Since the revolution, CIPE partner IACE – the Institut arabe des chefs d’entreprises, or Arab Institute of Business Leaders – has reached out to citizens from all walks of life in Tunisia – young entrepreneurs, business leaders, students, policymakers and more – to debate and search for solutions to Tunisia’s persistent economic challenges. To involve even more people in the exchange of knowledge and ideas, IACE just launched a new newsletter to share updates on Tunisia’s economic progress and upcoming events.
Among other features, the newsletter includes a new op-ed, The Second Republic, or the Third Conflict Cycle? The piece makes the urgent and vital point that even with a new Constitution approved and focus on upcoming elections, it is the economy that still matters most.
In 2011, both Tunisia and Egypt were rocked by popular protests against economic and political repression that ended in the ouster of their authoritarian governments. Three years later, how much progress have these states made in reforming their economies? And what has happened to the entrepreneurs whose grievances helped fuel these revolutions?
Reforming the Entrepreneurship Ecosystem in Post-Revolutionary Egypt and Tunisia, a report from CIPE and Stanford University’s Center for Democracy, Development, and the Rule of Law (CDDRL), attempts to answer these key questions. With this report, CIPE staff and IACE will engage policymakers and stakeholders in roundtable discussions to formulate policy recommendations in the coming weeks.
Working with CIPE Cairo staff and CIPE partner L’Institut Arabe des Chefs d’Entreprises (IACE) in Tunisia, lead researcher Amr Adly conducted an extensive study of existing literature and over 100 detailed interviews with entrepreneurs in each country to shed light on the obstacles and opportunities that comprise the entrepreneurial ecosystems in these post-revolutionary states.
The survey results paint a small yet detailed portrait of what life is like for the Egyptians and Tunisians trying to make ends meet in countries with increasing unemployment rates, among other worries. Dysfunctional and inaccessible regulatory structures, crony networks solidified by corrupt past regimes, and a lack of access to information for the private sector and policymakers are only a few of the areas for which Adly’s research provides nuance.
Who are the entrepreneurs that can withstand such an unstable environment? The majority of respondents in both countries affirmed that they do not trust formal contract enforcement, managed to start their business largely through self-financing due to a lack of access to loans, and endure high transaction costs as a result of inadequate institutions. They are men and women, younger and older, more or less educated, formally registered or informally operating, risking bankruptcy and/or jail time for a failed venture, running joint or solo endeavors—and they are all citizens for whom their government is not working.
Louis Delcart is the Director of Internationalisation and Innovation at VOKA – Flanders’ Chamber of Commerce Halle-Vilvoorde. He is serving as a mentor to the Chamber of Commerce and Industry of the Centre through CIPE’s Knowhow Mentorship program.
Tunisia is, for us Europeans, a touristic paradise, like Spain or Turkey. But it is also a country with an ancient civilization, dating from centuries before: Queen Dido, Hannibal and the Carthaginians, Pompey the Great and his African conquests, the Beys of Tunis and the corsairs attacking European ships from the pirates near Mahdia. They all are part of 3,000 years of rich history.
It was also in this country that the Arab Spring started in 2011. Within three weeks time, the popular uprising chased out the country’s autocratic leader, Ben Ali. A democratic process was started, with the election of Ennahda, a moderate Islamic party, to power. After three years, the love of the people for its new government is over. But Tunisia’s subsequent political development has been different from its neighboring countries: a technocratic interim government was recently formed and a new constitution is being edited, discussed, and voted on article by article in the parliament. Tunisia is – at least to this point — not missing its turn towards democracy.
It is in this context that I was invited by CIPE to mentor a chamber of commerce in this country. I was given a choice between two regional chambers, and I selected the one with the most elaborate strategic plan, the Chamber of Commerce and Industry of Centre (CCI-Centre) in Sousse, which made me curious.
Entrepreneurship is increasingly touted as a key ingredient to economic growth, job creation, and expanding opportunity, particularly for youth and women, in the Middle East and North Africa region. As a result, the number of initiatives supporting entrepreneurship in the region has increased exponentially, particularly following the Arab Spring.
Like many Arab Spring countries, Tunisia is experiencing a “youth bulge,” but neither that nor the lingering effects of the European financial crisis can entirely explain Tunisia’s high rate of youth unemployment. Youth unemployment in Tunisia is the result of structural issues in its education system and its labor market, as well as an ingrained understanding of “employment” based on decades of social and political development.
While talks between Tunisia’s political parties dominate the headlines, the emotional political debates going on right now belie troubling economic conditions that could prove just as debilitating to the country’s democratic transition.
Today, the unemployment rate in Tunisia among young people with a university degree is 30 percent, more than twice the 2005 rate of 14 percent. The spike in overall unemployment (now at 17 percent) is partly explained by the larger political and economic situation. Since Tunisia’s 2011 revolution, the economy has had a hard time regaining its pre-Arab spring growth rates. Al Qaeda’s presence in North Africa has grown in the last few years. Instability in neighboring Libya has only added to anxiety over the security situation in Tunisia, a country traditionally boasting healthy tourism revenues. Finally, demand for Tunisian exports has dried up in the European Union, Tunisia’s most important trade partner. These are well-known elements of Tunisia’s post-revolution narrative.
That’s just part of the equation, though. The European market may right itself, the Tunisian government may reassert its ability to secure the country, but Tunisia will still face the nagging issue of high unemployment among its young graduates. That 30 percent unemployment rate among recent graduates isn’t a result of just cyclical unemployment—from regional and global fluctuations—but structural unemployment.
According to the most recent Global Competitiveness Index from the World Economic Forum, the Tunisian labor market has failed to efficiently marshal its young talent to create jobs and growth. A seemingly concise diagnosis, but, when unpacked, it reveals a few phenomena that have combined for the perfect storm of youth unemployment: a gap between labor supply and demand, a prohibitively rigid labor market, and lingering cultural assumptions about self-employment and entrepreneurship.
One of the first people to walk through the doors after CIPE’s founding in 1983 was Hernando de Soto, President of the Institute for Liberty and Democracy (ILD) in Lima, Peru. Mr. de Soto had the fundamental insight that poor people were not part of the development problem but instead part of the solution. In his best-selling books, The Other Path and The Mystery of Capital, he explained how the lack of access to property rights and other institutions of a market economy keeps the poor in most developing countries trapped in the informal sector.
In one of its first-ever programs, CIPE teamed up with de Soto and ILD to begin bringing the poor in Peru from the extralegal economy into the formal economy and the rule of law. As a result of ILD’s unique and innovative property rights and business reform program, Peruvian society received $18.4 billion in net benefits between 1992 and 1997, including saving formalized urban owners some $196 million in red tape costs.