Tunisia

Tunisia has undergone a number of profound changes as a result of the revolution that launched the Arab Spring. In a clear break with the past, one of the first acts of the transitional government was to lift restrictions on information. With the end of the 23-year rule of Zine-el-Abidine Ben Ali, Tunisians finally have full access to the internet, without any controls on content. The country's first democratic election produced a majority in the Constituent Assembly for the once-banned Islamist Ennahdah Party, and a human rights advocate and admirer of Mahatma Gandhi, Moncef Marzouki is the new president. A temporary commission to investigate corruption has led to the signing of a law that will provide the statutory framework for stronger and independent institutions. Access to information, the right to elect legitimate representatives and institutions that guarantee accountability are key steps toward reshaping the relationship between citizens and their government. Tunisia remains in the vanguard, building an example for the Middle East and North Africa (MENA) region on how to establish a new social contract and grappling with the contests that naturally occur in this more open space.

The transformation is far from complete, however, and overcoming the legacies of the previous government will pose significant challenges. The new policy of open access to information has allowed for a more accurate measurement of social inequality. Before the revolution, Tunisia had an impressive record of economic performance.  Average annual growth of 5 percent (1997 to 2007) placed it among the fastest-growing countries of the MENA region for which average growth over the same period was 4.3 percent. Despite this growth, statistics confirm that one of the main motivations for the uprising which were sparked in the country’s interior in December 2010, was that many were excluded from its benefits.

Previously, official poverty numbers reported a national poverty rate of 3.8 percent in 2005.  Following the revolution, however, in September 2011 the National Statistics Institute published revised poverty estimates which show that the national average poverty rate in 2005 was 11.8 percent. Furthermore, the breakdown by region (published for the first time), shows that national averages hid large variations, with poverty rates as low as 5-7 percent in the Center-east and Grand Tunis region and as high as 29 percent in the Center-west of the country.

Tunisia also faces widespread unemployment, especially among the young and educated. Unemployment was estimated at 13 percent in 2010 overall (approximately 500,000 people) but is at 30.7 percent for young people (15-24 years old), and with rates now reaching as high as 44 percent for young university graduates (15-29 years old.) The lack of economic opportunity and social inclusion meant that even positive developments, such as improvements in health, education and gender parity, merely added to the general sense of frustration. Tunisia continues to be a low-wage, low-value added economy, unable to absorb an increase in skilled workers. This was compounded by bad governance, characterized by cronyism and anticompetitive practices, which allowed a privileged minority within privileged regions to enjoy the lion's share of the benefits of growth and prosperity. The transitional government in place before the elections announced a US$1.5 billion emergency plan to address unemployment and regional development, among a host of other concerns. This needs to be accompanied with structural reforms to create a dynamic private sector capable of producing the quality and quantity of jobs needed by Tunisia's predominantly young population. Without strong, inclusive growth, the frustrations and sense of exclusion that fueled the revolution could once again threaten social stability.

As it tackles this development challenge, Tunisia will also be navigating a number of economic headwinds. The current political uncertainty has affected both foreign direct investment and tourism. The global financial crisis has led to a decline in exports. The drop off in demand from the European Union in particular, its main trading partner, has had a significant impact. The conflict in Libya produced an influx of refugees, and the return of Tunisian migrant workers. While many of the refugees have now returned to Libya, the loss of remittances from migrant workers is estimated at between US$48 and US$83 million. The cumulative result is that the economy is now estimated to have had negative growth of minus 1.8 percent in 2011, which pushed unemployment to 18.9 percent. The next few years, in which the Constituent Assembly drafts a new constitution and organizes elections, will be vital for Tunisia's political transition. With the sovereign debt crisis continuing to dampen European demand, and no clear timeframe for Libya's recovery, the government may have to rely on more fiscal stimulus to deliver opportunities and redress economic disparities. Critical support from the international community will be needed to finance the programs aimed at ensuring social and economic challenges do not overwhelm the political process. This would allow Tunisia vital breathing space until its anticipated recovery in 2014, when the growth rates required to satisfy popular aspirations are expected to return in the wake of a broader international recovery.

The World Bank Group’s overarching objective in Tunisia will be to support economic recovery and strengthen governance and inclusion during the political transition. It will also be to assist the interim government realize its current programs focused on transparency, accountability and citizen participation. As the new authorities emerge, and priorities are defined, the Bank will develop strategies to support them, in broad consultation with a wide range of civil society stakeholders. 

In the immediate aftermath of the revolution, and at the request of the interim authorities, a USD$500 million Development Policy Loan (DPL) was approved to help mitigate the economic impact of the uprising, and lay the foundation for a more dynamic, inclusive and open society. The Governance and Opportunity Development Policy Loan (GO DPL) provided fast-disbursing funds in support of government measures to jump start the economy, and relieve the plight of the unemployed and the poorest and most vulnerable groups. It was also designed to help the government respond to the demands of the revolution by improving transparency and accountability. The Bank mobilized global expertise and significantly scaled up technical assistance to support the design and implementation of the interim authority’s reform program. This process was informed by extensive consultations with the emerging civil society on thematic areas such as youth employment, governance, health and education, to determine priorities. The DPL will be the primary vehicle for budgetary support, coupled with ongoing technical assistance and widespread consultation, throughout the vital transition period in which a new constitution is drafted and the country returns to the polls. After the elections, the World Bank Group began to work with the new government, but also continues to engage with a broad array of civil society organizations, to define development goals that are consistent with citizens’ expectations and needs.   Following the January 2011 revolution, the Bank responded to the interim Government’s request to provide budget support for a short-term innovative reform program that addressed unresolved issues such as access to information, that had remained on the back burner for decades.  The GO DPL was prepared jointly with the African Development Bank (AfDB), the European Union (EU) and French Agency for Development (AFD), who together contributed an additional $800 million to the $500 million IBRD financing, for a total lending package of $1.3 billion.

The Bank is also involved in analytical work to strengthen Tunisia’s business environment, as the engine for sustainable and inclusive growth. This will be in the form of a Development Policy Review and an Investment Climate Assessment, which will assist the interim Government to develop strategies that encourage investment, while also identifying current legal and administrative bottlenecks preventing the private sector from reaching its full investment potential.   Removing red tape, increasing transparency and reducing the discretion and privileges which particularly prejudiced domestic investors in the past, will send a strong signal to all investors that the rules of the game have changed and that Tunisia is now open for business on a more level playing field. Key elements of this analytical work will build on a US$50 million loan to Tunisia approved in July 2011 under the Arab World Initiative Micro, Small and Medium Enterprise Facility. By promoting increased lending to micro, small and medium enterprises, the regional facility supports the innovation and diversification necessary for the kind of private sector that drives growth and delivers jobs and opportunities to all Tunisians, rather than a privileged minority. The International Finance Corporation (IFC) has approved an investment of US$100 million in the program, and will also contribute to the financial sector analytical work. This has been complemented by $50 million in parallel financing from the AfDB.

A number of projects that were ongoing prior to the revolution which focused on economic inclusion will continue to receive Bank support and financing. Efforts will be made to speed up implementation of projects that cohere with the policy objectives of the interim government, such as the Second Natural Resources Management Project and the Fourth Northwest Mountainous and Forested Areas Project, both approved in 2010, which aim to improve socioeconomic conditions in lagging regions where newly disaggregated poverty data paints a stark picture of need. The Bank will stay focused on, and support the Government in  addressing short-term employment needs, with ongoing support to public training and assistance programs, as well as marshaling trust fund resources to back innovative approaches to job creation. In response to longer-term concerns, but no less urgent, the Bank will proceed with a plan to invest in a 50 MW Concentrated Solar Power plant, in support of Tunisia's efforts to mitigate the effects of climate change and lower dependency on fossil fuels. Apart from the obvious benefits to the environment, the construction project could stimulate local manufacturing, with the finished plant providing skilled green industry jobs for the future.

Partners

The World Bank operates as part of a broader international effort in Tunisia, together with the African Development Bank, European Union, bilateral donors (France, Japan, US, others), and United Nations agencies.  The Tunisian Constituent Assembly Government is taking the lead in donor coordination efforts.

The World Bank was able to respond quickly to changing circumstances, and provide key budgetary support to the interim government following the January 14, 2011 revolution. The USD$500 million GO DPL supported the initial reform efforts to create a more just society, with, among other things, equal access to information and opportunities for all Tunisians, more transparent public procurement procedures, and increased citizen involvement in evaluating the quality of social service delivery.

Working with Affiliated Network for Social Accountability-Arab World, the Bank has helped establish a regional platform for constructive engagement between civil society organizations, government, media and the private sector in Tunisia. This is a key step toward giving citizens more voice, and building a new social contract based on inclusion and accountability.

The Bank was able to mobilize trust fund resources to help Tunisia manage the consequences of the conflict in neighboring Tunisia. A grant from the State and Peace Building Fund is being finalized that will provide support for the reintegration of 40,000 Tunisian migrant workers returning from Libya, and to support services and job creation for communities along the border.

Discussions with the newly elected Constituent Assembly Interim Government are ongoing to determine their priorities and how the Bank can best support them. This will be the next chapter in a decade of assistance that, notwithstanding inequities and exclusion, has yielded significant economic and social progress in some respects including:

• Northwest Mountainous and Forestry Areas Development Project helped increase the average household agricultural income by 85%; access to roads from 56% to 81% for communities in targeted areas; access to potable water from 69% to 81% of households (representing 4,980 additional households); and vegetation and forest cover within project areas grew from 32% in 2003 to 38% in 2009. Cultivated areas significantly increased from 17% to 23% for fodder crops and from 0.8% to 2% for market gardening; and crop yields almost doubled for olives and increased by 40% for wheat. In addition, some community members received small amounts of equipment and materials and training in technical and organizational skills. As a result, 101chnical and organizational skills. As a result, 101 development committees and three cooperatives were created.

• Global Competitiveness and Accelerated Economic Growth in Tunisia was helped by a range of development policy loan programs. Exports doubled over a 10 year period, total factor productivity rebounded from a negative rate in the 1980s to 1.24% in the 1990s and 1.4% in 2000–2006. Furthermore, exports of goods doubled in value between 1996 and 2007, while annual foreign direct investment flows increased steadily, averaging 2.2% of GDP in 1996–00, 2.6% in 2002–05 and 5% in 2006–2008. Tunisia ranked as Africa’s most competitive country in Davos’ 2009 Global Competitiveness Report. All this translated into a 5% growth since the mid-1990 despite recurrent internal (droughts) and external shocks.

• Employment was targeted with gradual changes in policies and regulations governing the labor market. A World Bank-backed program helped restructure the portfolio of active labor market policies and helped reform operations and processes of the public employment services to enhance efficiency and effectiveness. The program supported the hiring of over 16,000 (vocational-technical) jobseekers in 2009 by the private sector through public-private training initiatives. It helped to create 464 jobs and modernize laws, regulations, and processes of public employment services for the difficult-to-place, long-term unemployed cases. The effort has managed to find 2,300 jobs and plans to place 5,000 more applicants by 2012.

• Education Quality was targeted with a $99 million World Bank loan contributing to the development of new school curricula, the creation and distribution of new textbooks and the implementation of new tools to measure student performance. In addition, an extensive training program for teachers was created to equip them with the skills needed for innovative teaching methods.  The new methodology aimed to provide each child with basic competencies in a range of core subjects. It also required teachers to focus on each student’s needs and progress. The Priority Schools Program now covers some 600 primary schools and 100 middle schools. Kindergarten classes have been created in over 400 schools to cater to the most disadvantaged children.