• The Tunisian economy recovered somewhat in 2012, with GDP growing by 3.3%, but this was insufficient to respond to the country’s main challenges: unemployment, especially among young graduates, and regional disparities.

     

  • Tunisia’s political transition has taken longer than expected, with postponed elections and a growing political divide. Political debate prevails over an economic reflection.

  • Tunisia has maintained its development potential, but reforms must continue to strengthen sectors with a high value added. Modernisation of agriculture and the development of energies should help Tunisia make better use of its natural resources.

Overview

Tunisia’s economy rebounded in 2012, growing by 3.3%. A good agricultural season and the relative recovery in tourism, foreign direct investment (FDI) and hydrocarbon and phosphate production, which almost stagnated in 2011, contributed to the economic recovery. However, the European crisis and the decline in external demand had a negative impact on exports, particularly of textiles and machinery and electricity. Overall, production benefited from a more stable social climate in 2011 and continued domestic demand, but the economy as a whole is not improving as fast as was expected. Unemployment remains high, as do the current-account and budget deficits, because of the lack of structural reforms and the failure of the country’s main economic partner, Europe, to achieve a strong economic recovery. The greatest risks are ideological tensions, protests and possible pre-election populist policies, which could lead to overspending.

Political uncertainty is slowing down economic decisions and weakening the recovery that has begun. Security has deteriorated, tarnishing Tunisia’s reputation as a safe country. The government is expected to continue with the line of reforms undertaken by the transitional authorities to improve growth and governance and diminish regional disparities. These reforms should be accompanied by a stable climate that can be maintained in the long term to restore investor and public confidence.

Tunisia’s main natural resource, phosphate, remains vital to an economic recovery in 2013. For many years the country has been developing its phosphate processing industry to produce phosphoric acid and fertilisers, becoming the world’s second largest producer and leading exporter of trisodium phosphate (TSP), with 21.7% of global production and 31.2% of global exports. To expand its exports, the public corporation Groupe chimique tunisien (GCT) is involved in international co-operation projects with partners from India (Tunisian Indian Fertilizers, Tifert) and China. The structural changes under way are set to continue, with improvements to the way natural resources are used.

Figure 1: Real GDP Growth 2013 (North)

Table 1: Macroeconomic indicators

 2011201220132014
Real GDP growth-1.93.33.44.6
Real GDP per capita growth-32.23.33.5
CPI inflation3.55.65.54.5
Budget balance % GDP-3.4-6-5.9-4.8
Current account % GDP-7.4-8-7.5-6.7

Recent Developments & Prospects

Table 2: GDP by Sector (percentage of GDP)

 20072011
Agriculture, forestry & fishing--
Agriculture, hunting, forestry, fishing9.49
Construction4.74.4
Electricity, gas and water1.31.5
Electricity, water and sanitation--
Extractions--
Finance, insurance and social solidarity--
Finance, real estate and business services15.115.4
General government services--
Gross domestic product at basic prices / factor cost100100
Manufacturing18.317.7
Mining7.17.5
Other services0.50.5
Public Administration & Personal Services--
Public Administration, Education, Health & Social Work, Community, Social & Personal Services16.217.6
Public administration, education, health & social work, community, social & personal services--
Social services--
Transport, storage and communication1313.1
Transportation, communication & information--
Wholesale and retail trade, hotels and restaurants14.413.3
Wholesale, retail trade and real estate ownership--

After a contraction of almost 2% in 2011, growth slightly exceeded the government target of 3.3% in 2012, despite the still uncertain domestic and global climate. However, part of this growth is due to statistical catch-up. It remains far too low to respond to the twofold challenge of unemployment and regional development disparities.

Growth in value added in 2012 varied greatly among different sectors and followed a different pattern than in previous years.

As in 2011, the primary sector profited from good rainfall and a good agricultural season. For the second year in a row cereal production increased (+8.7%), reaching 2.5 million tonnes, but this caters for only 70% of domestic consumption. Olive production for 2012/13 is estimated at 1.15 million tonnes (equivalent to 230 000 tonnes of olive oil), a rise of 27% on the figure for 2011/12. In total, the agricultural sector’s value added grew by 4% in 2012, providing a 9% share of GDP. Poor weather conditions during the current season are expected to diminish the yield in 2013.

Growth in manufacturing was weak and unsustained (growth was negative in the second quarter), with the sector’s share of GDP up to 17.3% in 2012. The main export industries – textiles and machinery and electricity – were hit hard by lower demand from Europe, recording negative growth despite a slight recovery in exports in the final months of the year. The refining and chemical industries (phosphate processing) performed better, contributing to exports.

Manufacturing – a vital sector in terms of jobs and foreign exchange earnings – is still held back by a low value added, a low-skilled workforce and over-dependence on the European market. A reform is needed to make manufacturing companies more competitive through innovation and a strategy to improve and diversify their supply and their markets. Weak growth in the euro area in 2013 could further stunt the sector’s growth.

Non-manufacturing sectors also recovered only partially in 2012. Growth in value added has not recovered to its 2010 level despite strong growth in the value added of the mining and energy-production (electricity and gas) sectors, with phosphate production in 2012 expected to reach 3 million tonnes out of a total capacity of 8 million tonnes. However, the partial recovery has increased the value of phosphate and derivative exports by 25%. Repeated breaks in production due to strikes could make Tunisia lose some of its export markets.

Hydrocarbon exports in 2012 increased by 22% thanks to good world prices and sustained production. Energy remains the most attractive sector for FDI, so production is expected to rise, with a small number of new jobs created.

Trade services, whose value added rose by more than 4% in 2012, now contributes almost 45% of GDP. The services sector, which drove growth in 2012, is sustained mainly by tourism (transport, hotels and restaurants), but also by the vitality of local demand. Having collapsed in 2011, tourism revenue rebounded somewhat in 2012 thanks to an increase in arrivals at frontiers and spending per tourist. 

Non-market services (primarily administrative) also remained dynamic and their contribution to GDP stood at 17.5% in 2012.

No statistical data are able to measure the boom in the informal sector, identified by both the government and the private sector. However, the sector is currently being analysed.

Tunisia would benefit from further diversifying its markets, both geographically and in terms of economic sectors, since this would make the economy less vulnerable to internal and external shocks. At present, the country depends too heavily on its European customers and its three main exports: machinery and electricity, textiles, and phosphates.

Consumption – mainly private – remained a major source of growth in 2012. It was artificially driven by pay rises, higher subsidies and a very accommodative monetary policy. The recent measures announced by the Central Bank of Tunisia (BCT) to “rationalise imports” and limit consumer credit could slow this trend, which would damage growth. Consumption’s contribution to GDP was estimated at an average of 60-65% for the period 2008-10. This figure is expected to be revised downwards in 2013 thanks to a recovery in exports and more balanced growth.

Despite the expansionary policy, public and private investments are both struggling to return to the levels seen before the revolution. With the climate remaining uncertain, public economic decisions have been delayed. In addition, investment, mainly in energy in the case of FDI, has not had the desired knock-on effect. However, since investments planned for 2012 were postponed until 2013, these indicators should automatically improve.

Finally, growth is not creating enough jobs or sufficiently improving the quality of jobs. Unemployment, especially among graduates, remains a major concern. On average, 60 000 new graduates join the labour market every year, but the public and private sectors hire only half of them. The latest figures from the national statistics agency (INS) indicate that unemployment stood at 16.7% in the final quarter of 2012 and unemployment among university graduates rose to 33.2%, up from 27% in the second quarter. Tunisia’s unemployment indicators still expose the country’s social, regional and gender-based disparities. Female unemployment stands at 24.2%, compared to 13.9% for male unemployment.

The recovery of certain vital sectors in the Tunisian economy (tourism, phosphates) and the return of FDI flows are expected to continue in 2013. A more predictable economic and political situation, a more stable Libya and a better economic climate in Europe will strongly influence Tunisian growth. The many uncertainties on the demand side make it difficult to predict whether the government’s growth target of 4.5% for 2013 will be met. On the supply side, however, since there was only a partial recovery in economic activity in 2012 following the slowdown, or even the paralysis of certain sectors, in 2011, there is room for strong growth, especially for phosphate production.

Macroeconomic Policy

Fiscal Policy

Since the January 2011 revolution, the government has been striving to respond to the pressing socio-economic demands. It hopes to use its expansionary fiscal policy to support the recovery and boost both consumption and public investment. However, this policy has increased the budget deficit because of the slowdown in economic activity, the worsening international climate and the ongoing calls for social reform. The deficit for 2012 is expected to reach 6% of GDP, compared to 3.4% in 2011. Current projections predict the figure will rise to 5.9% in 2013 before gradually falling to 2.5% by 2017.

While the 2012 additional budget act (LFC) provided for a hike in capital expenditure, the actual out-turn remains relatively low, at a similar level to the out-turn in 2011.  Expenditure on salaries and subsidies, on the other hand, rose considerably, reaching 11.4% of GDP in 2012, and is expected to remain high in 2013 (11.2% of GDP). Adjustments to the prices of hydrocarbon products have been announced for 2013. Although it would be difficult politically, it is essential that the government reform the subsidy system, especially for fuels, so that the subsidies are better targeted.

On the revenue side, tax revenue mobilisation was more effective than the mobilisation of non-tax revenue, thanks notably to the increase in imports, pay rises and the economic upturn. The sale of confiscated assets at the end of the year also helped increase the resources.

In 2012, the government tried to increase transparency and good governance. In particular, it began to systematically publish monthly budget execution reports. In an effort to distribute financial resources more fairly, for the first time since the 2012 LFC the government based its economic-development budget allocations on a regional-development index.

Local public finances (income and expenditure) are still not managed effectively and are in need of urgent reforms. Many additional allocations had to be made to local authorities that were close to bankruptcy. Consequently, the ceiling on the tax on industrial, commercial and professional firms (Taxe sur les établissements à caractère industriel) was abolished in 2012.

The 2013 budget continues the effort to relaunch the economy. Investment spending will reach TND 5.5 billion (Tunisian dinars), a similar level to that achieved in 2012. Operating expenditure should be almost 15% higher than in 2012. This additional expenditure will largely be covered by additional tax revenue and debt.

The authorities now have little room for manoeuvre and the government needs to control pay rises and subsidies in order to ensure medium-term stability and to speed up public investment.

Table 3: Public Finances (percentage of GDP)

 200920102011201220132014
Total revenue and grants23.423.425.7252525.3
Tax revenue19.92021.120.920.520.4
Oil revenue------
Grants0.30.10.60.20.51
Total expenditure and net lending (a)26.124.3293130.930.1
Current expenditure17.917.621.123.823.222.5
Excluding interest15.915.819.321.321.421.2
Wages and salaries10.710.711.911.411.211.4
Interest21.81.82.61.91.3
Primary balance-0.70.8-1.5-3.5-4-3.5
Overall balance-2.7-1-3.4-6-5.9-4.8

Monetary Policy

To support the stimulus policy, the BCT adopted an accommodative monetary policy in 2012. The banks’ structural liquidity shortage in 2011 continued in 2012, with the Central Bank having to inject as much as TND 5 billion into the money market during the first ten months of 2012. Deposits grew by 10.8% in 2012 (against 5.1% in 2011), while credits to the economy grew by only 8.7% (against 13.4% in 2011).

Inflation averaged at 5.6% in December 2012, up from 3.5% in 2011. Inflation was driven up by higher international market prices for certain imported goods, a depreciated dinar, a bigger payroll, weaker price control, distribution network problems, and the smuggling of certain goods to neighbouring countries. Rising inflationary pressures prompted the BCT to tighten its monetary policy and adopt a neutral intervention strategy, and in August 2012 it raised its intervention rate by 25 base points, bringing it to 3.75%.

The average monthly money-market rate stood at 3.98% in December 2012, but the real interest rate remains negative. The BCT has thus changed its interventions on the interbank market since the beginning of 2012 to allow the interbank rate to increase. In October 2012 it also imposed a minimum reserve requirement of 50% of the rise in outstanding consumer credit. These measures aim to reduce inflationary pressures, stimulate the mobilisation of bank deposits and moderately increase the volume of credit.

After a sharp rise of 11% up to 30 July 2012, the benchmark stock market index Tunindex closed 2012 with a loss of about 3%. The violent protests by Salafis on 14 September outside the US Embassy and political tensions have not helped reassure investors.

Since April 2012, the BCT has adopted a more flexible approach to managing the exchange rate, basing its reference rate on the average interbank exchange rate rather than a currency basket. According to the International Monetary Fund (IMF), the exchange rate is broadly in line with medium-term fundamentals.

Economic Cooperation, Regional Integration & Trade

For many years, Tunisia has been committed to economic openness towards its traditional economic partners, especially the European Union (EU), while exploring opportunities for diversification. It signed a free-trade agreement on industrial goods with the EU in 2008, and the stalled discussions between the two parties on a full, thorough free-trade agreement (including services and agricultural goods) resumed in 2011. This agreement covers not only tariffs but also market access, sanitary measures, intellectual property, competition law and protection of investment.

Because of the sluggish European markets, the emergence of new partners and the government’s new political line, the Tunisian authorities are adopting measures to diversify their economic partners. In particular, there is renewed interest in Maghreb integration. A comprehensive plan to boost trade was approved by the five Maghreb countries in June 2012.

Following rapid growth in 2011, growth in foreign trade slowed in 2012, with exports growing at a slower pace (5.8%) than imports (13.3%). In late October, the coverage rate was no higher than 69.5% (against 74.5% a year earlier). The rise in international prices and the devaluation of the dinar caused the trade deficit to expand by 35%, having remained stable between 2010 and 2011. Although the bulk of Tunisia’s trade is still with the EU, its clients and suppliers have diversified somewhat. No less than 71.5% of exports were to the EU, down from 77% a year earlier; while 53.5% of imports were from the EU, down from 58% a year earlier.

Thanks to the revival of certain activities that had almost ground to a halt (mining and energy), the domestic market outperformed exports, unlike in 2011. The temporary measures announced by the BCT in September 2012 to “rationalise imports” could create fears that the government will adopt a more restrictive trade policy to limit the bleeding of foreign-currency resources. Consumer credit could be cut down and some of the public procurement procedures planned in 2012 could be postponed.

In 2012, FDI flows were almost 80% higher than in 2011 and 27.4% higher than in 2010 thanks to two extraordinary transactions in December. However, FDI created fewer jobs than in previous years, and those targeting the manufacturing sector almost stagnated.

The tourism sector recovered from its 33% drop in revenue in 2011 thanks to a 22% rise in arrivals at frontiers in 2012. There are more tourists from the Maghreb region, but European tourists are becoming increasingly rare.

Table 4: Current Account (percentage of GDP)

 2004200920102011201220132014
Trade balance-7.9-8.5-7.6-10.4-10.1-11.8-13
Exports of goods (f.o.b.)31.533.137.138.84037.637.1
Imports of goods (f.o.b.)39.441.644.649.250.149.450.1
Services4.85.85.63.42.84.66.3
Factor income0.4-0.7-1.7-1.7-1.8-1.5-1.1
Current transfers0.40.5-1.11.31.11.21.1
Current account balance-2.4-2.8-4.8-7.4-8-7.5-6.7

Debt Policy

Public debt stabilised at 44% of GDP, but could rise over the next few years until 2016, before declining. This rise should be sustainable if growth remains rapid enough. Nevertheless, the fragile economic prospects, the risk of the dinar depreciating and the need to fund bank recapitalisation or the consolidation of public funds or enterprises could jeopardise debt sustainability. All these factors call for vigilance.

Almost 60% of public debt is held abroad, mostly by multilateral and bilateral creditors. Less than one third is in the hands of the financial market. Almost half the debt is denominated in euros. The authorities have also sought to obtain long repayment periods to give the economic recovery the necessary time to become firmly established.

In light of the liquidity needs and growing debt, the 2013 budget is the first to envisage the issue of sukuk for a total of TND 1 billion. These securities will initially be limited to the national and local market, with the remuneration linked to the country’s ratings.

The political and economic uncertainties resulting from the transition to democracy led most credit rating agencies to maintain the negative credit rating outlook in 2012, or even to downgrade it to speculative. Nevertheless, Tunisia has a reasonably good debt ratio, making it credible and trustworthy to multilateral and bilateral donors.

Because it adhered to the principles of macroeconomic equilibrium in the past, Tunisia has been able to deal with the various shocks it has encountered since the revolution. The government has turned mainly to international institutions rather than the international financial markets, taking advantage of the more favourable rates offered by multilateral banks and bilateral agencies. It has also made use of guarantees provided by other countries (United States and Japan).

Figure 2: Stock of total external debt and debt service 2013

Economic & Political Governance

Private Sector

The private sector, still dominated by the family of the president deposed in 2011, is benefiting from a more open economy since the revolution, developing new sectors such as franchises, micro-finance and private equity. But the economy is yet to reap the rewards of this greater openness because of the instability and ongoing corruption, which has spread further.

Although Tunisia figured well in international rankings on the private sector, it has become less attractive to investors since the revolution. It has thus slipped 12 places in the World Bank report Doing Business 2013 ranking for starting a business, falling from 54th to 66th, with an above-average number of procedures for the region.

Business operators took a wait-and-see approach in 2012, amid economic and political uncertainty. Foreign investment (FDI and portfolio investment) has been slow to recover to the same level seen in 2010, while the traditionally low domestic investment is in decline. According to a survey conducted in 2012 by the Tunisian Institute of Competitiveness and Quantitative Studies (ITCEQ), corruption and insecurity still tarnish the business climate in Tunisia.

The government does not seem to be questioning economic openness, but operators are highly critical of certain decisions. In February 2013, 465 businessmen were prohibited from leaving the country following the revolution. This prohibition was made without a court order, thus harming trade and investment. Economic operators also disapprove of the restrictive measures placed on business accounts in foreign currency, which, at least provisionally, are becoming increasingly regulated.

Tunisia still has a deeply dual private sector. The offshore sector for exports mainly consists of subcontractors for European firms. The local market has remained largely closed to foreign investment, despite a programme of privatisations and concessions. Whereas it once seemed like a pioneer, Tunisia's neighbours in the region have now caught up with it. The rule of law must be established and respected and political and social stability must return if Tunisia is to continue being an attractive market. 

Reforms now under way should restore confidence and instil a business-friendly climate so that the country can finally reap the rewards of the revolution. A new investment-incentive code is due to be adopted in 2013 to enshrine freedom of investment and close the huge gap between the export-oriented sector and the domestic sector. Measures introduced to simplify administrative procedures and the new judicial precinct specialising in economic and financial cases should improve the business environment, even though law enforcement can sometimes be difficult in the current context.

Financial Sector

The financial system is heavily dominated by banks, which hold 80% of assets. The non-bank financial sector remains very small. The country has a relatively dense banking network and the penetration rate of banking services is the highest among Maghreb countries. Local banks have gradually become more involved in financing the economy and the total volume of credit is growing faster than GDP. 

Tunisia’s fragmented banking sector, in which state-owned banks have a strong presence with 39% of total assets, was already plagued with structural vulnerabilities before the revolution. These weaknesses include under-capitalisation, the failure of banking supervision and inadequate management of risk. The country’s banks have not been spared by the political crisis and its economic consequences. They have been exposed to risks linked to vulnerable sectors like tourism and agriculture and to companies belonging to the former president’s family. Profits are low and doubtful debt is increasing, despite the flexibility of the BCT. State banks are most vulnerable, especially the Société tunisienne de banque (STB). According to the BCT, the rate of non-performing loans rose to 20% in 2012, and this was despite a circular sent in June 2011 asking banks not to place debts declared after the revolution in this category.

Various reforms are already under way to restructure the banking sector, with the support of technical and financial partners. In 2012, the government audited the three state-owned banks and decided initially to recapitalise two of them, STB and Banque de l’habitat (BH). It also decided to improve the banks’ solvency and soundness by increasing the size of their risk-adjusted assets.

According to an ITCEQ survey conducted in 2012, access to credit remains one of the biggest hurdles for Tunisia’s productive fabric, formed mainly by SMEs, because it is so expensive. In June 2012, the average effective interest rate stood at 6.14%. This high rate is compounded by the mortgage guarantees required, which are inversely proportional to the size of the company. Many banks remain unable to offer loans, savings accounts or insurance policies designed specifically for SMEs and young entrepreneurs or to offer products tailored for large-scale projects. The aftermath of the revolution has also been marked by a greater reluctance to take risks.

A much-needed diversification of the financial sector seems to have begun, as is manifested by reforms under way to introduce Islamic finance, the development of micro finance and private-equity investments.

The stock market contributes little to financing the economy, with only around sixty companies listed. Market capitalisation remains low, at just 20% of GDP at the end of December 2012. However, the authorities have discussed listing on the stock exchange several public companies that operate in competitive sectors and are in major need of finance for their investments and to reduce the pressure on the national budget.

Public Sector Management, Institutions & Reform

The relatively strong public institutions have ensured continuity despite the turmoil caused by the revolution. The authorities have opened the floor for a debate and initiated consultation with the general public and with the private sector, even though doing so could greatly slow down the decision-making process. 

The revolution has revealed how widespread corruption is and the transitional governments have demonstrated their desire to address the problem, introducing a series of reforms, including a law on access to information and an anti-embezzlement committee. Measures are also being taken to modernise administrative and financial controls. However, these provisions are insufficient and not always accompanied by the measures necessary to implement them. Economic operators and the general public complain that corruption is now widespread and therefore more difficult to control. Despite scoring well in international rankings, law enforcement has been more difficult since the revolution due to public protests (especially occupation of private properties) and poor co‑ordination among the authorities.

Tunisia’s civil service is overstaffed, relatively unproductive and unevenly distributed across the country, thus exacerbating regional disparities. Moreover, staff numbers may increase further, even though this would place a heavy burden on the national budget.

Officially, civil servants are hired and promoted based on merit, but provisions have recently been introduced to support the hiring of staff based on specific situations, temporarily encouraging positive discrimination in favour of those injured in the revolution and former prisoners. Although the civil service provides job security and stability, candidates with the greatest potential are often discouraged by salaries that are lower than in the private sector and not sufficiently based on performance. In fact, there is a relatively small difference between the highest and the lowest salary within an administrative body.

The public sector still weighs heavily in the Tunisian economy, and even more so since the state seized the assets linked to the previous regime, albeit provisionally. For instance, the state has become a shareholder of three telecommunication companies. As part of the privatisation process, several tenders are likely to take place in 2013. No less than 115 companies are expected to be bought by the Deposits and Consignments Fund (Caisse des dépôts et consignations [CDC]), which plans to develop a rehabilitation plan in partnership with investors.

Natural Resource Management & Environment

The revolution has had a negative impact on environmental factors, revealing and exacerbating governance problems and the difficulties the authorities have in enforcing the law. There has been a resurgence in over-exploitation of resources in nature reserves in several areas: hunting (for instance, turtles in the Sahel region), deforestation, uncontrolled construction in protected areas and poor waste management. 

At the same time, however, there is an emerging movement among citizens calling for better management of natural resources and the environment. These demands focus in particular on improving the quality of life, reducing the differences in public health among regions and within towns and cities by providing equal access to drinking water, sanitation, and better waste management. 

Local residents have challenged the planned locations of phosphate processing plants and the accompanying industrial waste sites. Phosphates cause more pollution than any other industry in Tunisia and the current legislation on the industry’s environmental impact is not enforced.

The Environment Ministry does not have the power to contribute effectively to the environment dossiers prepared by other government ministries. Institutions involved in economic activities fail to take this into sufficient consideration, and the Environment Ministry’s lack of involvement prevents greater efficiency. Further reforms should also enable the ministry to deal with regional issues, and the current changes taking place will perhaps provide an opportunity to consider these institutional changes. The new draft constitution includes a section on sustainable development and institutionalises the right to environmental protection and sustainable development.

Political Context

Although the Tunisian transition has been showcased as an example, the constitutional process is taking longer than expected.

More than a year after the Constituent Assembly was formed in October 2011, the drafting of the Constitution is still being delayed. In the first half of 2012 things seemed to be calming down, but since the second half of the year social and political tensions have flared back up and disagreements have arisen between the ruling parties. Nevertheless, an agreement was announced in October 2012 on the make-up of the future regime (mixed), the date of elections (planned for around the third quarter of 2013) and the forming of an independent electoral commission.

As the elections approach, the political landscape is becoming more polarised, with the strong, well-organised, ruling Islamist-based Ennahdha party facing a growing challenge from Nida' Tunis (Call of Tunisia), the party led by the prime minister of the previous transitional government, Beji Caïd Essebsi. Far-left movements belonging to the left front and Salafis participate in demonstrations and influence the two main parties.

The decisions that were expected have been delayed by the social climate, which remains very tense, as well as by the government’s inexperience and the lead-up to the elections, making the current term of office very short. However, time management remains an essential factor for a successful transition.

The state of emergency announced in January 2011 continued throughout 2012 after it was extended various times because unrest continued to resurface. Although rare, violent incidents involving religious extremists have taken huge proportions, including the attack on the US embassy in September 2012 and the assassination of the opposition leader Chokri Belaïd in February 2013. Developments in the rest of the region could also impact the country’s security. 

Social unrest has grown since the third quarter, especially inland, sometimes leading to violent clashes with security forces. Despite the growing violence, there have been fewer strikes and blockades in the productive sectors than in 2011.

The way to ensure a successful transition, restoring confidence and relaunching the economy, lies in drawing up a roadmap that all political players will follow.

Social Context & Human Development

Building Human Resources

Over the past two decades, the Tunisian government has spent an average of 2% of GDP on health and 6.3% on education. However, huge gaps still exist among social classes, among regions and between men and women. In addition, education reforms to provide widespread access to higher education have been made at the expense of the quality of education and of teacher training. Moreover, education remains centralised and poorer regions are unable to provide the necessary quality because they lack resources and incentives to attract good teachers.

The university system is criticised for its inability to provide the qualifications needed by the labour market, resulting in a lack of recognition of qualifications and a high graduate-unemployment rate. Faced with this challenge, in 2012 the government passed legislation to create a national higher-education assessment, quality-assurance and accreditation body, plans for which had initially been drawn up back in 2008.

The public health service still provides 66% of consultations and 90% of hospital admissions in healthcare centres and primary-level university hospitals. However, there are large regional differences in access to healthcare. Coastal and urban areas have better health infrastructure, more modern equipment and more qualified staff. Quality in public healthcare is deteriorating because there is no in-service training programme, working conditions are deficient and controls are insufficient. Almost 50% of users of public health services are dissatisfied with the quality of treatment they receive, citing the shortage of drugs, old equipment and uncleanliness. In response, the government passed legislation in 2012 to set up an independent body for the accreditation of health facilities and services. This body will evaluate the quality of care and help Tunisia to begin exporting health services through medical tourism.

Thanks to the necessary control measures, malaria was eradicated twenty years ago. Tuberculosis is relatively rare. The number of HIV/AIDS cases has remained relatively stable since 1990, although there has been a small but steady increase since 2003.

The new draft Constitution includes an entire article dedicated to children’s rights, an issue that was ignored by previous constitutions. However, since the revolution, adoption rights and the prohibition of corporal punishment, which seemed to be irreversible, are now once again the subject of debate.

Poverty Reduction, Social Protection & Labour

Tunisia’s poverty rate has long been underestimated. According to a study conducted by the national statistics agency (INS), the poverty rate stood at 15.5% in 2010 (4.6% for extreme poverty), down from 23.3% in 2005 and 32.4% in 2000. However, this decline has benefited the West-Central and South-West regions very little, with differences between regions growing and differences within regions shrinking. 

Social protection programmes are not well targeted, resulting in varying amounts of coverage depending on each person’s social-security scheme, social class and region. Traditional solidarity mechanisms tend to have a lower effect when the economy is struggling. The lack of social safety nets is becoming increasingly visible. Outreach programmes focus on providing temporary support rather than a way out of poverty.

There is a higher rate of intergenerational transmission of poverty than in the past. Although unemployment has emerged as the main social problem in the light of the revolution, in the past unemployed people were not covered by social safety nets or insurance mechanisms. The government therefore amended Decree 349-2009, which defines the programme of the national employment fund (FNE), in order to make its active employment policies more effective and create the structures to monitor and evaluate those policies.

Pension schemes in Tunisia are relatively old and are plagued with increasing problems, including fund deficits (since 2010 for state pensions and forecast by 2015 for private pensions) and inadequate pensions, with around 65% of pensioners who have private pensions receiving less than the minimum wage (SMIG). These problems are compounded by an ageing population, high unemployment, a large informal economy, and the decline of traditional solidarity mechanisms. Despite ongoing discussions and the urgency of the matter, it will be difficult for the government to speed up this reform in the short term because the measures are so unpopular. 

The national health insurance fund (NHIF), created in 2006 to bring together the insurance and healthcare schemes as part of a single fund and to extend coverage to private healthcare providers, is believed to be already in deficit.

Social transfers seemed to be an essential part of Tunisia’s development policy, but the revolution has revealed that resources were not used equitably. Since the revolution, the numbers benefiting from social action programmes have multiplied, but there has been little improvement to how the programmes are targeted. In 2012, 235 000 families (compared with 135 000 before the revolution) received TND 100 a month and TND 10 per child in school (for a maximum of three children) and a free health card. Also, as many as 570 000 families have received some kind of one-off grant. The Ministry of Social Affairs has launched a three-year study to review the eligibility of families in need. In 2012, a circular was adopted to launch a single information system for social-welfare programmes and to create a system to check and target those benefiting from the programmes. 

Labour laws are fairly advanced and provide good safeguards to workers. In 2012, the government made adjustments to ensure better treatment of workers. It increased the standard minimum wage (SMIG) and the agricultural minimum wage (SMAG). However, the revolution has revealed that the present legislation is often ignored, especially in the private sector.

Since the revolution the debate has been opened up to the general public. Thanks to simplified procedures for approving associations, 8 320 associations were registered in 2011, more than four times the number registered in 2010. Mechanisms have been put in place to give members of the public access to information and to enable them to evaluate services provided by social sectors. Various community development initiatives have been launched with the support of donors and international NGOs.

Gender Equality

Since Tunisia gained independence steps have been taken to support women and consolidate their rights. These steps have included creating institutional structures to support women, taking gender into account in development planning and using positive discrimination. However, equality has not become firmly entrenched in Tunisian society, so the measures need to be kept in place to preserve rights already obtained.

Government efforts have drastically reduced illiteracy, even though there are still imbalances in basic education (26.4% illiteracy among girls vs. 11.5% among boys in 2010). Universities have more female students (61.6% in 2012) than male students.

In rural areas, there is often inadequate access to healthcare specifically for women, especially gynaecology. Reproductive health has always benefited from active government policies, but a change in the social discourse has led to greater concern in particular for disadvantaged groups.

Despite having access to education, women are underrepresented in the workplace, representing only a quarter of the country’s 3.2 million workers and having a higher rate of unemployment than men. In sectors with high job insecurity and underemployment there are more women. Also, outside the civil service there are major salary differences between men and women. Finally, the proportion of women in work is not constant and becomes lower after the age of 30.

Thematic analysis: Structural transformation and natural resources

Since the 1960s, the industrial and service sectors have increased their share of GDP and the number of jobs they provide at the expense of the agricultural sector. Governments have recognised the importance of exports for development since the 1970s, especially the government of Zine El Abidine Ben Ali (1987-2011). Tunisia has adopted a growth strategy aimed at stimulating exports through policies to promote investment among domestic firms. Measures have also been taken to attract FDI and investment in infrastructure.

These policies along with Tunisia’s trade agreements have had a relatively positive effect, boosting growth in textiles, machinery and electricity, and agribusiness. Though Tunisia’s mineral resources are not comparable with those of the countries in the region, it has developed its mineral exports to the extent that they represent a higher proportion of GDP than those of Morocco or Egypt. In the five years from 1995-99 they accounted for 57.5% of GDP; in 2005-09 that figure rose to 57.5%.

Tunisia is not rich in natural resources, except in phosphate. In 2011 the mining sector (led by phosphate) contributed 7.5% of GDP and 10% of exports. Founded in 1896, the Compagnie de phosphates de Gafsa (CPG) has an annual production capacity of 8 million tonnes across its various sites. Annual phosphate production fluctuated between 7 and 8 million tonnes from 2007 to 2010, with annual investments of between TND 50 and 100 million and annual turnovers ranging from TND 400 million to TND 1.5 billion. The revolution reversed the downward trend in the number of employees, which has risen from 4 898 in 2010 to 5 573 in 2011 and 8 050 at the end of 2012.

Tunisia has been developing its phosphate-processing industry for a number of years, producing phosphoric acid and fertilisers. Formed in 1947, the GCT has an annual production capacity of 6.5 million tonnes through its four production centres (Gabès, Sfax, Skhira et M’dhilla). The group’s production capacity of phosphoric acid and fertilisers are 1.3 million tonnes of malondialdehyde (MDA), 1.3 million tonnes of diammonium phosphate (DAP), 0.9 million tonnes of trisodium phosphate (TSP), 0.3 million tonnes of ammonium nitrate (AN) and 0.1 million tonnes of dicalcium phosphate (DCP).

Tunisia is the second largest producer and the largest exporter of TSP, with 21.7% of global production and a 31.2% market share; the fourth largest producer and second largest exporter of DAP, with 5.2% of global production and a 9.6% market share; and the fifth largest producer and third largest exporter of phosphoric acid, with 5.3% of global production and a 12.5% ​​market share. To further expand these export markets, the GCT is developing its international co‑operation with Indian and Chinese phosphoric acid consumers.

The raw materials that the group needs are phosphate, ammonia and sulphide. The GCT provides 80% of the phosphate needs for local manufacture. Ammonia is imported from Russia, the Black Sea and the Middle East, while sulphide is imported from Russia, the United Arab Emirates (UAE), Kuwait and Kazakhstan.

Tunisia has failed to export goods with a high value added, which would enable the country to take better advantage of its export-based growth strategy. However, following the Multi Fibre Arrangement’s expiry in 2005 and faced with global competition in the textile sector, Tunisia began to diversify the goods it supplies, moving towards products with a higher value added. For many years, textiles provided almost half the country’s exports, but by 2012 their contribution had dwindled to 22.3%. Textile exports as a share of total exports had been stagnant since 2005 before falling, going from 47% in 1993 to 26% in 2010. Meanwhile, the contribution made by machinery and electricity increased from 12% in 1993 to 34% in 2010. However, traditional industries like mining and energy still accounted for 24% of exports in 2010, a figure that has remained stable over time. Agriculture and agribusiness together provided 8% of exports in 2010, down from 12% in 1993.

The industrial sector is still very labour intensive, especially the textile industry, and is concentrated on assembly operations. The shift towards sectors with a higher value added could help make export revenue less volatile and raise productivity. The measures the Tunisian government can take over the coming years to make the economy more competitive include diversifying its trading partners, ensuring a better match between supply and demand in the labour market, providing better governance in terms of political responsibility, developing a culture of entrepreneurship, and providing financial support for export companies through the generational investment vehicle called the Ajyal Fund.  

Agribusiness has expanded since 2003 thanks to relatively steady growth in exports, which doubled in size between 2005 and 2008, but remain well below their potential. Tunisia’s main exports are olive oil, fishery products, dates, and fruit and vegetables. Although the government has taken measures to help upgrade the sector, such as creating the Bizerte technopole in 2010, agribusiness is still affected by distortions that do not help the development of an export-oriented industry. Support policies have created a bias that favours import markets at the expense of exports. There is also strong protection of agricultural goods at the border (beef, lamb/mutton and wheat), domestic price controls for agricultural goods (cereals, milk, sugar beets and tobacco) and subsidies on agricultural inputs (chemical fertilisers, pesticides and water). While these measures protect producers against fluctuations in world prices, they do not provide the necessary incentives to be competitive. 

In terms of sustainability, phosphates are Tunisia’s most polluting industry, generating liquid and solid waste and greenhouse emissions. The GCT has begun investing in pollution-control equipment to analyse to what extent the industry complies with international standards and regulations. The investment needed to make production and waste management less polluting is huge, which is why the current business structure has been maintained.

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