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FEATURE STORY

Tunisia is at key juncture to stimulate innovation based economic growth

April 16, 2010


April 2010 - Tunisia’s historically positive and consistent performance along key economic indicators has led to a critical step in its development prospects. The new Tunisia Development Policy Review (DPR) identifies one of Tunisia’s key economic challenges as reducing its unemployment rate, particularly for the highly educated sectors of the economy.

Achieving this transformation calls for an ambitious reform agenda

The task will be to focus on generating not only fast-paced, but high quality growth, by promoting the creation of an economy able to absorb its increasingly more skilled labor force. Innovation serves as the crux of the new growth model, supported by strong human capital and a healthy macroeconomic environment. Meeting the challenges of natural resources constraints through innovation, fostering an enabling environment for accelerated structural changes, and deepening global integration will also be critical to shaping Tunisia reform agenda.

Deepening global integration is crucial to realizing the potential for innovation

In addition to human development initiatives, global integration along four reform areas is crucial, including attracting Foreign Direct Investment in high value-added sectors; enhancing regional integration and penetrating new markets in the Middle East and North Africa and Sub-Saharan Africa and opening the capital account to allow Tunisian firms to expand in neighboring and other distant markets.

Finally, Tunisia is subject to similar water and land constraints that afflict several countries in MENA that can hamper its prospects to create the jobs needed for its growing labor force. It will be important to combine conservation efforts, increased efficiency, investment in infrastructure, and tighter environmental regulation to temper the negative effects.

Quick overview of the study

  • Chapter 1 reviews growth and employment outcomes and challenges.
  • Chapter 2 discusses the rationale for increasing the pace of structural transformation of the economy in order to boost growth and reduce unemployment.
  • Chapter 3 examines the strengths and weaknesses of Tunisia’s innovation system and strategies and proposes reform options in light of the international experience.
  • Chapter 4 discusses key aspects of Tunisia’s global integration that could further contribute to innovation and productivity growth.
  • Chapters 5 discusses the key improvement in the enabling environment needed to support innovation and productivity growth (economic regulation, education sector reforms, financial sector reforms and labor market).
  • Chapter 6 discusses structural transformation issues in natural resource-intensive sectors and examine the specific sectoral reforms needed to address the trade-offs between several objectives, including growth and natural resources preservation.

Data

  • The country has sustained a 5 percent growth rate per annum over the last 20 years.
  • In 2007, the education system produced 60,000 university graduates and close to 60 percent of the new entrants in the labor market that year had a university degree. In the same year, only a small fraction of the 70,000 new jobs created originated in skill-intensive sectors.
  • Education absorbs 20 percent of Tunisia’s budget’s (7 percent of GDP)
  • More than 860,000 new jobs will need to be created in the next 10 years to avoid further deterioration of the employment situation.
  • In Tunisia, productivity growth (1.40 percent per year in 2000-2006) lags behind Malaysia’s (1.47 percent) and Korea’s (1.90 percent).
  • Annual FDI flows averaged 2.2 percent of GDP in 1996-00, 2.6 percent of GDP in 2002-05 and 5 percent of GDP in 2006-2008.

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