Tunisia: Government Must Cooperate, Not Alienate

African Business took the opportunity to discuss the situation in Tunisia with Fadhel Abdelkefi, CEO of the Tunisie Valeurs Group and chairman of the board of the Tunis Stock Exchange, and Hedi Larbi, director and advisor to the MENA region vice-president at the World Bank. Interview by Selma Ben Mahmoud.

African Business: What are the major challenges when it comes to policy making in the current Tunisian context?

Fadhel Abdelkefi: The revolution has revealed an economic reality that is far worse than the perception that we had before. The poverty rate stands at 25% when everyone, including international financial institutions, thought that it was below 5%.

Second, in 2011, Tunisia experienced the first recession in 25 years. Unemployment keeps on rising with 700,000 to 1m people currently seeking jobs, and our foreign reserves are down to less than 100 days of imports.

Although we did not suffer major damage to the infrastructure during the revolution, and provision of utilities such as water, sewage, electricity and the internet never stopped, we accumulated tremendous losses. There has been increasing disorder and very low production and productivity ever since.

Distrust vis-à-vis the government and between the different factions of Tunisian society have increased strongly and the atmosphere is not favourable to restoring production and investments to previous levels.

Several Tunisian corporates that contribute significantly to the Tunisian GDP with tens of thousands of people on their payrolls have been through huge disruption. For example, Groupe Chimique Tunisien (GCT, Tunisian Chemical Group) was forced to shut down significant parts of its activities for several days with tremendous losses for the government, the workers and their families.

Hedi Larbi: I agree with Fadhel’s analysis and I want to stress the importance of the political economy in transition countries like Tunisia. The level of social discontent within the Tunisian society has increased tremendously since January 2011, reaching unprecedented levels that are about to bring about a total disruption of the productive system. The level of perceived insecurity, the absence of the rule of law, the shaky political stability – a consequence of the lack of a transition road map and apparent government inexperience in managing public affairs – are seriously hampering domestic and foreign investments, and delaying an economic recovery. The government, which must be held as being primarily responsible for the current dire status of affairs, and which is the most influential political force, should pay much more attention to the economic and social issues if it wishes the transition process to lead an open and inclusive democratic system in Tunisia.

There’s an urgent need to put an end to the political bickering, and blame game and to focus on the crucial social and economic issues such as employment, economic recovery and the provision of services especially to backward regions of the interior. There is a need to focus on the quality of health and education delivery that is all-important to the wellbeing of the Tunisian population.

Policy makers at all levels, government and non-government stakeholders should refrain from politicising everything. They should be moving ahead with a democratic constitution, where the public sphere, including freedoms and rights, equality, citizenship and sovereignty and the private spheres, i.e religion, are clearly separated to lay a strong foundation for a vibrant and sustainable democracy.

The political elite and its leadership, from all political strands, need to be more pragmatic, consensual and reconciliatory to accelerate the transition process, reduce the ongoing tension, improve security, restore the rule of law and give enough assurance to the private sector in order for the latter to resume investment and boost growth and job creation.

Q: How do you see the way forward in the near future?

Fadhel Abdelkefi: Theoretically, there are three different ways to channel the investments required to get back on the path of the economic recovery: public investments, international grants and private investments.

It is obvious that the current shape of the Tunisian fiscal situation does not allow for further public investments – 85% of the budget is allocated to fixed costs and we cannot rely on the international community, especially our European partners because of the economic crisis there. Therefore a big push driven by the Tunisian private sector is the only possible solution.

Our private sector has the means and the know-how to undertake this big push. However, it has to be provided with the necessary guarantees and the appropriate business environment. The government would gain a lot from engaging with the private sector, individually or collectively, with adequately tailored messages to identify their needs, address their fears and perceived threats as a result of the prevailing uncertain environment, and lack of independent justice system. The private sector will not move forward if the government does not signal a very strong cooperative attitude.

Hedi Larbi: There’s a strong and urgent need for the government to step up and put in place a favourable environment for local and foreign private investments.

This starts with the stabilisation of the macroeconomic framework to gradually stop the deterioration of the twin deficits, fiscal and current account, and restore foreign reserves to an acceptable level. Simultaneously, the government should effectively engage in consensus building and relationship mending with all components of society in particular with the private sector.

The current mistrust and sporadic accusations of the private sector are not conducive to building a healthy business environment. This means a revision of some of the existing regulations deemed cumbersome and costly, but also a de facto revision of the way things are done by the government and public sector.

The government must take the opportunity to send a signal that a new economic governance of the country is being put in place where the rules of the game are well spelled out and applied equally to all and where corruption is fought by effective legal means.

In this context, the government should adopt a more cooperative approach that favours collaboration and partnership with the all economic and social actors to ensure participation and transparency in policy formulation and decision making.

Private-public partnerships, within an accountable and transparent governance system – including an independent and efficient justice system – should become the modus operandi in Tunisia, if we want to unleash the tremendous energy of the Tunisian private sector and put to work the real treasure of Tunisia: the exceptional quality of its young men and women.

Fadhel Abdelkefi: This is very true. There is a huge need for a more adaptive government, focused on what it is best at. There are a number of quick fixes that can lead in that direction.

For instance, the government can start with an active management of the assets that have been confiscated from the cronies of the previous regime, more than 300 companies. It could sell these assets and use the proceeds to set up socially responsible investment funds that co-invest with the private sector in the most urgent areas, including in promoting new start-ups.

Hedi Larbi: Another complementary quick fix towards a more adaptive government could be to set up a task force of private sector representatives that the government consults on all major decisions related to the economy.

Tunisia has all the tools to move forward and to truly become the rising lion of the African economy. Our country has no history of division on sectarian or religious grounds. We could therefore have easily avoided the current costly polarisation over the role of religion in a nascent democratic Tunisia. This has never been one of the demands of the revolution. Our identity is crystal clear to all Tunisians.

Tunisia has an incredible geo-strategic position, rich, well-educated and entrepreneurial human capital, relatively good public institutions and vibrant and dynamic private sector. The government should invest in better understanding Tunisian society and build on its strengths and not exacerbate its weaknesses. Smart and pragmatic management of the public sector and a cooperative attitude towards the private sector are key to accelerating the recovery process.