Abstract
The challenge of Tunisia is to achieve two development objectives: escape the middle-income trap and break out the post-revolution vicious circle. This chapter engages in a thoughtful diagnosis of the Tunisian economy and identifies the main binding constraints that prevent it from escaping the middle-income trap. It begins by presenting the socioeconomic achievements of Tunisia since its independence. Then, it analyzes the structure of its economy (regional and sectoral, public and private sectors, formal and informal sectors, investment and entrepreneurship). After that, it delves into the business environment and explores the main binding constraints impeding the development of the private sector. It dedicates a section to the situation of the education, research and innovation systems as well as the current progress toward a knowledge economy. It also focuses on unemployment, integration in the global economy and the evolution of the macroeconomic fundamentals. Finally, it dedicates a section to examine the banking sector and the changing monetary policy of the Central Bank of Tunisia. Throughout the main sections of the chapter, international benchmarking is done with the economies of Morocco, Malaysia and Turkey.
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Notes
- 1.
For more details, see the report African Union Commission, UNECA, AfDB and UNDP (2013) “Food security in Africa: Issues, challenges and lessons”, MDG Report 2013, Assessing Progress in Africa toward the Millennium Development Goals.
- 2.
Tunisian National Institute of Statistics.
- 3.
Global Health Observatory data repository (2013). The death rates in other countries are Turkey (8.9), Morocco (20.8) and Malaysia (24).
- 4.
ILO (2015) estimates the share of non-agricultural informal employment in the total employment of Tunisia to be 50.6%. Ben Cheikh (2013) estimates it to be 30%. Buehn and Schneider (2009) estimate the informal economy of Tunisia to be 39.5% of GDP in 2006 (the average for the 76 developing countries is 35.5%).
- 5.
The current president of the Parliament Mohamed Ennaceur noted in 2011—when he was in charge of the ministry of social affairs—that “the wage increasing shall not result from power relationship, but from the productivity indexed on the purchasing power, taking in account the competition of the enterprise and its sustainability” (Leaders News, 2011). He regretted the disappearance of the division “Productivity and wage norms” within the ministry and noted the inexistence of an instrument to measure the evolution of the productivity.
- 6.
In my graduation project from Tunisia Polytechnic School (Nabi, 1998), I recommended the creation of a national authority mandated of monitoring the governance of the state-owned enterprises. In Nabi (1998), I analyzed the utilization by five state-owned enterprises of a methodology (called “Surplus Accounts Method”) for the calculus of the annual change in their total factor productivity (TFP). I identified many imperfections and made some recommendations in order to correctly use that methodology. Unfortunately, it seems that the method is no more applied and there is no more production of annual reports analyzing the evolution of the TFP. I believe that it is important to revive the production of the TFP reports using the Surplus Account Method and other monitoring tools. Such reports are very useful during wage negotiations.
- 7.
The statistics are gathered from Tunisian Government (2018), “Livre Blanc: Rapport de synthèse sur la réforme des entreprises publiques en Tunisie”, March 2018, www.reformes.gov.tn.
- 8.
This resulted from the dynamism of Tunisian companies like Coficab group and Chakira Cables which have become regional players in Africa. It also resulted from foreign companies like STMicroelectronics entering the market and growing since the 1990s. Tunisia is now a preferential EU partner and belongs to the top ten bundles and cables exporting countries (Whiteshield Partners, 2012).
- 9.
National Institute of Statistics and ITCEQ.
- 10.
It should be noted here that saving interest rate (fixed by the Central Bank of Tunisia) decreased from 6.87% in 1996 to 4% in June 2017 with an average of 2.82% during the period December 2010–December 2016.
- 11.
Many independent constitutional bodies planned in 2014 have been created: The Elections Commission, the Audio-Visual Communication Commission, the Human Rights Commission and The Good Governance and Anti-Corruption Commission. The Commission for Sustainable Development and the Rights of Future Generations has not been created yet. The most urgent task today is establishing the new Constitutional Court, the most important pillar in the checks and balances system of a democracy.
- 12.
Nabi and Boughzala (2009) suggested that the state shall consider the social cost of youth graduate unemployment and estimate it to be 418 TND monthly per person. This social cost is related to health, psychology and familial problems as well as to violence resulting from the frustration of being unemployed after graduation.
- 13.
This structural problem is not recent. In 2007, the World Bank noted that about 70% of the new entrants to the Tunisian labor market every year are not able to find a job.
- 14.
The percentage of male emigrants to France holding a tertiary education increased from 18% in 2007 to 20.5% in 2008 (ILO, 2011). According to the statistics published in 2018 by the OECD, Tunisia is ranked among the TOP countries in terms of brain drain with more than 20% of its university graduates working in the OECD countries. http://www.oecd.org/social/poverty/migrationandthebraindrainphenomenon.htm.
- 15.
For instance, the unemployment rate approximated 27% in the Governorate of Tataouine in 2014.
- 16.
Around 52% of the active population in Tunisia is employed in services. This means that improving the competitiveness of the services sector is crucial to generate jobs.
- 17.
Namely by removing the dichotomy between the firing of those under open-ended and fixed-term contracts.
- 18.
In my quality of senior economist of the Islamic Development Bank Group, I participated in field missions and meetings with senior officials from the Tunisian government, in preparation of the “Member Country Partnership Strategy for Tunisia 2013–2015” (MCPS). With other economists who participated in the elaboration of the MCPS, I was aware about the importance of developing short-term policies and an integrated strategy to restore confidence and calm the social unrest, two necessary conditions to undertake the structural reforms.
- 19.
The economic globalization, de facto index, quantifies trade and investment flows, whereas the economic globalization, de jure index, focuses on “hidden import barriers”, “mean tariff rate”, “taxes on international trade” and “capital account restrictions”.
- 20.
My calculi are based on the following Cobb-Douglas function Y = AK0.4L0.6. Data of the stock of physical capital are based on Berlemann and Wesselhöft (2014) for the period 2000–2010. Additional estimations for the years 2012–2017 were calculated using data from the Gross Fixed Capital Formation of the WDI based on the perpetual inventory method with a depreciation rate of 4%.
- 21.
IBRD (International Bank for Reconstruction and Development) and IDA (International Development Association) credits are public and publicly guaranteed debt extended by the World Bank Group.
- 22.
The ratio of market capitalization of listed domestic companies in percentage of GDP equals 19.6% in 2012. For the same year this ratio was much higher in Morocco (53.4%), Turkey (40%) and Malaysia (148.4%).
- 23.
In April 2017, the Tunisian currency was exposed to speculative pressure after the speech of the minister of finance regarding the slow convergence of the dinar to the parity of 3 against the European currency. This obliged the governor of the central bank and the economic adviser of the government to intervene in the media trying to restore confidence in the value of the dinar. These interventions were clearly motivated by the fear of exacerbated macroeconomic difficulties via the well-known self-fulfilling expectations mechanism. Yet, the speculative pressure obliged the central bank to inject 100 million American dollars in order to limit the acceleration of the dinar’s depreciation.
- 24.
Difference between investment and saving.
- 25.
In 2014, for example, Tunisia raised 1.8 billion USD through the issuance of sovereign bonds on the international market with guarantee of the American and the Japanese governments. Meanwhile, in June 2014 the government raised 955 billion TND on the national market through a national sovereign bond issuance which is considered as the third one after 1956 and 1964.
- 26.
Taking into consideration the external debt of the state-owned enterprises which are guaranteed by the government, the rate is around 80%.
- 27.
Along this downward part of the curve, the external debt dampens the economic growth through two channels: (1) the adverse effects on the physical capital accumulation (a contribution of 1/3 on average) and (2) the negative effects on the total factor productivity (a contribution of 2/3 on average) (Pattillo et al., 2004).
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Nabi, M.S. (2019). Diagnosing the Tunisian Economy. In: Making the Tunisian Resurgence. Palgrave Macmillan, Singapore. https://doi.org/10.1007/978-981-13-3771-0_2
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