Can Tunisia Combat Extremism with Economic Growth?

Tunisia’s important tourism sector has been drastically impacted by three high-profile terrorist attacks this year, the most recent of which took place in late November in downtown Tunis. As Tunisia ramps up security in its ongoing effort to combat militants within its own borders, thousands of Tunisians are believed to have taken up arms and joined opposition forces in Syria, mainly with Al-Nusra and the Islamic State (ISIL). Such extremism and attacks have devastating human costs, as well as far-reaching implications for economic growth.  President Beji Caid Essebsi has declared a “war against terrorism” in response to the latest attacks; hopefully he will not overlook including pro-growth reforms in his arsenal.

Tunisia was heralded as the lone success of the Arab Spring movement, as demonstrated by the Tunisian National Dialogue Quartet winning the Nobel Peace Prize this year. The relatively peaceful transition to a democratic government inspired millions. Although some economic reforms quickly followed the political ones, the country has so far failed to gain significant traction in terms of growth. A series of factors have conspired against the country, such as declining oil and phosphate prices, security concerns, regional instabilities in Egypt and Libya, and a protracted economic recovery in Europe, Tunisia’s main trading partner. These factors have all dragged on growth and put upward pressure on unemployment.

Tunisia’s high cost of unemployment

The chart below is a visualization of the most recent unemployment data for specified countries, versus the per capital number of fighters who have taken up arms in Syria up to September 2014. Although it would be unwarranted to draw any conclusions about the link between economic opportunity and the allure of radicalization, the chart does suggest that a link could exist, and suggests that Tunisia is a bit of an outlier in terms of the number of fighters.   

 

Although direct evidence supporting a causal link between economic opportunity and recruitment into extremist cells is difficult to identify, a number of studies have pointed out that there is an association between the two. Tunisia is believed to be the origin of up to 3,000 fighters that have joined the opposition against President Bashar al-Assad in Syria, with the majority having joined ISIL. Given the high unemployment levels, particularly among youth, it is not difficult to imagine that marginalization from the labor market could create an environment for recruiters to prey on disillusioned young Tunisians. Providing opportunity for such at-risk people may be just as effective, if not more so, than combating extremist groups using military and security forces.

What can be done?

The pre-revolution economy was based around state-run enterprises and created an uneven distribution of employment across the country that persists today. Tunisia now has the political opportunity to begin implementing pro-growth reforms and rectify this disparity. The current Nidaa Tounes-led coalition holds a comfortable majority in Parliament, and enjoys international support from both the U.S. and EU. Improving access to credit, lifting regulatory barriers, simplifying the tax code to improve revenue and limit evasion, and improving the supervision, competition and credit distribution of the banking sector are key reforms that would facilitate domestically-led growth and foreign investment in Tunisia. Progress has been made in this regard, and one can expect such reforms to take shape in 2016—as long as the country does not get distracted by the ongoing security threat.

Post 2011, the country has much to be proud of. However, Tunisia’s government must act urgently in order to improve competiveness, business conditions and public finances. Recent unemployment data put the national unemployment rate at 15.3%, and this will increase as approximately 70 hotels and other associated business have been forced to close this year as tourism revenues have dried up, largely due to travelers’ security concerns. The unemployment rate for people with higher education is 30%.

GDP growth has moderated consistently since 2011, the year after the revolution, growing 2.7% in 2014. FocusEconomics Panelists see GDP slowing to 1.0% in 2015, before recovering to 2.8% in 2016. Unemployment shot up to 18.6% after the revolution and has not managed to fall back to pre-revolutionary levels of around 12.7%. FocusEconomics panelists expect unemployment in 2015 to remain steady at 2014’s 15.1%. For 2016, the panel forecasts unemployment moderating slightly to 14.8%.

Unlocking the growth potential of Tunisia’s labor force will likely present untold benefits in terms of both security and well as economic growth. Indeed, it was the story of Mohamed Bouazizi, a marginalized Tunisian street vendor frustrated with the lack of opportunity in his country, that that ignited the Arab Spring movement.

Date: December 15, 2015


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