Tunisia’s lack of reforms disappoints international creditors

The prime minister and his aides might not be paying much attention but successive International Monetary Fund adjustment programmes since 2011 have disappointed the country’s leading international economic partners in Washington, Brussels and Paris.
Thursday 01/04/2021
People walk in the Medina, in the old city of Tunis, amid the coronavirus disease outbreak. (REUTERS)
People walk in the Medina, in the old city of Tunis, amid the coronavirus disease outbreak. (REUTERS)

The economic and financial indicators have been flashing red for so long  for those who are at the helm of Tunisia’s government in the Kasbah, the old district in the Tunis Medina where the prime minister’s offices are located. The beautiful 16th century royal palace from where Premier Hichem Mechichi carries out his daunting task offers an ironic reminder of the state of affairs in the North African country these days; an attractive setting but a relatively ineffective and disappointing management of the country’s acute economic crisis.

The prime minister and his aides might not be paying much attention but successive International Monetary Fund adjustment programmes since 2011 have disappointed the country’s leading international economic partners in Washington, Brussels and Paris. Western diplomats who work in Tunis know they cannot hold Tunisian governments to their word. The “balance sheet of successive IMF programmes is disappointing overall” concluded a confidential report on Tunisia for the French Ministry of Finance last summer.

“Disappointing” means, in plain English, that they have failed. “A group of families (which the report estimates at 14) maintain a rentier system which operates through regulation that restricts competition.”

The OECD points to an endless list of “licenses and authorisations” required to invest, obtain bank credits… and “heavy bureaucratic rules.” The decree 218-417 was published three years ago and, with 221 pages, is the longest legal text in the history of the country. Its aim, which has totally and utterly failed, was to improve the business environment. It lists 243 such licenses and authorisations but only six of these have been cancelled within two years of its publication.

“Bureaucratic control, and the power of the civil service to grant licenses, authorisations, credits or a customs’ s waiver constitute as many impediments to the emergence of new actors and new investments” notes the report.

As the World Bank review “Privilege-Resistant Policies in the Middle East and North Africa” noted in 2018, such barriers “privilege a few (often unproductive) incumbents who enjoy a competition edge because of their connections or ability to influence policy-making and delivery.” Capture, collusion, exclusion, discretionary treatment and non-competition in the market place take place in the process of policy formation which is, on the face of it paradoxical, if one considers that 92% of net job creation between 1996 and 2010 was in firms less than five years old and with fewer than five employees. In other words, state capture robs younger entrepreneurs who are the future of the country of opportunities. This explains why skilled young Tunisians are exiting the country in growing numbers.

The public sector has turned into a vampire sucking out the very life of the Tunisian economy. The very nature of the state created by Habib Bourguiba after independence in 1956 needs to be re-examined. It was and remains highly centralised and weighs heavily on all economic activity. The result, as Tunisian economist Hachemi Alaya pointed out in 2016, “is that the strategy of every social group is to make sure they penetrate, influence and, if they can, take the state prisoner.”

The French report concludes that parliament (ARP) has become “the convergence point of all clientelist networks”. It goes on to say that the countrys’ main trade union (UGTT) “has positioned itself as an opposition (force) and does not hesitate to oppose the IMF openly.” The weight of UGTT is proportionate to the numbers of Tunisians who are on the state payroll – 677,000 civil servants and 350,000 employed by state companies most of which are in the red, if not like Tunis Air, bankrupt in all but name. The deal announced, March 31, by the government and the UGTT is a step in the right direction. But the devil is in the detail, as they say.

This deep crisis of the Tunisian state explains why more than two thirds of those between 15 and 24 are unemployed, the increasing importance of the informal economy, where any number of shady deals takes place and which pays no taxes. This assessment of the country is shared by president Kais Saied and the European Union.

The French report concludes that “the challenges related to the democratic transition have always won over financial considerations stricto sensu”. In a very unstable region, the priority of international aid donors has been to “consolidate” the democratic transition despite the fact that every attempt to reform the economic system since 2011 has failed.

”Moral hazard has thus become a key issue.” The unstinting support of those countries and institutions which have been lending to Tunisia has thus created a non-virtuous cycle which is undermining rather that giving support to democratic transition.

The new constitution which was adopted in 2014 is a hybrid legal text which, because it does not define clearly the respective powers of parliament, the president of the government and the head of state, has resulted in institutional paralysis.

Acting as according to his vision of himself as the guarantor of institutional legality Kais Saied publicly denounces but does nothing to overcome the institutional impasse which has paralysed the government reshuffle for months. The situation is made worse by the absence of a constitutional court. The selection of the 12 judges who are to sit on the court’s bench has been blocked since 2015 by the legislative branch’s stalling tactics, and in practical terms by Ennahda, the largest party in parliament, which has now suddenly moved to expedite the selection of the court’s judges amid accusations that it needs the court to threaten the president with impeachement.

Saied may lack political experience but his popularity is intact a year and a half after his election by three quarters of those who cast a ballot, notably young Tunisians even if the latter do not all share his conservative social views. Is he preparing the ground for a dissolution of the national assembly? Will he call a referendum to discuss a new constitution? Nobody is certain.

Rachid Ghannoushi, the parliamentary speaker and leader of  Ennahda easily inserted his party, after 2011, into the web of dubious practices which pass for politics in Tunis. Since the so-called revolution, Ennahda’s voter support has atrophied in every election since 2011 as a result of the calamitous role it played in government, in collaboration  with small and essentially inept parties .

“So-called ” because a revolution requires a political project and a well-thought strategy.  The protests of 2010-11 demanded more social justice, less corruption from the ruling family and more consideration for the poorer regions which send three-quarters of their phosphates, oil gas, water, durum wheat and internal migrants to the coast and capital in return for a standard of living which is one third of the richer regions.

The second largest party in the assembly is Qalb Tunes whose leader, a media baron, Nabil Karoui is in prison on suspicion of tax evasion and money laundering. The parliament resembles a noisy souk (market) awash with money rather than ideas and policies which might address the country’s real economic problems. Fish rots from the head downwards goes the old Arab proverb. How right it is.

The president likes to quote the second caliph of Islam, Umar Ibn al-Khattab, also called al-Faruq (he who distinguishes evil from good) who in his lifetime became a paragon of virtue in Sunni tradition. Sticking to an unyielding moral position which insists the Augean stables must be cleaned cannot, of itself, solve the economic and social crisis which confronts Tunisia.  But in the absence of any real executive powers and considering what Kais Daly, a respected former head of the state phosphate company, calls the “magical economic thinking” on the part of  political leaders, there is little more that Kais Saied can do.

As the guarantor of the security of Tunisia’s borders, the president knows he can count on  good cooperation with Algerian security on Tunisia’s western boarder and of that on the USA on the border with Libya. The Tunisian army has had close ties with its US counterpart since independence. Many of its senior officers have been trained in the US which has helped Tunisia modernise its counter-terrorism capacity. Those guarantees can only be put to good use if the political parties are built around coherent ideologies and class or economic interests. They will carry no credibility so long as their internal functioning and financing remain opaque. This truth is valid for all political parties but even more so to those which, like Ennahda and Qalb Tunes, belong to the majority in the parliament and back the government which rules the country.