February 16, 2011 / 1:31 PM / 8 years ago

OPINION-Tunisia's revolt offers economic lessons for all

(Francis Ghiles, a leading expert on the Maghreb, is a Senior Research Fellow at the Barcelona Centre for International Affairs. The views are expressed are his own.)

By Francis Ghiles

BARCELONA, Feb 15 - The economic, financial and social fallout of the Jasmine Revolution which swept General Zine al-Abidine Ben Ali from power a month ago presents a major challenge to the interim government of Tunisia.

The recent political turmoil is expected to cut the growth of real Gross Domestic Product (GDP) from 3.4 percent to between 1.5 and 2.5 percent in 2011.

Government sources estimate economic losses at $5 billion, which is equivalent to 11 percent of GDP.

The tourism industry, which is a major provider of jobs and foreign currency (equivalent to 6 percent of GDP), is bound to see a drop in foreign receipts.

But major European countries have already lifted their ban on their nationals travelling to the country, and an energetic promotion campaign by the Tunisian authorities should save the summer season, which is the most lucrative period of the year for hoteliers in the coastal resorts such as Hammamet and Djerba.

A slowdown in economic activity combined with pressures to increase government spending could widen the fiscal deficit from 2.3 percent of GDP in 2010 to 4.4 percent in 2011.

The disruption to exports of manufacturing and the drop in earning from tourism could widen the current account deficit from an estimated 4.7 percent of GDP in 2010 to 6 percent this year.

A TRADE UNION AT WORK

The Union Générale des Travaileurs Tunisiens (UGTT) which was founded in 1946 and is the oldest of its kind in Africa, played a key role in supporting the uprising against the former dictator.

It is centre stage today because it is one of the only two structured forces in the country; the other is the government which filled the vacuum created by the fleeing Ben Ali.

It did so imperfectly, maybe, but quickly, and was able to incorporate some younger men well known for their competence and unquestionable honesty.

The former ruling Rassemblent Constitutionel Démocratique collapsed like a pack of cards because it had been turned by Ben Ali from the single ruling Socialist Destour Party under Habib Bourguiba — albeit one in which serious debates took place — into an empty shell.

The UGTT is well aware that its endorsement will make or break most of those who will decide to stand in the forthcoming elections, and the government cannot bang its fist on the table after the events of last January.

The union is encouraging workers in state companies whose jobs had been outsourced in recent years and thus made less secure to fight to be fully integrated, and thus enjoy full social benefits. It also encourages the workforce more broadly to demand salary increase across the board.

It well knows however that neither state nor private companies can afford the bill: last weekend the managers of the Regency Hotel in Gammarth near Tunis closed it and sent the 50 resident tourists to a nearby establishment.

The message was clear and is likely to be repeated elsewhere — the longer the current febrile social situation lasts, the more factories and hotels will close and the number of jobless will soar. Playing Robin Hood is not a role for which the UGTT is well suited.

The labour union was complicit in most of the labour and wage policies of the former regime: seeking to revamp its image through demagoguery will force many private Tunisian firms into bankruptcy while foreign companies which have delocalised to Tunisia in recent years, notably in the textile sector, could close shop and leave.

It is worth pointing out that workers have in no way destroyed machines or factories — those farms and businesses which have been torched were the property of entrepreneurs with close, often family, links to the former dictator, while the supermarkets and car dealerships which suffered the same fate in the days that followed the former ruler’s flight from Tunis were looted before being set on fire by militias loyal to the former president, never by the local populace.

The situation in the eastern provinces remains tense because hatred of local entrepreneurs, henchmen and militias of the former dictator was exacerbated by the release of prisoners, often criminals, by members of the former militias to cause trouble.

El Kef in the eastern uplands thus went through a nasty few days after Feb. 4, but the army moved in and a five-day mopping up brought back peace and calm.

GETTING THE ECONOMY BACK ON ITS FEET

In one crucial sector for exports, automotive supplies, production is quickly returning to normal. It is a sector where some of the most respected entrepreneurial families operate, people who are not tainted by corruption and are respected by the workforce.

Exports of automotive and electrical goods are worth 8 billion dinars ($5.6 billion) out of 19 billion dinars ($13.3 billion) overall for manufactured goods: Tunisia is the first exporter in Africa for such goods, its reputation is excellent. Prolonged social unrest could compromise that reputation.

A conference of Tunisia’s closest economic partners is expected to be convened next month at which the government will explain how much it needs in soft loans to tide it over the current turmoil and what structural reforms it envisages to encourage the higher rate of growth (6-8 percent instead of the annual average of the past 20 years of 4.7 percent) needed to achieve more broadly based growth whose benefits can be disseminated to the middle and lower classes.

Three factors play in the country’s favour: the external debt is manageable at 46 percent of GDP; that part of debt interest and principal repayments which fall due in 2011 amounts to $2.4 billion, equivalent to 11 percent of exports of goods and services and $2.5 billion next year; much of the debt is on concessional terms.

Some Tunisian banks will suffer from an increase in non performing loans due to the failure of companies owned by the Trabelsis, the family of the former president’s wife.

Disposing of the ill-begotten assets of the former first family will take time but is being conducted rigorously and with the full support of Tunisia’s foreign partners.

THERE IS HOMEWORK TO DO FOR ALL

The situation in Tunisia offers its foreign economic partners, the European Union in particular, a unique opportunity to reshape relations with a country with which it has longstanding ties: when the Soviet Union collapsed, Germany strongly promoted a policy of helping the newly emerging democracies in Eastern Europe.

France has been wrong footed by events in Tunisia — it could redeem itself by offering strong support, with Britain, Germany, Italy and Spain.

Beyond helping anchor a more democratic and better governed Tunisia, progress in North Africa’s smallest country can only encourage its neighbours to reform.

The World Bank estimated, in a report on Tunisia in 2004, that corruption and nepotism were costing the country 2 or 3 points of growth every year; as many as 200,000 jobs could have been lost between 1995 and 2010 because of the predatory practices of the former dictator’s family, according to Tunisian economist Mahmud Ben Romdane.

One quarter of the estimated $150 billion of private savings held offshore by private residents of the Maghreb come from Tunisia: the scope for investment in a country where the rule of law prevails is considerable.

Recent events in Tunisia call into question the quality of governance indicators.

A recent Institute of International Finance (IFF) report notes (1): “Unfortunately, governance indicators published by the World Bank and Transparency International failed to capture the extent of corruption in Tunisia ... Commonly used indicators of competitiveness, corruption, and governance for Tunisia and other developing countries are generally of poor quality and exaggerate the positive bias.”

Those at the IMF and the World Bank, but also in Paris and Brussels, who have hailed Tunisia as a model of virtue will have to try harder.

Reforms are needed in Tunis, but also in Washington and in some European capitals there is homework to do.

1 Tunisia: Short-Term Challenges, Long Term Opportunities, Institute of International Finance, February 10, 2011 Editing by William Maclean and Giles Elgood

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