Tunisian Economic Development Based on Moderation, Pragmatism

by Richard H. Curtiss

The dramatic increases in Tunisia’s economic, social, medical and educational standards in the 40 years since it obtained its independence from France would be noteworthy for any Middle Eastern or North African country. What is particularly remarkable, however, is that Tunisia, which has just signed an association agreement with the European Union, has achieved this status despite the absence of the abundant natural resources enjoyed by its closest neighbors.

It is only very recently that geologists have discovered oil deposits that have made Tunisia self-sufficient in energy, at least for a time. And it is only in the future that lines transporting natural gas from Algeria across Tunisia to the Mediterranean will provide transit fees (payable in natural gas) to give Tunisia an energy surplus beyond its own immediate needs.

Nevertheless Tunisia has achieved growth statistics that make it an inviting investment prospect not only for its European Union associates, but also for American and Far Eastern companies. The reason, according to Tunisian Minister of International Cooperation and Investment Mohamed Ghannouchi, is that Tunisia is “pragmatic, not ideological.”

The country’s objectives are “to improve conditions of living for the people, create employment opportunities for its youth, and achieve an economy that can catch up with the developed countries,” the minister explains. “It is a policy that tries to reconcile the short- and long-term objectives, and the results attained over the past eight years demonstrate that it is a policy that has met with some success.”

To illustrate his point, Ghannouchi points out that Tunisia’s 1996 expected economic growth rate of 8 percent is “two-and-a-half times greater than its demographic growth rate, it is obtaining part of its investment needs on the world market, its social standards are improving rapidly, and it has avoided the problems of political instability that many other countries in the region are facing.”

“That is why,” he explains, “we have some confidence in the ability of Tunisia to pursue its development policies and to overcome the challenges that will be posed by opening our markets to the world.

“Tunisian assets include credible leadership, clear vision, and concrete results, based on policies which are the objects of consensus,” the minister explains. But the country’s greatest asset is its “skilled labor force. The best Tunisian investment has been educating its population since independence.

“As a result it has one of the highest educational levels in the region. There is one scientific technician per 2,000 inhabitants, which is a rate compatible with Malaysia, one of the most successful Asian countries.”

Tunisia already has 130,000 students in its institutions of higher education, Ghannouchi notes, and by the year 2001 it will have 200,000.

A second major asset is Tunisia’s capacity to offer vocational training to 15,000 students at present. It expects to expand this capacity to 60,000 students after seven years.

A third major asset, according to the minister, “is the spirit of moderation that marks Tunisia, ancient and modern. Our history reflects this openness and moderation of character. Women play a major role in reinforcing this characteristic, which the government is counting on to reinforce our ability to develop and to pursue the changes that have been introduced.

“We rely on ourselves. We also rely on international cooperation to speed up development. For example, Tunisia has succeeded in establishing commercial relationships with many countries, and has agreements guaranteeing investments with 33 countries, including the United States.”

Tunisia’s human resources assets soon will be put to the test. It is a member of the World Trade Organization and has the equivalent of America’s “most favored nation” trade agreements with a large number of countries. All these agreements provide mutual access to each other’s markets.

Further, Tunisia’s agreement of association with the European Union allows Tunisian products into European markets duty free. Some European products, such as machinery, already have duty-free access to Tunisian markets. However, after a grace period of 12 years, all EU products will have such duty-free access to Tunisian markets, meaning that by then all Tunisian products will have to be competitive with European products in terms of both price and quality.

Tunisia is the first southern Mediterranean country to enter into such an association with the EU, which has similar agreements with a number of Eastern European countries such as the Czech Republic, Slovakia, Poland and Hungary. In the Middle East, Morocco and Israel also have signed an association agreement with Europe. Egypt perhaps will follow.

Some Tunisian products, such as textiles, shoes, electrical components and automobile spare parts, already are competitive on world markets. And Tunisia is expanding its pharmaceutical and food products industries to make them equally competitive.

But Ghannouchi is realistic about the challenge his country faces in opening what traditionally has been a protected market to world competition. “Countries everywhere are competing for exports,” he notes. “And especially in Asia competing countries are more and more aggressive.”

The minister turns wistful when he discusses U.S.-Tunisian economic relations. “The U.S. strongly supported Tunisia in the 1960s and 1970s,” he recalls. “Unfortunately, aid slowed in the 1980s and now is practically non-existent.”

In fact the only U.S. government aid program still operating in Tunisia is the Overseas Private Investment Corporation (OPIC), which extends loans to U.S. firms planning to invest overseas. “The private sector in the U.S. could play a major role in Tunisia,” the minister continues. “Reforms of the past two or three years have improved the investment climate in the country. Foreign investors can freely transfer their profits. Tunisian currency is convertible.”

Most of the private U.S. economic interest in Tunisia has been in the energy sector. Leading U.S. participants to date have been Texaco and Marathon petroleum in the oil exploration and drilling field, and Citibank, which has been established in Tunisia for several years and plays a major role in Tunisian banking. In manufacturing, Packard Electric, a subsidiary of General Motors, employs 1,500 workers in the assembly of vehicle harnesses for export to Europe, and Nabisco packages food products for the Middle East in Tunisia.

To prove his point about Tunisia’s stability and promise for investors, Minister Ghannouchi cites a number of impressive statistics. The country has reduced the number of Tunisians living below the poverty level from 11 to 6 percent since 1985, and has greatly increased the size of its middle class and improved its living and housing standards during the same period.

Education is compulsory, with 100 percent enrollment of Tunisian first graders, which gradually declines to 92 percent of Tunisia’s 12-year-olds. The country now is concentrating on reducing this drop-out rate even further by making more schools available in remote desert and mountain areas.

To realize these achievements, Tunisia has pursued an integrated strategy including economic, social, political and environmental considerations. The end result of such a consensus-building approach to economic development, Ghannouchi believes, is the kind of social stability that will attract the investment Tunisia needs to enable it to compete in a global open market. It also will justify the moderation and openness that, in the minister’s words, has been characteristic of Tunisian history from the time of Carthage to the present.