August 21, 2015
Tunisia Needs Entrepreneurs
By Mohsin Khan and Hanane Lahnaoui
Previous governments have only paid lip service to the ongoing jobs crisis and applied temporary and makeshift solutions. Successive governments, including the current government of President Beji Caid Essebsi, have exclusively focused on establishing political institutions to support democracy and paid insufficient attention to the economy. Absent a major effort to address the jobs situation, the ingredients for another round of political turmoil and upheaval could threaten Tunisia’s fragile stability unless the government tackles the problem quickly.
Tunisia, like other Middle East countries, faces a serious youth bulge. Over 15 percent of the population is between the ages 15 and 24. This figure will continue to grow rapidly and whether it turns into a demographic dividend or a demographic disaster will depend on the youth finding productive jobs. While the present level of youth unemployment (of over 30 percent) is bad enough, the unemployment rate of college graduates today is nearly 50 percent. Every year some 60,000 college graduates enter the labor market, while only 35,000 jobs are created.
Tunisia’s economy relies on the agriculture, tourism, mining, energy, and manufacturing sectors, which have recently lacked investment in technological innovation and new businesses that could create job opportunities. Without jobs in the formal market, the unemployed youth have sought employment in the informal market, estimated to be more than one third of Tunisia’s total Gross Domestic Product (GDP), or economic opportunity abroad, mainly in Europe. Aside from leaving a third of the productive labor force without suitable employment, these unemployed youth are inclined to create social unrest and security problems in their communities as a response to their economic circumstances.
Where will productive and well-paid jobs come from in Tunisia? Jobs cannot be created overnight, as other Arab Spring countries have discovered. The only agency that can create jobs quickly is the government. Government jobs offer life-long stability, competitive benefits, and relatively good salaries. But this tactic often creates a budgetary burden on the government and a bloated, highly inefficient bureaucracy. Following the 2011 revolution, the Tunisian government increased the number of public sector jobs by 17 percent, hiring 90,000 new workers in 2011-2012. In the following two years, the government added another 40,000 jobs each year. This policy is clearly unsustainable and undesirable. The government cannot afford to play the role of employer of last resort.
In this context, it is natural to consider the large and growing young population in Tunisia as a challenge. However, the youth can be an important asset for the country. At a time when demographics are changing globally, many developed countries face a declining younger generation. Therefore, Tunisia should consider its youth as job creators rather than only job seekers and as contributors to economic development. Consequently, the government should focus on developing the private sector and equipping young Tunisians with the necessary skills to participate in private sector activities.
One of the solutions proposed to combat the challenge of unemployment is entrepreneurship. This idea was the theme of a major conference in Tunis earlier this year where President Obama pledged to support new entrepreneurs in Tunisia. Based on the idea of creating new businesses and projects that enable individuals or companies to innovate and produce, entrepreneurship contributes to the well-being of the national economy by diversifying sectors and industries. It generates employment opportunities for the entrepreneurs themselves and for those they hire to implement their projects. In fact, in Tunisia, micro-startups created 92 percent of the private sector jobs between 1996 and 2010.
Yet, startups in Tunisia face considerable difficulties in entering the market and establishing a foothold. The World Bank’s 2015 Doing Business report ranks Tunisia at 60 out of 189 countries in terms of ease of doing business. This number worsened compared to 2014, when the county ranked 56. Tunisia fared particularly poorly in two areas: It ranked 100 in the category of “starting a business” and 116 in “getting credit.” Not enough firms are created and few expand because of the constraints they face from government regulations, lack of financing from banks, and a mismatch of skills between the needs of the private sector and graduates produced by the educational system.
Tunisia can promote entrepreneurship through a number of policy changes. Easing government regulations on establishing small businesses and ensuring the availability of bank financing are the obvious ones, but educating the public on entrepreneurship is also an essential factor. The country introduced new reforms in 2002 that focus on enhancing the teaching of entrepreneurship in schools. Tunisia offers opportunities for students at the university level to take classes on entrepreneurship and business planning. Tunisian universities also host clubs, incubators, and competitions for students to share their ideas and grow them into businesses.
Morocco’s “Moukawalati” entrepreneurship program offers a model for Tunisia to emulate. This program, implemented by the Moroccan government, helps and guides entrepreneurs toward success. Moukawalati assists entrepreneurs in starting their businesses, launching their projects, and implementing their enterprises. Moukawalati also helps in financing and providing access to loans. This program is open to Moroccans between the ages of 20 and 45. It has created at least 506 job opportunities between 2006 and 2010, according to Morocco’s Center for Regional Investment.
The Tunisian educational programs in entrepreneurship lack well trained teachers and business professionals—essential factors for the success of such programs. Teaching entrepreneurship at the graduate level in Tunisia could help to drive innovation and competition and introducing courses that teach students to be self-sufficient could develop the resilience and creativity needed to succeed. Offering these classes early could also help build a business culture over time. In Dubai, 74 percent of private schools teach entrepreneurship skills and start doing so as early as in the sixth grade.
Innovation, creativity, resilience, and education are the keys to expanding Tunisia’s economy and creating job opportunities. In the wake of the recent terrorist attacks at the Bardo museum and the Sousse beach resort, the hit to the tourism sector—and its impact on the economy—indicates a clear need for Tunisia to diversify its industries and take advantage of its young human resources. Creating an environment where small businesses and entrepreneurs can prosper would have knock-on effects that reach beyond money, potentially helping Tunisia reach a stable and prosperous equilibrium.
Mohsin Khan is a Nonresident Senior Fellow with the Atlantic Council’s Rafik Hariri Center for the Middle East.
Hanane Lahnaoui is an intern with the Atlantic Council’s Rafik Hariri Center for the Middle East.