part of this will be for Tunisia to improve its investment climate by modernising its legal framework, regulations, and economic institutions.
This would also help Tunisia out of its current system of cronyism without threatening existing business interests, as it would broaden the pool of opportunity rather than target existing activity.
To support this effort, the EU delegation in the country should build out a joint version of the successful model that was used by Tunisians to design their investment law.
A joint steering group with leading Tunisian economic actors could identify necessary reforms, as well as the obstacles to implementing them.
This group could be incentivised by further FDI and political pressure from EU member states to ease the reform process. It could also play the role of coordinating between European needs and Tunisian capacities in specific sectors.
To win Tunisian public support for the programme, the EU should widely communicate the conditionality of European grants, private sector involvement, and direct support for larger projects.
Alongside working with Tunisian partners to improve the investment environment, Europeans can directly help to stimulate growth in key fields that align with broader European interests in the southern neighbourhood.
Key among them is natural resources management, particularly in the water and energy sectors. Directly subsidising infrastructure development in these key areas would help reduce Tunisian water insecurity, making the country more resilient against the anticipated impact of climate change.
Moreover, helping Tunisia’s transition to green energy would help lessen the destructive impact of subsidy reforms and the cost of providing energy and fuel. Given Tunisia’s unattractiveness to capital markets and poor regulatory framework (which discourages private sector investment), projects such as this require the support of foreign states.
If the EU does not take such opportunities, they could become entry points for intervention from competing powers such as China.
Europe can also help meet its own migration targets by supporting Tunisia’s fishing industry, which has collapsed due to overfishing and climate change. This caused some in the industry to shift into the lucrative business of human smuggling.
The EU should provide financial incentives to scrap old boats instead of allowing them to be used for trafficking. It could also provide structural adjustment assistance to create alternative sources of income for those dependent on fishing while working with relevant Tunisian municipalities to revitalise their regions and develop more constructive industries to make up for the decline of fishing.
As part of the switch to helping Tunisia gradually integrate with Europe’s internal market, the EU should try to emulate its agricultural agreement with Morocco and give Tunisian agriculture streamlined market access to Europe.
This could give an immediate boost to the agricultural industry, to counteract the recent losses caused by the pandemic. Similarly, Europe could provide assistance to Tunisia’s burgeoning medical supplies sector, which could grow into a potentially lucrative export industry and help Europe bring the manufacturing of personal protective equipment and pharmaceuticals closer to home.
Harmonising Tunisia’s medical sector with Europe’s could also help European medical companies grow in the country, which has become a regional centre for health tourism.
Although such steps can help stimulate the economy, Tunisia’s prime minister will still require assistance from European states to create social welfare programmes that can absorb the immediate social costs of the IMF deal.
This will involve setting up a more progressive taxation system to bolster the state’s revenues, reducing capital flight, and reforming the subsidy programme.
Steps towards a deeper partnership
The EU and its member states should work together to advance a cohesive engagement approach to Tunisia that builds a deeper partnership through a series of incremental steps.
Youth engagement is an important example of how the sides can join forces to secure European interests, help Tunisia’s economy, and develop a closer relationship. For example, they could upgrade the EU-Tunisia Youth Partnership, founded in 2016, so that it provides scholarships for education and vocational training in Europe.
This could involve giving participants a period of time in which they were allowed to work in an EU member state after graduating. Such a step would improve the skills of young Tunisians and create ties with European industry that could eventually lead to increased trade.
Such programmes could also help stem the tide of young Tunisians attempting illegal crossings into Europe, by providing more legal pathways with greater opportunities. It would also reduce the brain drain of professionals permanently leaving the country.
In addition, the EU could help provide grants for entrepreneurs in fields such as technology and encourage exchanges between European and Tunisian entrepreneurs.
Similarly, through the Nicosia Initiative organised by the European Committee of the Regions, Europe could help Tunisia’s nascent decentralised political system grow roots by using twinning programmes to share experiences of how to improve the efficacy of municipalities and popular engagement with them.
Strengthening municipalities would help to counteract the privileged position of Tunisia’s capital and coastal regions, which would benefit the whole country. This twinning model could be broadened to include other institutions: for example, European civil services could share their experiences to help Tunisia’s reform efforts.
The EU should leverage its support and financial assistance to promote the full democratisation of Tunisia’s political system. But, to prevent obstructionist politicians from attacking the European effort as neo-colonialist, the EU needs to position itself as trying to help Tunisians advance democratisation and economic growth.
Member states can back the EU up on this by pressuring Saied for a renewed national dialogue to implement the Tunisian constitution.
This would involve a road map for appointing judges to the constitutional court and completing the national commissions provided for in the constitution on issues such as good governance, anticorruption, human rights, and sustainable development.
Such a proposal would create a more constructive conduit for the president’s desire to retain popularity, by allowing him to publicly lead a national constitutional project.
This could also help discourage him from adopting a destructive focus on rewriting the constitution following his failed gambit to force early elections.
Mechichi would gain greater leverage over parliament if Europe clearly linked financial assistance for the implementation of his economic reforms to parliament’s efforts to update hundreds of outdated laws and the penal code.
Since the next elections will be heavily influenced by the aftermath of the IMF deal, all parliamentary groups will have an incentive to show themselves to be part of the solution rather than part of the problem.
Tunisia’s dalliance with disaster is forging a constituency of political actors willing to drive positive change. This gives Europeans an opportunity to raise the privileged partnership first envisioned in 2012 to a new level.
But, to do this, Europe will need to take decisive and integrated action to give Mechichi confidence that he will be supported following the IMF deal. A clear message of strong international backing contingent on Tunisian progress towards reforms can help pull Tunisia back from the brink.
If Europeans work with their Tunisian partners across the political spectrum to identify clear reform targets and devise a plan for the EU to integrate its assistance, experience, and resources into driving Tunisian reform policy, there might be a glimmer of hope.
But this will require a team effort between the EU and key interested member states, such as France, Germany, Italy, and Spain: together, they must devise an iterative model of financial support for specific capacity-building measures and use their diplomatic influence to co-opt obstructive political actors.
There is no guarantee that Europe will capitalise on this opportunity. But, if it fails to, the stress of the IMF deal will foment instability and imperil the Arab uprisings’ only democratic success – opening the door to other geopolitical players to entrench themselves in Tunisia and reduce European credibility as an ally of other Maghreb states.
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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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