Tunisia: the Arab exception’s test

By Francis Ghilès, December 23, 2014

Tunisia's elections 2014

Tunisia’s elections 2014

The election victory of Béji Caid Essebsi is a vital moment in the pioneer country of the Arab revolts. It also reveals the scale of Tunisia's economic challenges. "The new Tunisian leaders will also need western countries to put their money where their mouths are".

The Arab revolts which started four years ago ushered in a period of change in the Middle East and north Africa which has been more violent and chaotic that most observers foresaw at the time. Syria is self-destructing. Egypt has reverted to military rule. The brutal Islamic State has emerged, leading to growing sectarian division and threatening a region-wide conflagration.

Amid the gloom, Tunisia – where the Arab revolts began in December 2010 – stands out as the one glimmer of real hope. Islamists won the general elections there in October 2011 but lost them two years later. A coalition of lay parties, Nidaa Tounes, led by the veteran politician Béji Caid Essebsi, won a plurality of votes in the elections in the country of October 2014. Essebsi is now set to become Tunisia’s fourth president, taking over from the erratic Moncef Marzouki (who is known in Tunis as tartour – the puppet, in his case of the Islamists. Essebsi maybe be 87 but his long career as ministerial colleague of the founder of modern Tunisia, Habib Bourguiba, suggests he will restore much needed dignity to the office of president.

The run-up to the election on 21 December 2014 has polarised Tunisian politics. This is above all because many in both main sides – supporters of the incumbent president and his opponent, as well as foreign observers – regard their confrontation as an extension of the regional clash between revolutionary forces, including Islamists and counter-revolutionary forces. The pattern of voting certainly underlines the chasm between the two camps, which divides social classes and pits the elites of the coast against parts of the south and east.

The risk of reviving political conflicts which have roots in the years of independence from France in the early 1950s is real. But the reality on the ground in Tunisia is also more nuanced than the “revolutionary vs counter-revolutionary” paradigm would suggest. The new president will have to reconcile Tunisians and show the region that Tunisia is exceptional in its capacity to forge a new dialogue, a new consensus. The three years of Moncef Marzouki’s presidency have in the end diminished the stature of this former opponent of Bourguiba’s authoritarian successor, Zine El Abidine Ben Ali. Will Béji Caid Essebsi, whom early results suggest has indeed won the election, do better?

The Bourguiba legacy

Habib Bourguiba had his faults, not least his incapacity to choose a successor by proper means when he was ailing in the 1980s. But the architect of Tunisia’s independence did put in place some of the essential foundations a modern state. He benefited in turn from reformist predecessors who, well before the French invasion of 1881, had enacted bold constitutional reforms – a paid civil service, the beginnings of a modern army, the Saddiki College in Tunis (modelled on the French lycée), and a certain separation between the state and religion.

Bourguiba gave Tunisian women equal rights in 1956 and family planning in 1961. These two major reforms explain the role women and the broader middle class play in the country today, and these two groups’ resistance to the Islamists’ attempt to use identity politics and  turn the clock back on women’s rights. They are key supporters of Béji Caid Essebsi (who is widely known as “Si Béji”). The early election results indicate that a majority of women voted for Béji, and that regional variations were also substantial: Béji got most votes in the poor eastern region of El Kef and the phosphate mining area of Gafsa in the south, while Marzouki did well in the south-central region of Kasserine and the south-east near the Libyan frontier.

When he was Bourguiba’s minister – in the prominent departments of foreign affairs, interior and defence – Essebsi acquired an experience in world affairs that should prove very useful today. He understands both the region and the wider world, has always enjoyed good relations with Tunisia’s powerful neighbour to the west, Algeria. This innate grasp will be key at a time when both armies are cooperating in the fight against terrorism, which affects the long border between the two countries.

Political trust is a prerequisite to deeper economic cooperation. Algeria gave Tunisia more money than the European Union when Si Béji was prime minister in 2011, and acts as the de facto guarantor of Tunisian stability (with the discreet blessing of the United States). The continuing and dangerous turmoil in Libya reinforces the likelihood that the new president will have the strong support of many countries in the region and beyond. At 88, Si Béji is no budding dictator, and he is in any case fully committed to the rule of law. If Tunisia is to grow deeper democratic roots, making the state more accountable is essential. This especially applies to the judicial system and police.

The prime minister he appoints will not necessarily be drawn from the ranks of Nidaa Tounes, the rather ramshackle party he has created and led since 2012, but it will have to be someone of stature. The mix of ministers – some political, some more technocratic – will send a vital signal to the population that the country is back in business. Nidaa Tounes is a coalition of personalities and groups and, in view of Si Béji’s age, a competent government led by a strong prime minister is necessary. New and younger talent should be brought to the fore – and it is available, as it is worth noting that the country’s elite did not flee after the fall of Ben Ali in January 2011. Indeed, thousands of educated Tunisians have come home, hoping to build a beacon of progress in north Africa.

The economic platform of Nidaa Tounes is predicated on international financial support to the tune of $5bn annually for the next three years. This comes at a time of intense debate about the economic, demographic and regional challenges Tunisia faces. Pessimists fear the country might be heading for a train-wreck but seasoned observers – particularly those who know Si Béji – remain cautiously optimistic that democracy is putting down healthy roots.

On a personal note, I have known him for forty years, and can confirm the impression of an honnête homme given in his fascinating 515-page memoirs – Habib Bourguiba, le bon grain et l’ivraie: mémoires de Béji Caiïd Essebsi (Sud Editions, Tunis, 2009). The memoirs are relatively candid for one who served in high office, and show Béji as usually siding with those who wished to reform the ruling Neo-Destour Party in Bourguiba’s time.

The Ben Ali distortion

One of the main obstacles to democratisation in the Middle East and north Africa is the opposition of Arab states to any such trend. This has not been the case in Tunisia, but its two neighbours present very contrasting situations. Libya is fast becoming a failed state, while uncertainty over Algeria makes it hard to predict the future course of this pivotal country.

The relative benevolence of foreign powers towards Tunisia is explained by the fact that the old Tunisian elites are still in control. North Africa’s smallest country has witnessed a change in the regime but not a change of regime. Algeria’s attitude is shared by the US, the two countries which in 1987 were apprised of the military officer Ben Ali’s intention to oust an ailing President Habib Bourguiba. In 2011 as in 1987, France was keen to maintain the status quo at any cost and did not believe the president’s fall was imminent. The US recognised the legitimacy of the protesters in Tunisia for three reasons which are not found in other Arab countries. The uprising’s lack of political direction was reassuring; it was not exploited by the Islamists; and, last but not least, Tunisia is not strategic in the way that Egypt, Bahrain and Saudi Arabia are.

That the protesters were not supported by a foreign country gave their movement credibility and independence. They came from the poorer classes. Many were young people with little hope of regular employment, even when they had university degrees and especially if they lived in the underdeveloped hinterland. They felt crushed, deeply resented their humiliation, and had nothing to lose. By contrast the middle classes and the trades unions (organised in the UGTT) did have something to lose, yet nevertheless they played an important role in organising the second phase of the riots, along with other professional organisations such as the lawyers’ federation and the Tunisia League of Human Rights. The army played a decisive role by not intervening; its refusal to fire on demonstrators contrasted with the response of militaries in other Arab states. It has played a key role in helping maintain the peace during the past four turbulent years.

In the decade before the uprising, the Ben Ali regime had evolved into a mafia-style system. This kept the middle classes and the many genuine private-sector entrepreneurs at arms’ length. Yet contrary to a commonly held view, the existence of a strong middle class in Tunisia did not translate into a process of democratisation. Its members were too dependent on the state and too bureaucratic. A feature of the economy which escaped most outside observers was the growing wealth disparities between the capital and the coast, and the increasingly poor western uplands and south of the country. Tunisians who live in the more affluent regions often hold their less educated and solvent compatriots in contempt. They forget that the profits from the phosphates mined for more than a century in the Gafsa region have never been reinvested there – all the value-added industries based on phosphate rock were built in the ports of Gabès and Sfax. Today, those poorer Tunisians are clamouring for their share of the wealth they created and which they have never enjoyed.

The World Bank illusion

Tunisia in the Ben Ali years was held up as the poster-child for Arab economic success. An evaluation on the website of the World Bank on 27 October 2010 gushed with enthusiasm for the country’s economic performance:

“Through a range of development loan programs with IRBD, Tunisia has boosted its global competitiveness and seen exports double over a little more than 10 years. The best illustration of Tunisia’s improved competitiveness is it total factor productivity growth, which often drives investment…..While productivity growth in 2000-2006 remained below South Korea’s and Malaysia’s, it represented one of the best performances in the Middle East and North Africa…..Tunisia ranked as Africa’s most competitive country’s in Davos’ 2009 Global Competitiveness Report.”

The contrast with the report the World Bank published in September 2014 is stark This states that “although the perception in Tunisia is that the economy is open and relatively well integrated, in fact compared to benchmark countries Tunisia remains less open (as measured by the share of exports and imports to GDP) and quite protected. Beyond the shiny façade presented by the former regime (the economy) was clearly a system asphyxiated by its own corruption.” For the World Bank to eat humble pie is unusual, but its views were shared by the IMF, the European Investment Bank, the Davos Forum and many western governments.

Neither of these reports addresses two vital issues, however. The first is the demographic profile of Tunisia. The average young Tunisian woman grew up in a family of seven children but will only bear one or two herself. Her mother was illiterate but her better educated daughter has neither the inclination nor the income to raise a large family. By 2000, Tunisia’s fertility rate had already fallen below replacement and is likely to fall further. One out of ten Tunisians is today an elderly dependant and, as the present generation ages, the ration will rise to about the same level as in western Europe. Even for wealthy western Europe, caring for this army of pensioners will strain resources to the limit. A poor country simply has no way to manage, and Tunisia has not provisioned for its rising number of older people.

The second concern is the low level of much university education in Tunisia: roughly one third of secondary school graduates go on to university, but the diplomas they obtain are largely worthless. Diploma mills here as in most Arab and other developing countries deliver paper degrees without merit to half-trained graduates. Any self-respecting middle-class family strives to get its children into French universities. The children of the poorer hinterland, who only started getting into Tunisian universities in recent years, find the sacrifices their parents made in the hope of getting better jobs dashed. Often there simply are no jobs.

Elite schools in China and India produce engineering graduates which meet world standards, but Turkey is the only Muslim country in the Middle East which can claim to do the same. Tunisia attracts a modest amount of foreign investment; but outsourcing by foreign companies adds only around 2,000 jobs a year, or one for every 180 university students. Although Tunisian engineers will work for a fifth of the cost of their European counterparts, there are simply not enough good engineers (let alone high-paying jobs even for the best ones). The most qualified university graduates seek greener pastures overseas. This is true not only of Tunisia but of all other Arab countries.

The economic fulcrum

Three question remained unanswered when the revolt in Tunisia got underway:

* To what degree would an uprising motivated by economic hardship make the very hardships which sparked it more severe as political and social turmoil led to a fall in output and a rise in unemployment?

* How would private investors, be they domestic or foreign, react to a deterioration in the political, social and security environment in which they operated?

* Would Tunisia’s key economic partners be  reluctant to give the financial support that might help underpin more democratic politics and better economic governance?

It was of course not Islam or poverty themselves that provoked the uprisings; it was the crushing humiliation that had deprived the majority of Tunisians who are under the age of thirty of the right to assert control over their own lives.

In principle, political and economic reform should ideally be conducted concurrently and in an integrated fashion, lest worsening economic conditions and rising unemployment derail political revolutions. But this is usually not possible. The challenges Tunisia has faced over the past four years remain. Economic conditions have deteriorated. Unofficial unemployment has de facto risen. Food staples are much more expensive. Tens of thousands of Tunisians have been added to the state payroll without proper qualification or justification in having such a job.

During the two years they governed Tunisia in 2012-13, the Islamists demonstrated their lack of interest, or inability, in addressing the economic and social problems of a modernising society. The Islamists favour free-wheeling – nay, crony – capitalism as do all authoritarian Arab regimes. Even more damming was their failure to control the hardline Salafi Islamists who not only resorted to violence in Tunisia but sent an estimated 3,000 of their number to Syria to join the war there. Such insecurity does little to attract domestic or foreign investment.

When the Islamists reluctantly relinquished power in late 2013, the morale of what was arguably one of the best qualified civil services in the Middle East and north Africa had sunk very low. Many of the country’s frontiers were no longer under state control. Regional gangs of traders in illicit goods and guns paraded as Islamists, or vice versa, fuelling a huge growth in the informal sector. The consequences were dire. Cheap imported goods flooded the country and forced the closure of local manufacturing, while the state lost a large chunk of the tax take, thus forcing to it borrow more, notably abroad. This problem must be set in a broader context. Tunisian leaders have long viewed aid from overseas as something they are due. It is about time they faced up to harder options. Why not offer conditions which would attract the Tunisian diaspora to invest in Tunisia? Why not use some the tens of billions of domestic savings invested abroad to develop the country?

The technocratic government which took over a year ago delivered a message as brutal as the bare statistics. GDP growth had averaged 2.3% annually since the fall of Ben Ali, 0.8% if government wages are subtracted (100,000 new recruits joined the civil service and state companies – many of the latter post huge deficits). That is the price paid for political expediency. Wages overall have grown by 40%, productivity by 0.2%. The cost of state subsidies to oil and gas products has rocketed by 270% over three years, and amounts to 6% of GDP. They essentially benefit well-off Tunisians. The budget deficit rose in 2013 to 6.5% of GDP, as against 5.7% in 2012, but would have risen much further had it not been for the very strong pressure from the IMF. The current-account deficit reached 9%, essentially the reflection of a deteriorating trade balance. Foreign debt, meanwhile, has increased by over a third to over 50% of GDP. Such figures are unsustainable.

Strikes have proliferated as the UGTT, which brokered the Islamists’ departure from government, continue to flex its muscles. Regional UGTT barons seem to think that nationalising or renationalising loss-making industries will save the country, and the union’s leadership in Tunis has difficulty in controlling its regional offshoots. The technocratic government led by Mehdi Jomaa did make some timid reforms in the run-up to the latest elections, and took important measures to re-establish security which had deteriorated during the years of Islamist government. But it lacked a clear political mandate. Growth over the past three years has been driven essentially by private consumption. The government started cutting subsidies, notably on fuel. But the aim of the fiscal reform it enacted was limited to increasing tax proceeds rather than making the system more investment-friendly.

The latest World Bank report has provoked controversy in Tunis. Former ministers of Ben Ali have argued that the situation in 2010 was not as dire as the report makes out, which invites the retort that they were probably responsible for feeding statistics which were too optimistic and hiding other less savoury aspects of the regime. Not that this lets the World Bank of the hook: whether its mistaken diagnosis was the result of pusillanimity, political pressure in Washington or plain incompetence is hard to tell. To accept blame, however, is all to its credit. This will help redeem its image in Tunisia and allow an increase in loans if and when the new government – which will be appointed after the new president is inaugurated – chooses to seek help. By admitting that corruption was widespread in Tunisia, the report also opens a Pandora’s box: is it not widespread in other countries of the region and why does the World Bank not say so? In other words, does the old order need to be overturned and more democratic politics to prevail before the World Bank tells the truth about its other Middle Eastern and North African clients?

The strategic matrix

The success or failure of economic reforms in Tunisia will depend on how pragmatic the new government and president chose to be. Few politicians share the pessimistic view that the country’s economy might be facing a slow collapse; that poorer Tunisians will press for their share of the cake more forcefully than hitherto; that if the secular parties fail, the Islamists will get another chance to take the reins of government. The politicians have not convinced many among the under 30s who confronted Ben Ali’s security forces four years ago to vote: 3m Tunisians who are entitled to vote out of a total of 10m are not registered. They are, if anything, less hopeful of getting a job than in 2010.  In the first round of presidential elections, younger Tunisian abstained massively. Only half of those entitled to vote cast their ballot.

The economic priorities of the new government will have to include building major infrastructure with a view to integrating the poorer western and southern hinterlands into the country’s economy; reforming the bureaucratic manner in which the country is governed, getting rid of the myriad authorisations and rules which hand far too much power to bureaucrats (159 infrastructure projects worth 8.8bn are in abeyance since the end of 2010); and encouraging young people to set up small companies, but at the same time backing those large companies which export goods with real added value. Crony capitalism and helping insiders must be curbed, a cardinal sin in a capital where so many families are related to one another.

Aiming state subsidies at those who need them and making the middle classes pay the full price for the foodstuffs and the fuel they consume, and cutting state support for the oil and gas which serves as feedstock for industry, are other requirements. The government could do worse than give much greater support to Enda Inter-Arabe, an ONG founded in 1990 which supports micro-entrepreneurs by providing financial (micro-credit) and non-financial services (training, coaching, trade fairs); 40% of its branches are located in rural areas. A recent visit to their offices, and some beneficiaries in Menzel Temime in the rural Cap Bon area north east of Tunis shows how far a credit of 500 or 1,000 Tunisian dinars (500 or (1,000) can go in the hands of determined, modest people. Enda Inter-Arabe certainly puts the Banque Nationale de l’Agriculture, which only lends to wealthy farmers, to shame.

But first the governmrnt must bring the informal sector under control and ensure that the state does not lose an estimated half of the tax income it is owed by its citizens. Mopping up the huge amount of informal money washing around Tunisia is essential to get the economy back working and to weaken the criminal networks which have flourished amid the corrosion of state authority. Being transparent, daring to debate publicly – the age of social networks and the internet has smashed censorship – and keeping the powerful trades union UGTT engaged: all this will require high political skills. A new social compact between the government, the unions and the employers’ federation UTICA is a must. The economy has proved more resilient than might have been expected; the country’s central bank, buffeted as it has been by strong political and security ill-winds, has played its regulatory role with poise. That role should be reinforced. Meanwhile, the security impact from the chaos in Libya is worrying, though in fact has been rather beneficial in economic terms.

The immediate aims of the new government will be twofold. First, to get a budget for 2015 approved by the national assembly. The draft submitted to parliament before the October elections was not even debated by deputies. The UGTT fully agrees that this needs to be passed. Beyond this, bold reforms are unlikely to be enacted quickly. Second, to offer a fresh policy to rekindle foreign interest in exploring for oil and gas (energy accounts for 7.5% of Tunisia’s GDP). Agreements need to be concluded with Italy and Algeria concerning the buying and selling of electricity; to build a legal framework which encourages the production of renewable energy and shale gas; and to simply existing rules, which are too many and too complex. Getting the right mix of energy policies is all the more pressing because Tunisia risks losing part of its manufacturing offshore sector to eastern Europe because of rising costs. International aid should be conditioned, to a degree, on the next government enacting a long-term energy policy worthy of what the sector could contribute to Tunisia’s economic recovery.

The new Tunisian leaders will also need western countries to put their money where their mouths are. The authoritarian regime of President Ben Ali was not merely an internal affair, but one bolstered by the United States, France and international organisations such as the IRBD. If the Middle East is to be managed for its resource rents or the ability of certain countries to stay stable, then outside powers will have to do much of the management. Lecturing Tunisia, of all countries, on economic reform is almost risible. Tunisia’s resource rents were manipulated and shared by international interests playing their own game. By 2010, the recent IRBD report notes, firms belonging to Ben Ali’s extended family accounted for “a striking 21.3% of all net private sector profits” – which amounts to 0.5% of GDP.

The Tunisian people are unlikely to recover the billions worth of property, shares and gold that the Ben Ali clan secreted in France, Switzerland, the US and elsewhere. Would it not be timely for the US, France and the European Union to support the new Tunisian government with a mixture of loans and investment guarantees? Debt write-offs might be superficially attractive, but their net effect would be to damage the country’s signature. A mix of loans and guarantees will help to stabilise the country and prove that democracy delivers – surely a wise investment in the medium term. The great lesson Tunisia has yet to learn is how to mobilise the talent and resources of its diaspora. The Chinese are an example worth examining here; but no Arab country, to date, seems to notice or care.

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Francis Ghilès is senior research fellow at the Barcelona Centre for International Affairs (Cidob). He was the Financial Times’s north Africa Correspondent from 1981-95, and now contributes to newspapers such as the New York Times, Wall Street Journal, Le Monde, El Pais and La Vanguardia. He is a specialist in emerging energy markets and their relationship to political trends, and has advised western governments and corporations working in north Africa

Article courtesy of Open Democracy

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