Tunisia Must Drive Economic Reforms
30 September 2014
Read by 1879 persons
Following last week’s “Investing in Tunisia: Startup Democracy” conference, optimism is high. Prime Minister Mehdi Jomaa has strongly affirmed that economic recovery is now a top priority. A consensus has emerged on the reforms to be undertaken, with a feeling that it is imperative to get started. The conference attracted political leaders and business people from over 30 countries, including the Prime Ministers of Algeria, France and Morocco; significant attendance signifying Tunisia can count on international support as it embarks on the path of reforms.
This conference has above all created a momentum that the country must take advantage of.
It must now be followed by strong political measures to attract investors and boost growth and employment. There is no time to lose: growth is slowing and the macroeconomic situation is worsening. To accomplish these reforms, Tunisia must take advantage of the momentum and seek broader consensus to build a national coalition around crucial economic directions. The national economic dialogue will be an important vector in this regard, as it can encompass the whole spectrum of Tunisian society and create an inclusive debate on the reform program essential to the country’s economic transition.
The World Bank is publishing a report today, hoping it will contribute usefully to the discussions. Entitled “The Unfinished Revolution: Creating Opportunities, Quality Jobs and Wealth for All Tunisians,” this document provides a comprehensive diagnosis of the health of the Tunisian economy. By highlighting the deep-seated structural problems that have long hampered Tunisia, this report provides the factual elements and objective analysis that citizens and political leaders need to inform their debates and choices.
It appears that the lack of competition is a major problem, which the various interim governments have tried to address. The system of protection for national industries has actually locked up important economic sectors, while private sector businesses are stifled by the weight of regulations.
According to the report, the lack of competition costs the economy more than two billion dollars a year, or nearly 5% of the country’s wealth. It is now clear that the Ben Ali regime manipulated regulations, benefiting a few companies close to power, and that this practice has significantly harmed employment. In an open economy, new businesses are constantly emerging; the most efficient and productive develop and create ever more quality jobs. In Tunisia, business creations are rare. Protected businesses operating in locked-down sectors of the economy have little incentive to innovate or become more productive. Tunisians suffer from this situation, which results in a lower quality supply of goods and less efficient services. Most businesses stagnate, never developing or disappearing. Everyone has an interest in getting out of this quagmire, especially graduates without work whose skills would be sought in a context where innovation and greater productivity are valued.
The country has made remarkable progress in the last three years, in a challenging context. This is another reason to remain optimistic. There is a concerted effort to simplify the regulatory framework and reduce administrative constraints.
This is evidenced by the single windows that make it easier to register the creation of new businesses. License renewal is no longer an annual chore since their validity has been extended to three years. The opening of the telecommunications sector has been accompanied by an improvement in services and a reduction in prices. Tunisie Digitale 2018, an ambitious project aimed at extending high-speed internet coverage throughout the country, is a significant investment that will provide businesses with the infrastructure necessary for their growth.
These initiatives are moving in the right direction, but much more needs to be done to maintain this climate of optimism. The momentum is there, but more needs to be capitalized on. This is crucial for the vitality of the economy and the number of jobs that will result.
According to our report, increased competition will result in a 5% decrease in profit margins for businesses in operation, before stimulating labor productivity by an average of 5% and boosting gross domestic product growth by 4.5%, with the creation of around 50,000 jobs each year. Consolidating the progress already made would help move towards this objective.
In addition to easing the regulatory framework, increasing competition requires fair operating conditions so that businesses are on an equal footing and their success depends only on their efficiency and productivity. The adoption of the draft law on competition would lay the groundwork for such equity. The text will have to be accompanied by a reform of the Competition Council so that it is given the powers and independence necessary to ensure that the regulatory provisions are respected by all, in the spirit in which they were written, in order to guarantee fair conditions in the long term.
It is in this type of environment that productive businesses will be able to thrive and create quality jobs in sufficient numbers.
Our report lists the main economic obstacles and makes detailed proposals for removing them. However, this change will only happen if all stakeholders agree on a common path. Business leaders and union officials, as well as members of civil society organizations, have an important role to play. The coalitions that have heavily influenced the adoption of the new Constitution will be just as instrumental in achieving the ambitions presented at the “Investing in Tunisia: Startup Democracy” conference.
We hope that this latest report will help build this coalition and demonstrate our commitment to supporting the economic transition in Tunisia, by providing our resources and expertise.
Eileen Murray.
Huffpostmaghreb.com
Published September 24, 2014.
Posted online September 30, 2014.
This conference has above all created a momentum that the country must take advantage of.
It must now be followed by strong political measures to attract investors and boost growth and employment. There is no time to lose: growth is slowing and the macroeconomic situation is worsening. To accomplish these reforms, Tunisia must take advantage of the momentum and seek broader consensus to build a national coalition around crucial economic directions. The national economic dialogue will be an important vector in this regard, as it can encompass the whole spectrum of Tunisian society and create an inclusive debate on the reform program essential to the country’s economic transition.
The World Bank is publishing a report today, hoping it will contribute usefully to the discussions. Entitled “The Unfinished Revolution: Creating Opportunities, Quality Jobs and Wealth for All Tunisians,” this document provides a comprehensive diagnosis of the health of the Tunisian economy. By highlighting the deep-seated structural problems that have long hampered Tunisia, this report provides the factual elements and objective analysis that citizens and political leaders need to inform their debates and choices.
It appears that the lack of competition is a major problem, which the various interim governments have tried to address. The system of protection for national industries has actually locked up important economic sectors, while private sector businesses are stifled by the weight of regulations.
According to the report, the lack of competition costs the economy more than two billion dollars a year, or nearly 5% of the country’s wealth. It is now clear that the Ben Ali regime manipulated regulations, benefiting a few companies close to power, and that this practice has significantly harmed employment. In an open economy, new businesses are constantly emerging; the most efficient and productive develop and create ever more quality jobs. In Tunisia, business creations are rare. Protected businesses operating in locked-down sectors of the economy have little incentive to innovate or become more productive. Tunisians suffer from this situation, which results in a lower quality supply of goods and less efficient services. Most businesses stagnate, never developing or disappearing. Everyone has an interest in getting out of this quagmire, especially graduates without work whose skills would be sought in a context where innovation and greater productivity are valued.
The country has made remarkable progress in the last three years, in a challenging context. This is another reason to remain optimistic. There is a concerted effort to simplify the regulatory framework and reduce administrative constraints.
This is evidenced by the single windows that make it easier to register the creation of new businesses. License renewal is no longer an annual chore since their validity has been extended to three years. The opening of the telecommunications sector has been accompanied by an improvement in services and a reduction in prices. Tunisie Digitale 2018, an ambitious project aimed at extending high-speed internet coverage throughout the country, is a significant investment that will provide businesses with the infrastructure necessary for their growth.
These initiatives are moving in the right direction, but much more needs to be done to maintain this climate of optimism. The momentum is there, but more needs to be capitalized on. This is crucial for the vitality of the economy and the number of jobs that will result.
According to our report, increased competition will result in a 5% decrease in profit margins for businesses in operation, before stimulating labor productivity by an average of 5% and boosting gross domestic product growth by 4.5%, with the creation of around 50,000 jobs each year. Consolidating the progress already made would help move towards this objective.
In addition to easing the regulatory framework, increasing competition requires fair operating conditions so that businesses are on an equal footing and their success depends only on their efficiency and productivity. The adoption of the draft law on competition would lay the groundwork for such equity. The text will have to be accompanied by a reform of the Competition Council so that it is given the powers and independence necessary to ensure that the regulatory provisions are respected by all, in the spirit in which they were written, in order to guarantee fair conditions in the long term.
It is in this type of environment that productive businesses will be able to thrive and create quality jobs in sufficient numbers.
Our report lists the main economic obstacles and makes detailed proposals for removing them. However, this change will only happen if all stakeholders agree on a common path. Business leaders and union officials, as well as members of civil society organizations, have an important role to play. The coalitions that have heavily influenced the adoption of the new Constitution will be just as instrumental in achieving the ambitions presented at the “Investing in Tunisia: Startup Democracy” conference.
We hope that this latest report will help build this coalition and demonstrate our commitment to supporting the economic transition in Tunisia, by providing our resources and expertise.
Eileen Murray.
Huffpostmaghreb.com
Published September 24, 2014.
Posted online September 30, 2014.
