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March 23, 2018
Disappointment surrounding Tunisia’s democratic transition abounds in the country, and the volatile economy adds a degree of difficulty to politicians’ agendas. Economic development is always a long and arduous process, but the current strategy is clearly inadequate. Tunisians call on the government to do more to pull the economy out of stagnation by increasing public investment, providing jobs, and undertaking infrastructure projects. At the same time, the International Monetary Fund (IMF) and the European Union (EU) insist the Tunisian government pull back government subsidies and increase taxes. Tunisia must balance the need to provide economic opportunity and governmental services against the demands of the IMF. The solution is not in pursuing economic reforms alone, but also political reforms that supplement and support a healthy economy. Increased transparency, accountability, and good governance are essential in improving the economy and satisfying the population’s desire for jobs, technology, and opportunities.

Political Reform

Tunisians perceive by a wide margin that the current high inflation, rising poverty, and high unemployment rates are the most pressing issues in their communities. Municipal elections are scheduled for early May, but much of the population has grown apathetic and doubtful that political engagement yields real change. This is especially true among youth. A recent survey conducted by the International Republican Institute (IRI) found that 40 percent of Tunisians reported that they are unlikely to vote in the upcoming municipal election, and “lack of hope” was cited as the largest obstacle to youth participation in politics. However, the same survey found over 50 percent of Tunisians also believe that local and regional councils will improve the economy in regions where they possess the power to decide how money is spent. Tunisians, therefore, believe in the potential of local governance in the case that local authorities are given power that they exercise fairly. Therefore, a potential political reform to fight lack of morale and increase confidence in the government, which will in turn revitalize the economy, is decentralization.

Transferring responsibility, power, and resources to municipal governments as a form of decentralization could improve communication between civil society and the government. Decentralization is also a means to increase confidence in the elected officials and curb the extremism and corruption that deter political participation, which jeopardize the fragile democratic transition and the economy.

Lack of communication between the government and civil society is a major driver of discouragement among the population. Capable local governance could extend the government’s reach and ability to gauge the population’s demands. Local municipal councils can relay the sentiments of each municipality to the capital, allowing it to be more responsive to the concerns of communities across the country. Communities that feel they have a role in the government may reduce the current rift between the population and government officials. Strong municipalities could increase the perception among communities that the government is accountable for and responsive to people’s wants at the local and national level. This has the potential to empower citizens, draw them out of apathy, and bolster active participation.

Empowering citizens and engaging them in the community has other benefits, such as countering youth radicalization and violent extremism. Among North African countries, most foreign fighters who join extremist groups, such as the Islamic State in Iraq and al Sham (ISIS), by a large margin come from Tunisia. Economic drivers are a strong impetus for Tunisians to leave to fight in extremist militant groups. Extremist groups sell their ideologies to youth by offering what they deem solutions to their political and economic woes. Increasing confidence in the capabilities of local governance, especially to respond to economic grievances, among youth, could ease frustration and prevent some youth from joining militant groups.

Decentralization could also counter another deterrent to youth participation: corruption. Currently, politicians use anti-corruption as a campaign slogan, but do not have a defined program to fight it. Prime Minister Youssef Chahed employed strong anti-corruption rhetoric in 2017, but has yet to take meaningful action, only targeting a small number of individuals whose dismissal would not have a negative impact on him politically. Tunisians are not satisfied: Of those who participated in the same IRI survey, 78 percent of Tunisians perceive that corruption is higher than before the 2011 revolution, not only at the top, but also at the local level.

Tunisians recognize the damage corruption can do to the economy. Reducing corruption was selected by survey participants as a “very good” way to improve the economy at higher rates than land reform, investing in infrastructure, making it easier to start local businesses, and foreign investment.

Based on this information, the regime could benefit from fostering the political determination to fight corruption as efficiently as possible. The alternative is the continuation of low participation and confidence in Tunisia’s transitioning government. Local councils endowed with powers by a strong municipal code could interact with the local communities more extensively than the current centralized government structure does. Tunisians would see closely and firsthand the workings of the government and therefore requiring politicians to be more transparent. More Tunisians would have the ability to participate in politics, therefore increasing competition. Decentralization will give the government tools to fight corruption, win local confidence, and supplement a healthier economy.

Decentralization will not, of course, draw participation unless local representatives are in line with the agendas of their nationally elected counterparts. Updating the current laws regarding the process of municipal elections and establishing a municipal code would clearly establish the legal authority of local councils in the context of the nation’s government as a whole and therefore minimize tension between the local and central authorities. To optimize the initial launch of a more decentralized framework, the state should institute campaigns that target youth participation.

Another important and constructive step to boosting morale and political participation would be to appoint members of the Constitutional Court, which had been agreed to in the 2014 constitution and was supposed to be finished one year later. Constitutional bodies and supervisory commissions in all sectors can supplement the pivot away from corruption. The Court would have the authority to prevent members of Parliament from crossing any constitutional “red lines”. The parliament currently runs without any supervisory body. Introducing a watchdog that the public trusts would be further assurance that politicians are held accountable, thereby boosting voter turnout.

Economic Steps

In addition to the unsuccessful transition from agriculture to industrial-based development, the poor state of the Tunisian economy today is in part due to compound effects from the Ben Ali era, 1987 through 2011. The regime of Zine El Abidine Ben Ali perpetually delayed reforming state institutions and other economic reform because it found ways to benefit from outdated programs. Moving away from entrenched corruption and nepotism will supplement other economic reforms. Simultaneously, the government needs to promptly address issues such as high unemployment rates and price inflation. The current strategy of using temporary fixes such as borrowing money to pay employees and provide basic government services is not a sustainable solution.

Tunisia must review its current model of development, which has not been adjusted to account for social change since the 1980s. The existing model is based on cheap labor in most sectors, especially in manufactured goods and tourism. Due to demographic changes and headwinds of development in technology, innovation, and education, this approach has proved to be non-commensurate. Skilled jobs were not created at the same pace that the educational system churned out skilled workers. The outdated model of development does not perform to the satisfaction of a large number of citizens, the majority of which are university graduates who find the current job market unsuitable for their level of expertise.

Therefore, the government should specifically promote the creation of skilled jobs to absorb unemployment. Existing regulations render production in Tunisia more expensive than buying from Europe. The reason for which the regulations exist are thoughtful but in practice counter unproductive. The regulations distinguish between Tunisian and non-Tunisian companies in the hopes that foreign companies will attract more off short investment. However, the money this regulation attracts is not high, and therefore may not worth hurting Tunisian-born businesses. Changing these regulations could encourage more entrepreneurship. Tunisians would be motivated to start their own businesses to sell to and employ locals. Ideally, there would be more money and opportunity for individuals to get involved in small and medium industries sectors, therefore benefiting all levels of business.

Since the 2014 presidential and parliamentary elections, the GDP of Tunisia has decreased by twelve percent, dropping from $47.6 billion to its current level of $41.6. At the same time, the debt-to-GDP ratio reached 61 percent in 2016. Moody’s Investor Service recently downgraded Tunisia’s credit rating to levels on par with countries like Nigeria and Cameroon, further deterring creditors from lending to Tunisia. The ramifications of Moody’s decision could exacerbate unrest in Tunisia in the long term. In the IRI survey, 47 percent of participants reported the economic situation as “very bad” in late 2016 as opposed to only 20 percent five years earlier. The deteriorating economic situation indicates the need to change current policies. Tunisians perceive that the economic crisis is worsening, and exhibit the stress of the stifling crisis in social, economic, and political behavior.

Tunisia is trapped in a vicious cycle of paying off debts with funding from taxes. Overtaxing the middle class weakens its purchasing power. An alternative way to pay debts would be to decrease government expenditures and liberate the market. Reforming fiscal policies is critical to economic growth. Notable changes in the proposed budget include increasing certain taxes and decreasing taxes on firms. Tax rate cuts may incentivize firms to work, save, and invest, but increasing income taxes without an immediate reduction in governmental expenditures will likely lead to also an increase in budget and eventually reduce national savings and raise interest rates.

If taxpayers continue to see injustice and inequality and no improvement in government services, the demonstrations seen in January can be expected to continue. Steps must be taken to address societal inequality as well, not just economic. The IMF posits that higher taxes for the rich will cut inequality and will not negatively impact growth. More accountability for those in power could improve trust in the public economy as well – the misuse of public funds is no secret to Tunisians. For example, Tunisia has 83,840 state-owned vehicles, making it one of the top states for state owned vehicles per capita. This comes with a large price tag and ongoing fuel costs, and misuse is often reported. Although state-owned vehicles are only a small part of the bloated public sector, it is indicative of the systemic corruption and highlights that corruption is rampant at the lower levels as well as at the top of the national government. In fact, 20 percent of Tunisians indicate they experience corruption weekly.

Although youth unemployment is rampant and 2018 tax reforms increased the cost of living for most Tunisians, there are some positive trends for economic progress. Direct flights from the UK to Tunisia resumed for the first time since 2015. Europeans have regained confidence in Tunisia’s security and are returning to vacation there: experts predict that the number of tourists to visit Tunisia in 2018 will surpass pre-2015 levels, with 8.1 million tourists expected to visit. The boost to businesses will help Tunisians support their livelihoods and families in 2018. However, for the sake of the long-term health of the economy, many large-scale changes in the government are needed.

Relations with Europe and lenders

The Tunisian government is faced with the dual challenge of balancing pressure from the IMF to adopt austerity measures and the need to improve the provision of public services, all while navigating a democratic transition. However, these difficult circumstances do not excuse the government from undertaking political debate on economic reconciliation in a more visible and accountable manner. Tunisia could benefit from implementing integrated socioeconomic reforms in line with the spirit of the democratic transition.

The current deal between Tunisia and the IMF focuses on short-term financial balancing instead of longer-term sustainable development. However, Tunisia’s unique situation as both a transitioning democracy and a state whose economy relied on a tourism sector now in decline due to terrorism will need more than short-term solutions.

The role of European-Tunisian bilateral ties in the success of the Tunisian economy cannot be understated. Eighty percent of Tunisian exports go to Europe. Europeans also constitute a large portion of tourism to Tunisian shores and historical sites, on which the Tunisian economy heavily relies. Good relations between Tunisian and European governments and populations are essential. Tunisia’s recent inclusion by the EU to its list of countries engaged in money laundering and terrorism financing will likely negatively impact the Tunisian economy, making counterterrorism a key component of economic development as well. By definition, the EU’s decision to include Tunisia on these “blacklists” is justified: evidence supports the presence of terrorism and rampant corruption in Tunisia. However, there is skepticism around whether what goes on in Tunisia is to the same degree as other countries on the lists.

Modernization of the development model accompanied by political will to reform and public support will improve Tunisia’s economic and political condition and contribute to the country’s stabilization. Democracy is about more than holding free elections that reflect the choice of the people: Tunisia needs to adopt practices and values based on transparency, accountability, and good governance to make a democratic transition.

Amir Ben Ameur is a young Tunisian social activist, an advocate for youth development and democracy, and the founder of WeYouth. Twitter @emirbenameur
Erin Neale is a research assistant at the Rafik Hariri Center for the Middle East at the Atlantic Council. Twitter @erinaneale

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