Last month the US-Tunisia Joint Economic Commission (JEC) met in Washington to reaffirm economic partnership between the two countries and promote growth in key sectors. The meeting was an opportunity for Tunisia’s leaders to demonstrate their commitment to economic reforms and for the United States to commit further economic support to Tunisia in the form of assistance and market access. A serious effort to develop a US-Tunisia economic cooperation roadmap along with trust building between Tunisians and acceleration of a clear economic growth plan by the Tunisian government are the next steps for successful follow-on to the JEC.
Tunisia’s economy is weak and is in urgent need of reform and recovery. Real GDP growth was at a mere 0.8 percent in 2015 and rose modestly to 1 percent of real GDP growth year on year for Q1 2016. The unemployment rate for the country as a whole is over 15 percent, and is much higher in the country’s impoverished interior and among youth, who are jobless at a rate of nearly 38 percent. A recent Agence France Presse report from Kasserine, an under-resourced city in the country’s mountainous west, quoted residents as saying unemployment was a ticking time bomb, especially among the youth.
A November 2015 survey conducted by the International Republican Institute (IRI) revealed that while most Tunisians believe terrorism is the country’s biggest problem, most rated unemployment and jobs creation as the priority in terms of what they want to see from their government. In other words, Tunisians’ confidence in their government rests largely in how their leaders perform on improving the economy. This presents urgency but also opportunity for Tunisia’s decision-makers to enact a bold agenda for economic reform and growth.
The first step for the Tunisian government is to spearhead a serious discussion about the economy that builds trust between different interest groups in Tunisian society. Lingering aspects of the old order, including economic privileges for some and the stubborn persistence of corruption, continue to breed mistrust among Tunisians. In the same IRI survey, most respondents cited reducing corruption as the best way to generate employment. The Tunisian government can break the current cycle of mistrust if it is able to generate constructive communication between decision-makers, the private sector, and the public. Instead of viewing trust building simply as public dialogue though, the government should instead create mechanisms that result in lasting relationships.
One way to achieve this would be to implement the fast-track mechanism suggested by a recent Carnegie Endowment study on Tunisia, and replicate what has already worked in the security sector. This would leverage a mix of civil servants, business leaders and outside expertise to speed up project implementation in key sectors and regions. Another way to achieve this would be seminar oriented approaches that bring together public servants, private sector leaders, union representatives, journalists, and relevant civil society groups around economic oriented themes such as entrepreneurialism, business management, and private-public sector innovation. The goal is generating a framework for solving problems at the public policy level by educating on approaches and tearing down walls of mistrust at the working and interpersonal levels. The model is already successfully employed among public servants at the Institut Defense Nationale where top ranked civil servants from across Tunisia’s national ministries are joined by experts and thought leaders from other sectors for a year-long program of seminars and training. It can easily be broadened to include economic related themes with an expanded participant pool.
Concurrent with trust-building efforts, setting concrete 30/60/90 day goals would improve the country’s business climate. This could include cross-functional teams from within Tunisia’s national ministries to prioritize projects and jump-start efforts that make it easier for Tunisian entrepreneurs to run businesses by expediting the time it takes to obtain licenses and removing red tape on the number and types of approvals needed. As many Tunisians have valid suspicions about how their economy is managed given practices of the past, it is equally important that the government spearhead a new national initiative aimed at improving tax collection and fighting corruption. Doing so would make a notable contribution both to addressing Tunisia’s underlying trust issues and improving the current state of the government’s finances.
At the international level, Tunisia can attract the attention of investors by promoting its economic reform plan more aggressively. Efforts to hold a major international investment conference this fall are underway and should spur investment as a direct consequence of passing key reforms such as the public-private partnership law, the investment code, and the banking sector law. The US-Tunisia JEC, likewise, is an important step to making progress on the international stage and for the United States to lead by example in providing international support to Tunisia. But Tunisian decision-makers should view the JEC and other efforts as a way to both strengthen economic collaboration in the short run and establish a solid foundation for trade cooperation and partnerships on equal footing in the future.
In the short run, improving access to US markets for Tunisian export items in three key labor intensive sectors – textiles, agricultural products and handicrafts – will produce tangible benefits in terms of new jobs. The immediate trade benefits will help Tunisia access US markets more easily to boost job creation and build much needed momentum. Scaling olive oil and handicrafts exports would also have a significant short-term impact on job creation in the impoverished rural and interior areas of Tunisia that need it the most. On textiles, the United States should not let Tunisia be at a disadvantage compared to other countries that hold a free-trade agreement or that benefit from regional preferential agreements such as the sub-Saharan Africa Growth and Opportunity Act.
The Tunisian public is thirsty for the dividends these short term gains offer, but to reach its full potential Tunisian officials must also focus on win-win cooperation with the United States in the medium and long run. This requires a mindset of economic cooperation that positions the United States and Tunisia to go to market together in North and sub-Saharan Africa in fields such as education, information, communications and technology (ICT), and agribusiness. Tunisia’s high rate of university educated graduates makes it a good fit for helping US businesses expand operations elsewhere on the African continent, while its linguistic and cultural ties to the francophone world offer language skills and wherewithal typically lacking in US companies. By leveraging the technical know-how of US businesses in these sectors Tunisia’s economy can thrive and the US private sector footprint in Africa can grow. This is a pathway to future opportunity on the continent where the US is now being beaten by China.
In addition, cooperation in the renewable energy and ICT sectors would make a notable contribution to transitioning Tunisia’s economy from its current low-skill, low-wage state to the high-skill, high wage opportunities it needs in the coming decades. Doing so would position Tunisia as a value-add economic hub in the region. For this to succeed, low-dollar, high-yield programs that provide training and business management skills to aspiring Tunisian entrepreneurs and improving Tunisia’s vocational training schools should be expanded upon now.
Tunisia is again at a crossroads. Its economic struggles are threatening to undermine its political progress as the public becomes more and more disillusioned about the future. In the same IRI November poll, 86 percent of Tunisians said the country was headed in the wrong direction, the highest since IRI began surveying there in 2011. Failure to act on accelerating economic project implementation will breed instability with the potential that the many gains Tunisia has made since 2011 will be undone. This combined with the dynamic of growing youth disillusionment presents a volatile mix of factors that can be exploited by extremists.
If Tunisia’s leaders enact a bold economic implementation agenda and the United States helps relax trade access for Tunisia’s labor-intensive sectors and jointly develops with Tunisia a win-win model of economic cooperation, this will contribute to the building of a more prosperous nation. The JEC should be just the start.
Mohamed Malouche is board chairman of the Tunisian American Young Professionals (TAYP). Scott Mastic is Middle East and North Africa Director at the International Republican Institute (IRI).
Image: Photo: US Army Africa