While political prospects for Tunisia remain promising, the country faces daunting economic challenges. Can democracy deliver the economic goods? Mourad Teyeb writes in Tunis Not all this year's Arab uprisings have had a happy ending, with some of them disappointing on their promises either because of civil conflict, as in Libya, or as a result of regime-led violence, as in Syria, Yemen and Bahrain. Tunisia, with Egypt one of the two countries that have moved closest to a new democratic order as a result of this year's uprisings, may be paying a harsh economic price in the wake of the January 14 upheaval that saw the fall of the regime of former Tunisian president Zein Al-Abidine bin Ali and his flight into exile. Tourism in the country has been hit, labour unrest is up, investors are concerned and suspicious about the future, and unemployment is rising. Tunisian minister of finance Jaloul Ayed recognised these warning signs recently, saying that "the revolution [in Tunisia] will stall if democracy isn't quickly translated into economic well-being." Tunisia's gross domestic product currently stands at around $40 billion, and preventing a run on the country's banks and stabilising the economy have become the priorities of the transitional government. The latter has been endeavouring to attract foreign investors, as well as working on a stimulus programme to expand the country's infrastructure and help the unemployed, many of them young graduates, find jobs. Efforts are also being made in cooperation with international financial institutions such as the World Bank, the African Development Bank and the European Investment Bank, to find further international funding. According to government figures, 2011 and 2012 are likely to witness spikes in Tunisia's financial needs, with Ayed underlining the extent of the problem at the recent US-Islamic Forum held in Washington. Experts and government officials say that the country may need additional loans of US$3 to US$4 billion this year, which could be funded in different ways. "One of these is through official channels, like the World Bank, and we're pursuing this," said Mustapha Kamal Nabli, president of the Tunisian Central Bank. A second source of funding could be for the country to try to raise the additional funds on the financial markets. "Even before the January events, Tunisia was planning to go to the markets for funding," according to Nabli, who is also a former official of the World Bank. "However, we do not think that now is the right time for us to do this, as spreads [on Tunisian government bonds] have increased. We think that this is a cost we shouldn't be bearing right now, so we are waiting for the market to come to a better assessment of the risk." According to Nabli, the US and Europe would be making sound investments if they supported the democratic transition in Tunisia. "We think it would make a lot of sense for them to provide support through concessional financing, and we are hoping to see some of this materialise. We think this would be a good investment for democracy, so we are explaining to our friends why it is important for them to support us and why this would help them to be seen as caring about democracy." Since the January revolution, tourism, which accounts for 7% of Tunisian GDP, has nearly come to a halt. "March is when we usually prepare for the high season," said Habib Ferchichi, an official at the ministry of tourism in Tunis. "We were expecting that as the security and political situation stabilised, tourism would pick up. But that has not happened, and we are still at a standstill." Tourism arrivals from Europe have dropped by 50 to 60 per cent over the past three months. "If the situation in Libya had not worsened, tourism in Tunisia would have been better," Ferchichi said. The turmoil in neighbouring Libya has added to Tunisia's woes, as the two countries have major economic ties ranging from trade, investment and worker mobility to the export of goods and services, tourism and healthcare. These have now been put on hold because of the Libyan conflict, and more than 80,000 Tunisian workers who previously worked in Libya have returned to the country since February. Some Tunisian politicians, and an important part of the population, also believe that the scars left by the Bin Ali regime may be too deep to be treated with short- term remedies. Unemployment and under-employment are high among young people in Tunisia, and the country's interior is far less developed than its northern coast. As a result, what Tunisians want today from their new democratic government are greater efforts at fighting corruption and more emphasis on creating jobs for a population that is young and increasingly well-educated. "The removal of the corrupt, non-transparent and anti- competitive practices of the former regime is likely to herald a period of reinvigorated entrepreneurial activity in the country, provided the security situation stabilises," wrote Ann Wyman, head of emerging markets research at Nomura Holdings, in a briefing note last month. Ahmed Nejib Chebbi, a Tunisian opposition leader, also believes that "ending the rampant corruption of the Bin Ali regime will spur economic growth." Chebbi, founder of the Progressive Democratic Party and one of the ministers who stepped down from the country's interim cabinet in March, said that "with democracy and good governance, Tunisia will have more growth because nepotism and the abuse of power hampered growth in the past." "With the new conditions in Tunisia and in the region, we will see a huge market developing that will help investment in the region and serve as a factor for growth." The African Development Bank recently noted that Tunisia's economic growth potential was "likely to gain significantly as the drag of predatory corruption is lifted and a socio-political environment more conducive to individual liberty and private enterprise takes hold.'' Other commentators believe that the country's economic recovery is dependent on the political process and that the success or failure of the latter will have effects on the economy. Economic and political reform need to go hand in hand. The better the transition is carried out economically, the better the political transition will be.
