The Entrepreneurship Ecosystem in Tunisia
In Tunisia, where the 2012 unemployment rate is 18 percent overall, and 34 percent of the unemployed are young university graduates, entrepreneurship is a vital issue. In the wake of the revolution of January 14, 2011, tremendous social pressure has been placed on the new government to create jobs.
However, an unwieldy bureaucracy and public budget constraints make it nearly impossible for the public sector to offer new opportunities. Meanwhile, economic crises have shrunk demand in local and international markets, discouraging the private sector from recruiting new talent. In this context, one of the best ways to create jobs is to promote entrepreneurship. To do this in Tunisia, we need to upgrade the entrepreneurship ecosystem to create a more efficient and demand-driven approach.
There are a number of important key elements that require immediate attention if the ecosystem is to be strengthened:
Education: Some changes are being introduced within universities, such as new modules on the culture of entrepreneurship, business plans, and opportunity identification. These modules are taught not only in business schools but also to students in different fields. Other changes include:
- Pedagogical tools for entrepreneurship developed with the help of international organizations.
- Training of trainers organized by several universities.
- Incubators and entrepreneurial centers within universities, intended to create spin offs.
- Encouraging student associations to develop an entrepreneurial spirit or culture. These organizations, which promote events like social entrepreneurship project idea competitions, can receive funding from the business community.ty.
These efforts are an admirable start, but fall short because students continue to resist the idea of entrepreneurship, especially in the interior regions of the country. There must also be a focus on primary and secondary education in order to promote a cultural change. Youth should be exposed to the opportunities of creating a business in place of the mentality that all jobs come from the public sector.
Administration: Public agencies are important actors in the entrepreneurship ecosystem. They deliver approvals, authorization, tax benefit/ exemption, access to training, and investment incentives. Administrative reform is urgently needed because the bureaucracy is actually one of the barriers to entrepreneurship.
Industrial projects in many cases require numerous approvals and authorizations from different ministries which delay project implementation. This is compounded by the fact that the role of regional administration is still very limited.
While the new investment code has yet to pass a vote, the current code contains numerous impediments to entrepreneurial activity.
Finance: Currently, entrepreneurs receive 90 percent of their start up funding from public and private banks (excluding money from friends and family). Lending can be a long, difficult process and results in high interest rates: about 9 percent. In the case of financing from BTS, one of the largest providers of loans to new entrepreneurs, the maximum is 100.000 Dinars (about $62,000). While new financial tools such as angel investing, venture capital, and spin–off investing are being developed, reforms are needed to expand access to these tools for startups and small and medium-sized enterprises (SMEs).
Innovation policy: Currently 10 universities have technology transfer offices (TTO); however, the offices have not sparked business creation with the targeted innovations and technology. While technology clusters have been established, they are not sufficiently active to create an attractive environment for startups (only three TTO are effectively working in Tunisia). The innovation policy must start with the upgrading of research inside universities and then give startups the support needed in terms of copyrighting, funding, marketing etc. Importantly, universities must have autonomy in managing their budgets.
With only 10 patents a year registered outside the country by Tunisian entrepreneurs, we cannot have a growing economy. There must be greater effort to strengthen research performance. Tunisia already has a dynamic research center that focuses on basic research. Instead, researchers should focus on applied research. Incremental innovation is not sufficient, however, as we must also drive disruptive innovation.
L’Institut Arabe des Chefs D’Enterprise (IACE) has contributed to the development of these key areas in a number of ways. In 2008, IACE launched the Young Entrepreneurs Center, which aims to diffuse an entrepreneurial culture throughout the Tunisian population and especially among young adults. In addition to acting as the host for Global Entrepreneurship Week in the country, the Young Entrepreneurs Center conducts barometer surveys and publishes studies on entrepreneurship. Working with Georgetown University and American University, IACE also organized the Partners for Tunisian Economic Development program in 2012. This effort, which covered 10 poor regions in Tunisia, identified business opportunities and helped entrepreneurs develop business plans.
In March 2013, IACE launched the Entrepreneurship Tent, an open space that provides entrepreneurs with a discussion forum, information and orientation, and support through the process of business creation. The Tent also aims to advocate on behalf of entrepreneurs for changes to administrative and regulatory policies. The Entrepreneurship Tent brings representatives of government offices, banks and other organizations to meet people in towns and villages. This one-toone approach reduces the need for entrepreneurs to make long, unnecessary trips while improving communication and granting better visibility to entrepreneurs.
During a workshop organized by IACE in January 2013, it was determined that 73 percent of Tunisians (including young adults) have entrepreneurial intentions. This rate has grown since the January 14, 2011 revolution because of the institution of new governance in Tunisia. However, 46 percent of those potential entrepreneurs do not continue because of administrative and financial barriers. These results are very significant for the future of the country since the development of Tunisia is correlated with the capacity to create new enterprises. The main recommendation from the workshop was that upgrading of administrative processes is urgently needed especially with regard to supporting organizations and business centers.
The challenge in Tunisia for the coming years is to have a strategic vision of what kind of development is needed and in which sectors. There must also be a focus on developing the entrepreneurship ecosystem: to guide the education system toward entrepreneurship, to make administration more flexible and client oriented, to facilitate innovation at active clusters, and to create a diversified and efficient financial system.
IACE will continue to contribute to the reconfiguration of this ecosystem by developing awareness of the difficulties and barriers that entrepreneurs face. Additionally, IACE will propose reforms on the legal text and the investment code (the IACE proposition was given on Enterprise Day — December 2012). Finally, we will help give entrepreneurs the support they need by connecting them with established business people, financiers, and potential entrepreneurs who can provide mentoring, coaching, training, and consulting.
Majdi Hassen is Executive Director of Institut Arabe des Chefs d'Enterprises.
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Table of Contents
Foreword –- Karen Kerrigan, President & CEO, Small Business & Entrepreneurship Council; CIPE Vice Chair
Introduction – Kim Eric Bettcher, Ph.D., CIPE Senior Knowledge Manager
PART I: Overview of Entrepreneurship Ecosystems
Entrepreneurship and Economic Growth – Robert Litan, Director of Research, Bloomberg Government
How Do Institutions Facilitate Entrepreneurship? – Hernando de Soto, President, Institute for Liberty and Democracy
Why Institutions are Essential to Entrepreneurship – Mary Shirley, President, Ronald Coase Institute
Building Entrepreneurship Ecosystems – Anna Nadgrodkiewicz, Director, CIPE Multiregional Programs
CIPE's Approach to Building Environments for Entrepreneurial Success – John D. Sullivan, CIPE Executive Director
PART II: Elements of Ecosystems
Impact of Business Environment Reforms on New Firm Creation – Leora Klapper, Lead Economist, Finance & Private Sector, Development Research, World Bank & Douglas Randall, Research Analyst, Finance & Private Sector, Development Research, World Bank
Policymakers and Grassroots Networks Find They Need Each Other for Smarter Ecosystems – Jonathan Ortmans, President, Global Entrepreneurship Week
Enhancing Formal and Informal Entrepreneurship in Developing Countries – Daniel Cordova, President, Invertir Institute
Key Models of Effective Entrepreneurship Education – Lynda de la Viña, Director, Center for Global Entrepreneurship, University of Texas at San Antonio
Entrepreneurship and Trade: Recommendations for Policymakers – John Murphy, Vice President for International Affairs, U.S. Chamber of Commerce
Effects of the Ecosystem on Business Growth Decisions – Andrew Sherman, Senior Partner, Jones Day
PART III: Emerging Ecosystems
Entrepreneurship in the Philippines: Opportunities and Challenges for Inclusive Growth – Ryan Evangelista, Former Executive Director, Universal Access to Competitiveness
The Entrepreneurship Ecosystem in Tunisia – Majdi Hassen, Executive Director, Istitut Arabe des Chefs d'Entreprises
Supporting Youth Entrepreneurship in Pakistan – Majid Shabbir, Secretary General, Islamabad Chamber of Commerce & Industry
Fostering Entrepreneurship in Nepal through Cooperation – Robin Sitoula, Executive Director, Samriddhi, the Prosperity Foundation.