Tunisia's Economic Challenges

Lahcen Achy Paper December 22, 2011

Summary

Tunisian policymakers should seize the opportunity to pursue an innovative economic strategy to overcome four key challenges: high rates of youth unemployment, a large number of marginal jobs, increasing income inequality, and substantial regional disparities.

Related Topics

Maghreb

Middle East Economies

Add a comment

As Tunisia moves away from its former regime, policymakers need to seize this historic opportunity to pursue an innovative economic strategy to overcome four key challenges: high rates of youth unemployment, a large number of marginal jobs, increasing income inequality, and substantial regional disparities.

To overcome the first challenge, Tunisia needs to develop a sustainable process of job creation that relies on a competitive private sector, and the government must remove barriers to entrepreneurship and investment. Although the country has achieved relatively high economic growth during the past decade, the contribution of private investment has remained low, and the former regime pursued a political agenda vis-à-vis the private sector. The government now instead needs to open different economic sectors to competition and pursue related reforms.

To overcome the second challenge, policymakers need to design incentives to channel resources toward selected high-value-added and knowledgeintensive sectors, and likewise stimulate product innovation and market diversification. The country must also pursue its real opportunities in agriculture, industry, and services to promote an intensive use of human capital and to diversify its markets beyond Europe.

To overcome the third challenge, Tunisia must review its public finance system to achieve social justice and equitable sharing of the tax burden by streamlining tax regulations and eliminating unjustified tax breaks, cracking down on tax evaders, and ensuring that all taxpayers contribute according to their capacity. Likewise, the government needs to rationalize public spending, reduce costly and regressive universal fuel subsidies, better target assistance programs to the poor, and improve the delivery of public services.

To overcome the fourth challenge, the government should design a comprehensive development strategy that promotes parity in access to basic services such as education and health across the country’s regions. Thus, the government can promote labor mobility between regions by investing in transportation infrastructure, easing access to affordable housing, and developing regional complementarities. Such measures will expand opportunities for the people who live in the interior of the country without depriving those on the coast and eventually lead to a more balanced standard of living across regions.

Comments

Comment Policy

Report Abuse

Source: http://carnegie-mec.org/2011/12/22/tunisia-s-economic-challenges/awu2

More from The Global Think Tank

Al-Hayat

Social Peace Requires Both Economic Growth and Equity

Summary Arab states can benefit from the experiences of growing and stable emerging countries, including the lesson emerging countries offer that there is no inconsistency between economic growth and social equity. More >

National

The Interconnectedness of Arab Seasons

Summary The current uprisings taking place across the Middle East and North Africa are interconnected; the success or failure of one country’s democratic transition could have a direct impact on the prospects for transition in another. More >

Tunisia’s Lessons for the Arab World

Summary By holding largely peaceful elections just ten months after the fall of its long-time dictator, the country credited with sparking the waves of protest that swept the Arab world is serving as an example to the rest of the region. More >

December 19, 2011 Washington, D.C.

Public Opinion on Iraq and the Arab Spring

Summary Zogby Research Services conducted polling in eight countries across the Middle East and North Africa, as well as in the United States, to look at public opinion on the U.S. withdrawal from Iraq, the Arab Spring, and other recent developments in the region. More >

December 1, 2011 Washington, D.C.

A Conversation on Tunisia’s Future with Rached Ghannouchi

Summary In October, Tunisians went the polls and the moderate Islamist party Ennahda won 40 percent of the vote and the right to form a government. It remains to be seen what this will mean for the country, the region, and its relations with the West. More >

February 23, 2011 Washington, D.C.

A Conversation with Mustapha Nabli, Governor of Tunisia’s Central Bank: The Economic Dimensions of Unrest in the Arab World

Summary The unrest spreading throughout the Arab world will have significant economic implications for the region. More >

Twitter

@CarnegieMEC

@CarnegieMEC

In Fact

70%

of oil consumed in the United States

is for the transportation sector.

20%

of Chechnya’s pre-1994 population

has fled to different parts of the world.

58%

of oil consumed in China

was from foreign sources in 2012.

million cases pending

in India’s judicial system.

million people killed

in Cold War conflicts.

18%

of the U.S. economy

is consumed by healthcare.

$536

billion in goods and services

traded between the United States and China in 2012.

$100

billion in foreign investment and oil revenue

have been lost by Iran because of its nuclear program.

4700%

increase in China’s GDP per capita

between 1972 and today.

$11

billion have been spent

to complete the Bushehr nuclear reactor in Iran.

of Iran’s electricity needs

is all the Bushehr nuclear reactor provides.

new airports

are set to be built in China by 2015.

journalists

were imprisoned in Turkey as of August 2012 according to the OSCE.

67%

of the world's population

will reside in cities by 2050.

million Russian citizens

are considered “ethnic Muslims.”

Stay in the Know

Enter your email address in the field below to receive the latest Carnegie analysis in your inbox!

Carnegie Middle East Center

Regions

Countries

Samer Abboud

Suzanne Abourjeili

Lahcen Achy

Omar Dahi

Anas El Gomati

Muhammad Faour

Khaled Fattah

Mohamed Kerrou

Aline Matta

Sami Moubayed

Paul Salem

Yezid Sayigh