Since Tunisia’s uprising that ousted former President Zine El-Abedine Ben Ali, United States aid and assistance has been a pillar of the country’s economic recovery and political reconstruction. Millions of government dollars in cash for short-term debt relief and millions more in loan guarantees have poured into Tunisia, including the USAID-funded programs and NGOs working on capacity building through economic growth initiatives and grants. The problem with this response, however, is that it is based on the false assumption that the state-led infrastructure, which has been in place since Tunisia’s independence in 1956, is now conducive to growth simply because political power changed hands. Rather, the expectations that a liberal economy and private sector ecosystem would automatically emerge have resulted only in misguided and ultimately wasted American efforts.
The State Department currently concentrates a significant part of this money on workforce development through vocational trainings and scholarships geared towards youth and women. Aiming to cultivate entrepreneurs and small and medium enterprises (SMEs), the intent is that beneficiaries will become financially successful community leaders who guide Tunisia’s transition to democracy. But while Tunisia has become saturated with such activities, the mere presence and availability of these tools has proven unable to foster a genuine entrepreneurial spirit. This is primarily due to the fact that Tunisia does not have a real market economy, nor have its people ever been exposed to real competition.
Under post-independence President Habib Bourguiba, Tunisia pursued aggressive economic measures, but what was initially state-led industrialization increasingly became a rents-extracting system that the ruling family and its close friends abused. It was impossible for citizens to start businesses given this infrastructure of privileged access, restrictions, and licenses. Like most of its neighbors, Tunisia did initiate some pretense of opening up in the 1990s after receiving pressure from Western institutions to implement structural adjustment reforms, but the inability to effectively privatize state-owned enterprises despite accession to the World Trade Organization (WTO) and the General Agreement on Tariffs and Trade (GATT) revealed that these reforms were just a smokescreen. Tunisia may have been the second-fastest growing non-oil producing economy in the region before 2011, but it was clearly not growing enough to satisfy popular demand and pacify dissent.
The Ennahda-led government has so far proven just as resistant to implementing liberalizing measures, and is opting instead to propagate time-tested and failed policies. Indeed, unemployment currently stands at 16.5 percent, which is better than the post-revolution peak of 18.9 percent, but still significantly higher than the steady rate of thirteen percent under Ben Ali. The state continues to monopolize key industries such as telecoms (Tunisie Telecom) and phosphates production (CPG), the latter suffering in particular from increasing social tensions at plants in Gafsa, where unemployed job-seekers` recurring demonstrations have blocked access to facilities. In post-revolution Tunisia, privileged connections are more important than ever, as opening up markets and reforming state-owned access is especially difficult during times of democratic transition when, as in this case, the country’s economy has all but collapsed.
Grants and classroom learning cannot redress this decades-long culture that permeates Tunisia. Institutions are not used to cooperating on such issues in a country where everyone works to avoid collaboration. Public sector jobs are preferred by most because they are safe, stable, and structured, whereas risk-taking is anathema. Under Ben Ali, most businesses would open and close within just a few years. Building sustainable businesses, on the other hand, requires a shift in mentality reinforced by change at the top in Tunisia, not programs for skills training, job placement, and hands-on experience in future growth sectors that operate on a fantasy of a merit-based system. As further proof that such a climate does not exist, Transparency International’s poll released in July indicated that eighty percent of Tunisians believe the country has only become more corrupt.
Talks between the International Monetary Fund (IMF) and the Tunisian government that resulted in a 1.7 billion dollar loan finalized in June are a perfect example of this lack of trust in public institutions. A memo the Tunisian Institute for Strategic Studies released, a publicly-funded think tank affiliated with the office of the Tunisian president, alleged that the government had provided the IMF with information that “painted a much grimmer picture of the Tunisian economy than had been presented publicly” during the budget drafting process just a few months before. A common criticism from opposition politicians during the negotiations was that the government was not being transparent about the purpose of such a loan, which Tunisia would have to pay back within eight years.
The loan was also controversial beyond the debate over transparency issues. Stipulated measures requiring Tunisia to stabilize the economy and promote growth through drastic fiscal, monetary, and currency reforms, are bound to take their toll on the country’s middle class. Reductions in subsidies, increases in taxes, and higher interest rates all threaten to make the cost of living even higher and adversely affect Tunisians. The government is also looking to secure another loan guarantee agreement from the United States to help ease the current economic pain.
The one bright spot in American aid is the recently announced Tunisian-American Enterprise Fund (TAEF), which will invest in SMEs, starting with a twenty million dollar grant from USAID that will be used to make loans, provide private equity investments, and leverage private capital for investment. Unlike most other US programs in Tunisia, this one actually focuses on encouraging institutional reforms through market-oriented initiatives. However, given criticism of the State Department’s Middle East Partnership Initiative (MEPI) for its “lack of transparency” in distributing funds to recipients in Tunisia, TAEF will have to make an enormous effort to conduct due diligence.
Of course, creating more programs like TAEF that target the lack of an entrepreneurial ecosystem will be difficult as long as Tunisia remains in political deadlock without a ratified constitution and no general elections date in place. In order for capacity building to work, the capacity actually has to be there. US aid will not promote growth unless foreign economies—or Tunisians themselves—invest in the country. At the moment there is virtually no such investment because the situation is not stable enough to convince investors that they will get something in return.
The decision-making process is longer now because of political confusion, and that extends to the bureaucratic red tape standing in the way of Tunisia reaching its potential. Recent developments, however, promise to complicate things even further. It is difficult to see how Tunisia can move forward on economic reform given the assassinations, fragmentation, and uncompleted constitution that mar the political sphere.
As disruptive as politics as usual is to the domestic economy, the assassination of opposition leader Mohamed Brahmi has ensured that Tunisia’s transition will take even longer. The aftermath is causing unrest, with police clashing with protesters in Tunis, Sousse, Sidi Bouzid, and Gafsa, and sixty-five of the National Constituent Assembly’s (NCA) elected representatives resigning from their positions and calling for a national salvation government. Placing the blame on Ennahda, as much of the Tunisian public does, cannot help chances for stabilization either.
All of this further exacerbates preexisting conditions, such as the delayed constitution, an uncertain general elections date, and the recent formation of Tunisia’s version of Tamarrod. Elections were scheduled to take place before the end of the year, and the constitution, at least according to the Tunisian government, is nearly finished. Both processes will unquestionably be postponed even longer as the country continues to react to Brahmi’s death. Tunisia’s Tamarrod, seen before the assassination as an unorganized campaign having no chance of becoming a political player, may now find that its calls to dissolve the NCA no longer fall on deaf ears. Whether it can develop a critical constituency, though, depends on the capacity of its leaders.
The Tunisian General Labor Union (UGTT), a longtime influential political force, also has the capacity to disrupt. Tunisia’s largest workers syndicate issued calls for a general strike on Friday, 26 July, after Brahmi’s funeral, and condemned the police’s overuse of force in dispersing protesters in front of the NCA. More UGTT-decreed general strikes would certainly hamper day-to-day economic activity.
There is no doubt that the United States has an interest in helping Tunisia reach its potential. Unfortunately, there is no political will to change the state-imposed protectionism and capital cronyism that dominated the Ben Ali era and prevented a more productive environment from emerging. Only once there is a clear political roadmap in place will Tunisia even begin to think about changing the system for good.