Tunisia’s economic fallout

The propagator from which the Arab Spring blossomed stands to lose more from Libya’s descent than from its own uprising.

Ben Ali
Tracing the money stolen by Ben Ali’s family is an arduous affair and unlikely to yield large sums quickly [REUTERS]

A few weeks before the month of Ramadan sets in, Tunisia faces the economic fall out of two very different recent events. The first happened nearly five months ago and swept General Zine el Abidine Ben Ali from power in a popular uprising which wrought minimum damage on the fabric of Tunisian farming, manufacturing and tourism infrastructure – indeed there were numerous instances of workers defending factories against marauders or Ben Ali’s militia. The second has been in Libya, where the three month UN-authorised military intervention, formally led by NATO, in what had already become a civil war, has inflicted considerable damage to the country’s infrastructure. The instability attendant to a prolonged military campaign in Libya presents a serious strategic threat to its northern neighbour, Tunisia.

Three immediate consequences are worth noting: at least 250,000 Libyan nationals are reckoned to have crossed  into Tunisia; the risk of increased infiltration by al-Qaeda in the Islamic Maghreb – whose network of activists are present in Algeria, Mali and Niger – is real; finally, the pictures of fighting in Libya being flashed across western TV screens are complicating the task of the Tunisian government – as it seeks to convince European tourists, whose number had declined by 42 per cent to 928,000 as of the end of April compared with the same period in 2010, to return. 

Tunisia’s economic losses since the start of last winter’s revolt can be summed up as follows: an estimated $2bn worth of material damage suffered by buildings and infrastructure during the revolt, with a further $600m added to the existing import bill of oil related products and foodstuffs due to rising prices worldwide. Put another way, this is the equivalent of 5-6 per cent of its Gross Domestic Product, a fall which includes $1.2bn lost from the decline in tourist receipts and $1bn from events in Libya, home to many immigrant Tunisian workers and the destination of many Tunisian exports – white goods, foodstuffs and industrial equipment. North Africa’s smallest economy had benefitted over the years from the many Libyans who chose to spend considerable sums of money in Tunisian hotels and clinics. According to a recent survey by Ernst and Young, many Tunisian businessmen are more worried about the fall out from Libya than from the current situation in Tunisia, having confidence in their own country’s future. 

Foreign Direct Investment declined by 24.1 per cent to 580m Tunisian Dinars ($420m) during the first four months of the year and industrial production fell by 9.4 per cent. Production in the mining sector dropped by 60 per cent, due to continued strikes. GDP has fallen by 3.3 per cent during the first three months and is not expected to be above 0-1 per cent for the year as a whole.

Unemployment, meanwhile, has increased from an estimated 14 per cent at the end of 2010 to 19 per cent – and is estimated at 750-800,000 people. Should unemployment figures reach one million, that could constitute a political time bomb. Unemployment in the regions where last December’s revolt took root, the western uplands around Jendouba, El Kef, Kasserine – and further south in the phosphate mining area of Metlaoui – is, at 18 per cent, twice what it is on the coast and affects up to 40 per cent of young people.

Government programs to help 200,000 young people at a cost of TD 500m ($360m) this year only offer a short term remedy to what is the most intractable problem facing Tunisia’s interim and future governments, one which, contrary to the conviction of many outside observers, is more pressing than speculation about the number of votes the Islamic En Nahda party might poll in October. 

Lukewarm western response to Tunisia

When they met in Deauville just over a month ago, Western leaders pledged $20bn to help Tunisia and Egypt during the next few years – but no further details were forthcoming, nor was there any mention of possible concessionary terms for such aid. US President Barack Obama announced $2bn extra of OPIC guarantees for Maghreb countries, which is fine – except that it does little to meet current Tunisian needs. French President Nicolas Sarkozy talked of $1.2bn in fresh money from the European Union for both countries – but will this really translate into new money?

Some observers feel the EU leaders acted with undue caution, even pusillanimity: they were grandstanding, a behaviour which has become the hallmark of such summit meetings. Others saw no reason why more aid should be extended to a weak interim government in Tunis, where economic decision making is scattered among eight different ministries, the Prime Minister’s office and the central bank with no apparent coordination.

Tracing the money the extended family of Ben Ali stole is an arduous affair and unlikely to yield large sums quickly. Tunisian ambassadors abroad have been asked to help, but the country’s diplomatic corps has lost the quality it could boast until the late 1990s – because it has been debilitated by years of crony appointments.
Tunisia deserves stronger support from the EU than it is getting, if only because the country has characteristics which make it unusual among southern rim Mediterranean countries. These characteristics suggest that moves towards a more democratic form of governance stand a reasonable chance of succeeding; success in the region’s smallest country would be of benefit to 10.2 million Tunisians but also to tens of millions across North Africa who could look to a “success story” which offers hope for their own future.

A better governed Tunisia spells a slowing of the brain drain which sees many of the country’s brightest university graduates never return home from the universities in Europe and North America where they are studying; it means more jobs for the many young unemployed people who spearheaded last winter’s revolt; it offers some hope that 100 million North Africans have a future, a dream that can sustain the hard work needed to repair years of robber-takes-all rule.

Four reasons why the West should help Tunisia cope with the current economic turmoil 

Tunisia is small enough to pose no major security threat to its neighbours, other, maybe, than more democratic and transparent governance. It can claim one of the highest rates of literacy in the Arab world and a middle class which does not simply thrive on rent seeking. The development of this middle class was encouraged by the founder of modern Tunisia, the late President Habib Bourguiba – but its deeper historical roots can be traced back 2,800 years to the very foundation of Carthage, one of the great maritime empires of ancient Mediterranean history.

Second, Tunisia has been a well established state for centuries, unlike many of its peers in the broader Middle East. The first ever constitution in the Arab world was issued by the principal minister of M’hamed Bey, Khereddine Pasha in 1861, twenty years before France colonised the country. It is because the Tunisian state had an existence independent of the personal rule of Ben Ali that it was able to survive his departure, a situation which is not replicated in Libya. Law and order did not break down after the latter fled Carthage last January – and whatever the security problems the interim government has faced since then, not least the influx of hundreds of thousands of refugees from Libya, basic order has been maintained.

A third feature is that women were granted equal rights in 1956, at independence, by Habib Bourguiba who enacted the code of personal statute followed by family planning in the early 1960s. This happened decades before French, Italian and Spanish women were able to enjoy the same rights: Tunisia’s capacity to innovate socially is thus well grounded in its modern history and, as a result, women have a massive presence in the workforce and occupy many senior posts. That should help modernise economic and political governance.

Finally, it must be said that Tunisia has developed a real competitive export base. Exports of textiles and leather have declined as a percentage of exports overall during the past ten years, to be replaced by electronic and mechanical goods. Tunisian private sector firms such as Chakira, Sellami, Sassi, Mzabi and Abdessalem Ben Ayed work for respected international names such as Valeo (France), Lear Corporation (USA), Draxel Maier (Germany), Yazaki (Japan), and Yura Corporation (South Korea). These Tunisian firms are known for the quality and reliability of their products whose value added is way above what textiles and leather offered before. If Tunisian exports have increased at a faster rate than exports worldwide between 2001 and 2010 (up seven per cent as against 4.5 per cent) it is thanks to them.

Exports from these sectors have increased since the beginning of 2011. Improving Tunisia’s industrial performance and capacity to offer highly skilled jobs, in other words to move up the value added chain is predicated on their success and the capacity of future governments to reduce bureaucracy, nurture young entrepreneurs and find seed money, all of which has been hindered by past practises, notably a growing collusion of the banking sector with cronies of the former president. Contrary to prevailing views, pro-market reforms facilitated the reorganisation of authoritarian rule an contributed to the subversion of democratic tendencies both at the national and local level.

Long term economic challenges: reforming the education system and reducing regional disparities                     

It had seemed in recent years as if Tunisia was doing all the right things, not least spending 7.3 per cent of GDP on education, an effort that exceeds that of any other Arab country, including two per cent on university education. The problem is that many degrees are worthless, by any international standard. The mismatch between the field of specialisation chosen and the realities of the job market is obvious: 47 per cent of those who hold masters in economics, management and law fail to find a job, compared with 24.5 per cent in the engineering field. No Arab country produces graduates who can compete with their Asian counterparts. The only Muslim country today where graduates often meet world standards is Turkey.

Regional disparities compound the difficulties: the provinces of Tunis and Sfax, Tunisia’s second major manufacturing city from where many of the country’s leading manufacturing families hail, account for 75 per cent of non-agricultural jobs and, together with other coastal regions which enjoy the benefits of tourism, receive 65 per cent of public and the bulk of private investment. The average national poverty headcount may be 18.4 per cent but it ranges from 6.9 per cent in Tunis to over 30 per cent in the provinces along the country’s western frontier with Algeria. These figures might underestimate the true depth of the problem, as the reliability of some official statistics is now being openly questioned.

Back in January, the first interim government established a program offering part time employment opportunities in the state sector to long term unemployed graduates. That is a good start, but will do little to dampen the anger at the corruption of the former ruler. The Global Financial Integrity Foundation in Washington estimates the ill-gotten gains of the extended Ben Ali family at $12bn, just over one quarter of Tunisia’s estimated GDP of $43.5bn, and the annual cost of corruption at $1bn. This anger is far more deeply felt among the people in the poorer regions who suffered most from the lack of development over the years and who paid a heavier price to rid Tunisia from its former mafiosi leaders than the middle classes in Tunis and Sousse, who suffered little in recent years if they were wise enough to shut up.

Looking forward

Elections due in October will help write a new constitution. If all goes according to plan, a strong rebound in economic activity in 2012 after the near stagnation of 2011 will afford vital underpinning to create desperately needed jobs and start the arduous task of modernising the management of the economy. Recent history in the Maghreb – in Algeria between 1988 and 1992, provides a reminder of how difficult it is to push through bold political and economic reforms in a climate of financial and economic stress. Twenty years ago, France and the EU did little to help Algerian reformist leaders. This lack of support is not the only reason why those reforms failed but the question deserves to be asked: is history repeating itself?

French leaders, whose views on North Africa carry weight in Brussels, are peeved to have so utterly missed the boat last January. Neither Paris nor Washington appears to have a well thought out strategy for the future of Tunisia. In the country itself, the middle class is frightened while En Nahda and the trade union Union Générale des Travailleurs Tunisiens lock horns as they battle for the popular vote. Western leaders could help ensure the success of reforms in Tunisia if they actively engaged in helping to build a constructive dialogue between the young people, whose revolt brought Ben Ali down, and the middle classes who watched events unfold on their television screens in Tunis. If recent history repeats itself that would spell the end of any EU ambitious foreign policy towards North Africa for a generation.

The young Tunisians from the poorer western uplands are the real heroes of the revolution. How long will their patience last if the political class in Tunis cannot get its act together? Will they put up with having no jobs in six months time? How will they react to the reluctance of western rulers to lend a strong helping hand to their country in its hour of need? What lessons would other Arab countries draw from a potential failure of the Jasmine Revolution?

Francis Ghilès is a Senior Research Fellow at the Barcelona Centre for International Affairs (CIDOB). He was North Africa Correspondent for the Financial Times from 1977 to 1995 and contributes to the BBC World Service.

The views expressed in this article are the author’s own and do not necessarily represent Al Jazeera’s editorial policy.