Sunday,22 October, 2017
Current issue | Issue 1127, 20 - 26 December 2012
Sunday,22 October, 2017
Issue 1127, 20 - 26 December 2012

Ahram Weekly

Tunisia: business less than usual

Lassaad Ben Ahmed reviews how the economy of the first Arab Spring country has held up so far

Tunisia 2
Tunisia 2
Al-Ahram Weekly

Despite a relative revival of tourism last summer, and a boom crop of grains, the Tunisian economy is still wobbly. The industrial sector has been surprisingly stable, but Tunisian experts say that a flare-up of political disturbances, on a scale similar to that which accompanied the burning of the US embassy in September, would undermine hopes for a steady economic recovery.
On the upside, Tunisia still enjoys the support of its traditional economic partner, Europe. On 19 November 2012, the EU accorded Tunisia a “privileged partner” status. The IMF and the World Bank seem to be also optimistic about the long-term prospects of the Tunisian economy.
There are signs that the worst may be over. Figures released by the Tunisian government put the overall growth in 2012 at 3.4 per cent, a remarkable improvement over 2011, when the economy shrank by two per cent.
Many hope that stability will be restored once the new constitution is written. If this turns out to be true, the economy may surge into growth rates close to five per cent annually, which was common under the pre-revolutionary regime.
Tunisian officials are cautiously optimistic. While confident that the economy is capable of sustained growth, they admit that without political stability, nothing can be guaranteed.
The situation at present is less than reassuring. Inflation is going at 5.6 per cent, unemployment at 18 per cent, and the trade deficit at 30 per cent. Foreign reserves are declining quickly. Currently Tunisia has enough hard currency in its coffers for 90 days or so of imports. And, due to the political turmoil, the government is not able to make the tough decisions needed to balance the budget.
The ruling troika, as many call the coalition government of the country’s three biggest political groups — Al-Nahda Movement, the Congress for the Republic (CPR), and Al-Takattol (the Democratic Forum for Labour and Liberties) — still blames the old regime for the cascade of economic problems it has to address. It is hard, observers admit, to reverse the country’s tradition of corruption and mismanagement in weeks or months. But unless something is done to address the widespread joblessness and the lopsided distribution of income and wealth, the political turmoil will persist.
It was the uneven development, corruption and administrative ineptitude of the previous regime that led to the suicide of Mohamed Bouazizi and the revolution that followed. But since the country changed political tack, investors have been discouraged by the chaotic scenes of protests and labour disturbances.
The opposition parties are using every opportunity to embarrass the government. The recent disturbances in Siliana, south-west of the capital Tunis, for example, triggered demands by the Popular Front Party for the ouster of the ruling troika.
It is catch-22. Without calm, there is no hope for economic revival; and without economic revival there is no hope for calm. What Tunisia needs, experts say, is successful programmes for reform. But to introduce these, it will need a workable democracy.
For now, the government is mainly engaged in fire fighting. It raised wages by up to eight per cent in the hope of ending the protests, but this only led to a wave of price increases that neutralised the wage increases. If you speak to ordinary Tunisians, they will list price increases among their worst complaints. Some would volunteer the information that the previous regime was more successful in combating inflation.
Business owners are just as bitter as the workers. An endless wave of strikes and sit-ins has unhinged business confidence. To make things worse, export-oriented businesses also cite loss of income due to the economic woes in Europe, which accommodates more than two-thirds of Tunisia’s foreign trade.
Hundreds of companies are said to have left Tunisia to other venues, to Morocco for example, where the business climate is more stable.
Everywhere, you’ll hear complaints that the situation was somewhat better before the revolution. But there are many who hold on to the belief that the current situation is temporary and that a democratic Tunisia will be a better place for both business and workers.
Thankfully, the optimism is shared by major international organisations and some of Tunisia’s biggest trading partners.  The World Bank recently offered Tunisia a loan of $500 million on easy terms.
During a visit to Tunisia in late November, the vice president of the European Commission praised Tunisia for its democratisation efforts and said that it can rely on its “European friend.”
The EU is definitely coming through for post-revolutionary Tunisia. Since 2005, Tunisia has been seeking the “privileged partner” status with the EU, but its lack of freedoms and widespread corruption got in the way. The EU is hoping that this elevated level of recognition would encourage investors and help boost the Tunisian economy.
In Tunis, some dismissed the privileged partnership as a needless measure. The Popular Front of Hamma Hammami claims that partnership with the EU undermines the purchasing power of the middle classes and increases income disparity.
The IMF experts seem to agree that what Tunisia needs is not a reproduction of old economic policies but a reprioritisation of goals. David Lipton, the IMF first deputy managing director who visited Tunisia recently, says that North African countries will either face continued strife or implement new policies that meet the needs of their people.
So far, the government is not coming up with any creative methods for running the economy. Its policies reproduce those of the old regime, albeit with a religious touch. A bit of Islamic banking and some investment funds inspired by Sharia have cropped up. Apart from that, it’s business as usual — or less than usual.    

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