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Fix Tunisia With Fewer Lamborghinis, More Roads

By the Editors
January 14, 2013 6:30 PM EST
Tunisia
Tunisia

In the visceral struggle under way for the future of the Arab Spring, those who champion open and modern societies need a win, and soon, to light up a viable path forward.

The place to start is where the uprisings began two years ago: in Tunisia.

Tunisia is small (about the size of Greece), has a relatively educated population with strong cultural and economic bonds to Europe; a sizeable middle class; and a lively civil society. Thanks to functioning institutions and laws such as the 1956 Code of Personal Status, which offers Tunisian women more rights and protections than other countries in the region, it also has a head start on its Arab neighbors.

Building a stable democracy in the seat of the ancient Carthaginian Empire should therefore be easier, and cheaper, than in Libya or Egypt, let alone Yemen and Syria. So two years after Tunisians, with so much hope and courage, forced Zine El Abidine Ben Ali from power, why is the process proving so hard?

One answer is that the country has become snarled in a mismatch of politics, money and time: Politics, because the Islamist and secular parties that share power began wrestling for advantage before adopting a constitution; money, because without the stability that a constitution provides, business will not invest; and time, because Tunisians are impatient to see change.

When Ben Ali was unseated on Jan. 14, 2011, Tunisians expected a jump in living standards. Instead, unemployment rose to a peak of 19 percent from 13 percent the previous year, inflation doubled and the economy shrank. Frustration created an opening for hard-left labor unions to rally support and for marginal Salafist groups to grab attention by attacking art galleries and the U.S. Embassy. Islamists were suspected in the recent firebombing of a Muslim shrine, objectionable to purists, in a well-heeled Tunis suburb.

The government and the Constitutional Assembly have been slow to pass not just a constitution, but also laws on elections, investment, bankruptcy and other areas. Tunisia slipped five places on the World Bank’s most recent Ease of Doing Business Index, to 50th in the world, from 45th.

Yet Tunisia also has a more promising story to tell. Its constitution has taken longer than expected to draft partly because -- unlike in Egypt -- Islamist and secular parties have had to negotiate. A text was sent out for public consultation late last year, and fresh elections will follow its adoption.

On the economic side, there’s plenty of low-hanging fruit. An investment law that international financial officials describe as excellent is awaiting adoption, and the economy is returning to moderate growth, with unemployment falling a little, to 17 percent. Alaya Bettaieb, the secretary of state for investment and international cooperation, estimates that Tunisian companies are sitting on at least $20 billion in cash that they can invest, but won’t until they have political certainty and legal security.

Similarly, electricity provider Societe Tunisienne de l’Electricite et du Gaz, or STEG, and other state-owned utilities built fiber-optic networks across Tunisia under Ben Ali, for their internal use. Parliament is now considering a draft law that will let them lease the networks to telecommunications companies, enabling these to quickly hook up the badly served interior. That would be a big step. And a relatively recent law on franchising has opened the door to a range of foreign investments. There are no McDonalds or Starbucks in Tunisia, because previously the Ben Ali family controlled all franchises.

The hard question for Tunisia is how to make sure the politics are settled and investment begins to flow, before a major eruption in the streets derails all progress.

A big part of the answer has to include a combination of more outside assistance and a higher-profile, fully coordinated program to deliver results visible to ordinary Tunisians. Such a broad deal should also be used to spur the government to set a clear timetable to adopt the constitution and hold elections.

Tunisia has received significant loans and aid over the past two years, amounting to between $2.5 billion and $3 billion. But the money delivered so far has merely kept the country alive. Mustapha Kamel Nabli, a former World Bank economist and, until last July, Tunisia’s central-bank governor, estimates that the revolution cost Tunisia about 8 percent of gross domestic product, compared with the roughly 6.5 percent it has received in foreign aid. The gap was filled by one-time revenue, such as from the sale of Ben Ali family businesses. Not even the auction this month of thousands of Ben Ali’s personal effects will fill the budget gap. (If you want to help out by buying a Lamborghini Gallardo, or a 207 mph Mercedes McLaren SLR with ex-dictator-chic, click here.)

What’s needed is to break ground soon on roads, medical clinics and other public-infrastructure projects, plans for which languish on the government’s shelves. These can be funded with international aid and carried out in public-private partnerships that quickly get them up and running.

Similarly, the U.S. and the European Union could do more to encourage their own companies to invest in Tunisia, by providing guarantees and political-risk insurance. In the U.S. case, this could come from an expanded commitment to Tunisia by the Overseas Private Investment Corporation. The country’s own banks are broken and can’t provide sufficient credit.

The temptation with Tunisia is to dismiss it as too small, too economically and strategically insignificant to merit the added attention and resources of a miniature Marshall Plan: Unlike Libya, it has no oil, and unlike Egypt, it has neither a border and peace treaty with Israel, nor the Arab world’s largest population.

Ignoring little Tunisia, however, would be a big mistake. There is real strategic value to stabilizing the home of the Arab Spring, and a regional price to pay for failure. It would not take much to help Tunisia turn from mess to success.

To contact the Bloomberg View editorial board: view@bloomberg.net

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