Costly squabbles: The solution to Tunisia’s economic problems lies in political consensus

This post was written by Niveen Wahish (ERF Communications Officer)

In three years of transition, the Tunisian economy has suffered tremendously, mainly because of the political situation. This message was at the heart of a policy seminar, organized by the Economic Research Forum (ERF), on “The Performance of the Tunisian economy in light of the ongoing political transformations”.

Moez Labidi (University of Monastir)

Moez Labidi (University of Monastir)

According to Moez Labidi (University of Monastir), Tunisia’s growth rate has dropped to around 2.5-3 per cent in 2013 compared to 5.6 per cent in 2010. In his presentation titled “Tunisia’s Macroeconomics; waiting for political stability and structural reforms,” Labidi listed the number of problems faced by the Tunisian economy during the transition and since the revolution in early 2011. To start out, the pressure on the local currency prompted the Central Bank to use the foreign reserves in order to stabilize the exchange rate. Reserves today are sufficient for only 103 days of imports compared to 2010 when they were sufficient for 147 days of imports. Unemployment is at 15.9 per cent; and this figure doubles among university graduates. Over and above, Labidi highlighted the fact that policy makers were being faced with social challenges, which involved an urgent need for jobs and investment, and the high expectations of Tunisians; while in reality the government had limited resources. The government sought refuge in easy solutions that caused deterioration in fiscal balances. As a matter of example, massive spending on wage increases, public sector hiring and bailing out the businesses after the revolution are factors, among others, that led to a major growth of public expenditures in 2013. On the other hand, poor governance in the democratic transition process resulted in what Labidi called “distrust shock”, which affected negatively the structural reform agenda. He acknowledged that while the transition governments succeeded in avoiding a credit crunch, they failed in creating what he called a “confidence shock”. The latter would have urgently allowed for reforms, thus creating more flexibility for public finances and positive consequences on the structural reform agenda, and accordingly the investment agenda.

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Democratization in the Arab region: The role of geopolitics and origins of political change

ERF’s workshop and policy seminar on “The political economy of transformation in the ERF region” kicked off with its first session dedicated to discuss the rise and fall of representative political institutions in the region on the one hand, and the factors that brought about political and economic change in the region on the other.

In his presentation, Sami Atallah (Lebanese Center for Policy Studies) shed the light on the importance of historical geostrategic routes from India to England and how it affected the rise of contemporary political institutions in the Middle East. According to him, a glimpse at the countries on the geostrategic route, and their comparison to the rest of the world (except Europe and North and South America), shows how countries on the route are more authoritarian than other countries which are not geographically on the route. By going back to history, in 1798 when Napoleon invaded Egypt, Sami argues that British interference in the political institutions, which derived from their need to secure trade, was detrimental to the evolution of political representative institutions in the region. As a matter of example, the British intervention to remove the Consultative Council in Egypt in 1866 or to prevent the creation of a Consultative Council in Dubai in 1930 affected the rise and evolution of political representative institutions in both countries. Introducing democratic institutions in such countries, which are on the geostrategic route, was much harder in the aftermath of their independence.

Read the paper “Connecting England to India: How Geostrategic Routes Shaped Political Institutions in the Middle East

Watch our interview with Sami Atallah

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The political economy of transformation – Determinants of democracy in the Arab countries

By Moamen Gouda (University of Marburg, Germany) and Zeinab Sabet (GDNet)

ERF’s workshop and policy seminar on “The political economy of transformation in the ERF region” kicked off this morning. The workshop aims at discussing a number of draft papers, submitted in response to a call launched by ERF under the theme of the workshop, among authors and experts in order to improve its final output.

Panel session 1

Panel session 1

The ERF call for papers comes amid speculations regarding the direction the transformation process in the Arab spring countries is heading to and its final destination. Although the workshop refers in its title to ‘ERF region’, the majority of papers to be presented throughout the busy two days of October have to do more or less with Arab spring countries, with a special focus on Egypt. This morning session shedded new lights on the determinants of democracy in the Arab countries.

Sami Atallah (Lebanese Center for Policy Studies) argued that the legacy of British colonialism significantly affects contemporary political institutions and the prevailing authoritarian regimes existing in the Arab countries, particularly the Gulf ones. Looking at the importance of geostrategic routes between England and India, Hadi attempts to show their impact on the rise of political institutions in the Middle East. According to him, interference in the political institutions due to the British need to secure the trade was detrimental to the evolution of political representative institutions in the region. Introducing democratic institutions on the route countries was hence much harder in the aftermath of the independence of such countries.

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