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8/9/2019 2014-2015-Tunisia Interim Country Strategy Paper
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8/9/2019 2014-2015-Tunisia Interim Country Strategy Paper
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Tunisia
Interim Country Strategy Paper
2014 - 2015
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This strategy interim was prepared between June and September 2013. The interim strategy was approved by theBoard of the African Development Bank Group on March 5, 2014.
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T u n i s i a : I n t e r i m C o u n t r y S t r a t e g y P a p e r - 2 0 1 4 - 2 0 1 5 3
A f r i c a n D e v e l o p m e n t B a n k
Country Strategy Paper Drafting Team
Design Team:
V. CASTEL, C)*&' C6/59 E$/*5, ORNA
K. ABDERRAHIM-BEN SALAH, E$/*5, ORNA
P. TRAPE, P*/$*" C6/59 E$/*5, ORNA
M. CHAUVIN, E$/*5, ORNA
Team Members:
A. B. DIALLO, C)*&' E/&(9 E/(*/&&, ONEC1
A. KESSAB, G7&/"/$& E8&5, OSGE1
A. AHIAOUI, C)*&' ICT E8&5, ICT4D
A. CHOUCHANE, C)*&' R&&"$) E$/*5, EDRE1
B. BEN SASSI, P*/$*" W"5& "/% S"/*5"5*/ O''*$&,
OWAS
C. AMBERT, S&/* S5"5&(9 O''*$&, OPSM.0
C. MOLLINEDO-TRUJILLO, C)*&' S5"5&(*5, STRG
F. BOUGAIRE, P*/$*" W"5& "/% S"/*5"5*/ E/(*/&&,
AWF
H. CHAHBANI, P*/$*" I/'"56$56& E8&5, ONRI1
I. HAFSA, A*5"/5 S5"5*5*$*"/, ESTA
J. BANDIAK, S&/* M"$-&$/*5, OSGE1
J. MURARA, C)*&' S$*-&$/*5, OSHD1
K. HASSAMAL, S5"5&(9 A/"95, STRG
K. LUMBILA, S&/* E$/*5, OSGE1
L. BOURKANE, E$/*5, OSHD.2
L. DADE, R&(*/" F*/"/$*" M"/"(&&/5 C%*/"5,
ORPF.2
L. LANNES, P*/$*" H&"5) E$/*5, OSHD3
M.DAMAK, P*/$*" C&%*5 R* O''*$&, FFMA2
M. GUEE, P*/$*" E%6$"5*/ E$/*5, OSHD.2
M. OULD TOLBA, C)*&' A(/*5, OSAN1
S. DAH, P$6&&/5 E8&5, ORPF1
S. OMAR ELMI, ICT E8&5, ICT4D
T. MOURGUES, C/65"/5, OPSM0
W. DAKPO, R&(*/" P$6&&/5 C%*/"5, ORPF1
Regional Director:
J"$# KOLSTER, D*&$5, ORNA
Peer Review:K. MHIRSI, C)*&' I/7&5&/5 O''*$&, M"6*5*6 C6/59
O''*$&
M. NDONG NTAH, C)*&' C6/59 E$/*5, ORNB
H. SAMER, D*7**/ M"/"(&, OPEV2
S. LARBI, S&/* I/7&5&/5 O''*$&, OPSM3
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T u n i s i a : I n t e r i m C o u n t r y S t r a t e g y P a p e r - 2 0 1 4 - 2 0 1 54
A f r i c a n D e v e l o p m e n t B a n k
Table of Contents
11 I Introduction
13 II Country Context and Prospects
13 2.1 Context
A. Political Situation
B. Economic Context
C. Social Situation
D. Environment and Climate Change
25 2.2 Strategic Options
A. Country Strategic Framework
B. Challenges and Weaknesses
C. Strengths and Opportunities
31 2.3 AID Coordination/Harmonization and AfDB Positioning in the
Country
34 III Bank Group Strategy
34 3.1 Rationale for Bank Group’s Involvement40 3.2 Expected Outcomes and Targets41 3.3 Risks and Mitigative Measures43 3.4 Implementation Arrangements44 3.5 Country Dialogue Issues
45 IV Conclusions and Recommendation
45 4.1 Conclusions45 4.2 Recommendation
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List of Annexes
1. Endnotes
2. Results-Based Logical Framework – Tunisia’s CSP 2014-2015
3. I-CSP 2012-2013 Completion Report and Portfolio Performance Review (2013)
4. Tunisia’s Portfolio (UA) (September 2013)
5. Trends in Tunisia’s Sovereign Ratings
6. IMF: USD 1.74 Billion Standby Arrangement
7. Simulation in Terms of Loans
8. Poverty and Unemployment in the Regions
9. List of Economic and Sector Studies on Tunisia Carried out Since 2011
10. Status of Implementation of AfDB Budget Support Measures in 2011 and 2012
11. Civil Society Involvement in Strategy Preparation
12. Public Finance and Procurement Management Systems: Bank’s Risks and Fiduciary Strategy
12. Medium- and Long-Term Debt Sustainability Analysis
List of Figures
1. Contribution to the Growth of Key Sectors of the Economy
2. Macro-Economic Indicators
3. Distribution of FDI Flows by Sector (2012)
4. Governance Index 2012 – Tunisia’s Scores Compared to Africa
5. Freedom of Expression and Accountability and Corruption Perceptions Indices
6. Business Environment: Comparative Ranking with 183 Countries
7. Business Climate: Competitiveness Survey 2012 Results
8. Overall Factor Productivity Growth
9. GCI 2011-2012 Ranking
10. Tunisia’s Main Trading Partners
11. Main Destinations of Tunisian Exports and Complementarities
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A f r i c a n D e v e l o p m e n t B a n k
List of Tables
1. key Partners’ Active Portfolios by Sector (2013 - in USD Million)
2. Alignment with CSP-1 Analysis, Intervention Pillars and the Strategic Framework
3. Loan Scenarios
List of Boxes
1. Innovations in the Approach Adopted
2. Choice of the I-CSP Tool
Currency Equivalents - January 2014
CURRENCY UNIT = DINAR (TND)
UA 1 = TND 2.55
UA 1 = USD 1.54
UA 1 = EUR 1.12
FISCAL YEAR
1 JANUARY - 31 DECEMBER
12. Poverty, Inequality and Polarization in 2005 and 201013. Trends in the Overall Unemployment Rate Among University Graduates and Women
14. Trends in the Sophistication Index of Exports of Tunisia and Some ASIAN Countries
15. Indices of Regional Disparities in Terms of Wealth, Health and Education
16. Per Capita Investment in TND for the 1987-2010 Period
17. Rate of Youth Unemployment (Aged 18-30 years) by Type of Certificate (2010)
18. Share of Textile, Mechanical and Electronic Products in the Export Basket
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Acronyms and Abbreviations
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A f r i c a n D e v e l o p m e n t B a n k
AFD F&/$) D&7&&/5 A(&/$9
AfDB A'*$"/ D&7&&/5 B"/
AMU A"# M"() U/*/
ANC N"5*/" C/5*56&/5 A	
AWF A'*$"/ W"5& F"$**59
B B**/
BCT C&/5" B"/ ' T6/**"
CEDAW C/7&/5*/ / 5)& E**/"5*/ ' A F ' D*$**/"5*/ A("*/5
W&/
CPR C/(& ' 5)& R&6#*$
CSP C6/59 S5"5&(9 P"&
I-CSP I/5&* C6/59 S5"5&(9 P"&
DAC D&7&&/5 A*5"/$& C*55&&
EBRD E6&"/ B"/ ' R&$/56$5*/ "/% D&7&&/5
EIB E6&"/ I/7&5&/5 B"/
EU E6&"/ U/*/
EUD E6&"/ U/*/ D&&("5*/FDI F&*(/ D*&$5 I/7&5&/5
FIPA F&*(/ I/7&5&/5 P5*/ A(&/$9
GAFTZ G&"5& A"# F&& T"%& !/&
GDP G D&5*$ P%6$5
HDI H6"/ D&7&&/5 I/%&8
ICTs I/'"5*/ "/% C6/*$"5*/ T&$)/(*&
IFI I/5&/"5*/" F*/"/$*" I/5*565*/
IMF I/5&/"5*/" M/&5"9 F6/%
INS N"5*/" I/5*565& ' S5"5*5*$
ITCEQ T6/**"/ I/5*565& ' C&5*5*7&/& "/% Q6"/5*5"5*7& S56%*&
JBIC J""/ B"/ ' I/5&/"5*/" C&"5*/
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KfW K&%*5"/5"5';W*&%&"6'#"6KTOE K*5/ O* E6*7"&/5
MDCI M*/*59 ' D&7&&/5 "/% I/5&/"5*/" C&"5*/
MENA M*%%& E"5 "/% N5) A'*$"
MIC M*%%&-I/$& C6/59
MIC-TAF M*%%& I/$& C6/5*& T&$)/*$" A*5"/$& F6/%
NPLs N/-P&'*/( L"/
OECD O("/*:"5*/ ' E$/*$ C&"5*/ "/% D&7&&/5
OFID OPEC F6/% ' I/5&/"5*/" D&7&&/5
OPSCOM O&"5*/ C*55&&
PDAI I/5&("5&% A(*$656" D&7&&/5 P("&
PISA P("& ' I/5&/"5*/" S56%&/5 A&&/5
PISEAU W"5& S&$5 I/7&5&/5 P+&$5
PPP P6#*$-P*7"5& P"5/&)*
SME S"- "/% M&%*6-*:& E/5&*&
TND T6/**"/ D*/"
TNDB B**/ T6/**"/ D*/"
TNDM M**/ T6/**"/ D*/"
UA B"/ G6 U/*5 ' A$$6/5
UAB B**/ U/*5 ' A$$6/5
UAM M**/ U/*5 ' A$$6/5
UNCTAD U/*5&% N"5*/ C/'&&/$& / T"%& "/% D&7&&/5
USD U/*5&% S5"5& D"WAEMU W&5 A'*$"/ E$/*$ "/% M/&5"9 U/*/
WB W% B"/
WEF W% E$/*$ F6
WGI W% G7&/"/$& I/%*$"5
T u n i s i a : I n t e r i m C o u n t r y S t r a t e g y P a p e r - 2 0 1 4 - 2 0 1 58
A f r i c a n D e v e l o p m e n t B a n k
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Executive Summary
1. The previous Interim Country Strategy
Paper (I-CSP) was approved by the Bank’s
Board of Directors on 27 February 2012.
In view of political, economic and social
uncertainties in the wake of the Revolution,
the Bank opted for a two-year (2012-2013)
I-CSP. Two priority focus areas for the Bank
were adopted in agreement with Tunisian
authorities after broad consultations with civil
society and the private sector, namely: (i)
Growth and Economic Transformation and
(ii) Inclusion and Reduction of Regional
Disparities.
2. Political Context: In January 2014 the
adoption of the new constitution ended the
Tunisian political crisis that lasted more than6 months. Indeed the national consensus
signed by the main political parties in October
2013 to end the political crisis resulted in
the appointment of new Prime Minister in
December, and the announcement of his
government in January 2014, following the
adoption of the new Constitution. These two
major political events have ended the lack of
political visibility affecting donors’ intervention
and impeding economic recovery. The transition
process in Tunisia remains one of the most
stable in the sub-region and the forthcoming
elections scheduled for end of 2014 could
establish a renewed virtuous circle.
3. Economic Context: After the Revolution,
the Tunisian economy has been affected by
social movements, political developments
and the fragile global economic context.
However, the relative resilience of the economy
to the two shocks of the 2011 Revolution and
the Euro zone crisis tends to prove that despite
economic uncertainties, Tunisia’s economic
fundamentals are still good. After a GDP
contraction of 1.9% in 2011, the Tunisian
economy recorded a 3.3% growth rate in
2012. This rate is estimated to 2.6% in 2013
(BCT estimate).
4. Government’s Objectives: In a context
of transition, the authorities have opted for a
flexible strategy aimed at appeasing social
and economic demands while preparing
necessary structural reforms. The I-CSP is
based on Government’s guidelines which
were presented in March 2013. This vision
provides for a series of medium- and long-
term structural reforms and investments
aimed at creating conditions for accelerated
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growth and job creation to ensure regionalbalance and inclusive development.
5. Identification of Bank Group Operations:
the operations were identified on the basis
of the recommendations contained in the
I-CSP 2012-2013 completion report and the
discussions held with the Government and
development partners during missions fielded
in June and September 2013. Besides bilateral
meetings, a workshop was organized with
civil society in September 2013 to examine
the Government’s strategy. The document was
discussed with the new authorities in 2014.
6. Intervention Pillars: the I-CSP prioritizes
the principles of alignment with Government’s
priorities, particularly the creation of (higher
value added) jobs and the reduction of regional
disparities and to that end, it seeks to support
actions to develop an inclusive private sector.
The CSP is a continuation of the previous
I-CSP 2012-2013; however, it seeks to refocusthe Bank’s operation for the 2014-2015
period on two pillars, namely “governance”and “infrastructure” - in line with the Bank’s
Ten-Year Strategy. Furthermore, in a context
of transition, support within the framework of
the pillars will be provided with a dual temporal
objective of carrying out (i) short-term actions
to ensure rapid achievements and (ii) medium-
/long-term actions to lay the foundations for a
new more inclusive and higher value-added
development model.
7. Instruments and Risks: in view of
challenges on the Bank’s financing, special
emphasis will be laid on technical assistance.
Trends in risk assessment at the regional
and national levels will influence the level
and type of Bank operation (technical
assistance, investment projects or budget
support). In this respect, three scenarios
have been developed to introduce various
possible levels of commitment. Furthermore,
in terms of loans, priority will be given to
the “infrastructure” pillar in the “low” and“average” scenarios.
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I. Introduction
1.1 Tunisia is a founding member of the
Bank and its second historic beneficiary.
The Bank’s portfolio in Tunisia, which is the
institution’s second largest portfolio, comprises
16 operations and 24 technical assistance
operations amounting to UA 1.3 billion.
Furthermore, the Bank contributed UA 659
million to the State budget in 2011 and 2012.
1.2 The previous Interim Country Strategy
Paper (I-CSP) was approved by the
Bank’s Board of Directors on 27 February
2012. In view of political, economic and
social uncertainties following the Revolution,
the Bank opted for a two-year (2012-2013)
I-CSP. Two priority areas for Bank intervention
were adopted in agreement with Tunisianauthorities after broad consultations with civil
society and the private sector, namely: (i)
Growth and Economic Transformation and (ii)
Inclusion and Reduction of Regional Disparities.
1.3 Since the approval of the 2012-2013
I-CSP, Tunisia’s transition has been cha-
racterized by a decline in political visibility
and growing economic uncertainty.
1.4 Social movements, particularly in
disadvantaged regions, have continued,
bringing to the fore issues related to (qualitative
and quantitative) employment, the situation
of youths, regional disparities and poverty.
In addition, the crises in Europe and Libya
profoundly affected economic recovery,
already weakened by the Revolution.
1.5 The lack of political visibility during
the period 2012-2013 also contributed to
slowing down economic recovery. Besides
the unrest that took place between February
and July 2013, political uncertainty stemmed
from delays in drafting the new Constitution
and holding new elections.
1.6 Nevertheless, the authorities have
maintained, at the same time, a dialogue
with key development partners on reforms
and investments, even without a 5 years
development plan.
1.7 The authorities are striving to remove
such uncertainties and the adoption of the
Constitution in January 2014 is a major
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step in this regard. In fact, all partners andobservers think that the transition in Tunisia
remains one of the most advanced and most
promising in the region.
1.8 In this context, the authorities
requested the Bank to formulate a new
interim strategy for the 2014-2015 period.
The aspects of this strategy were identified
through consultation with the authorities,
development partners, civil society and the
private sector.
1.9 The period covered by this I-CSP will
be aligned with the national agenda.
During this period, political events will be
organized and a new development plan
designed.
1.10 Though the I-CSP is a continuation
of the previous interim strategy, it takes
into account lessons learned by the Bank
regarding its commitment during the transitionperiod initiated in 2011 and the findings of
many studies carried out.
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A f r i c a n D e v e l o p m e n t B a n k
Box 1: Innovations in the Approach Adopted
1. A commitment level that can be adjustedin the light of risks in order to mobilizemaximum resources.
2. Strong portfolio implementation supportthrough the establishment of an internalcoordination entity (Baobab) and theprovision of technical support to accelerate
procurement.
3. Strong mobilization of technical assis-tance resources and advisory capacities tosupport transition and develop the futureportfolio.
4. Refocusing activities on (i) supportto enhance the business climate and (ii)improvement of public service delivery and
access to employment in disadvantagedregions.
5. Strong mobilization of partners and theprivate sector in all operations for leverageeffect.
6. Support in designing the new developmentplan, where appropriate.
7. The logical framework of designedprojects should include indicators formonitoring the achievement of the Bank’s2013-2022 Strategy objectives.
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II. Country Context and Prospects
2.1 Political, economic and socialcontext
A. Political Situation
2.1.1 After exercising power for over 23
years, President Ben Ali went into exile on
14 January 2011 following one month of
protests. Pressure exerted by demonstrators
and civil society led to the setting up of three
successive transitional governments (from
January to December 2011) to manage the
country’s economy and prepare free and
transparent Constituent Assembly elections.
2.1.2 The October 2011 Constituent
Assembly elections, though delayed, wereconducted in accordance with the electoral
process in place. To form a stable majority,
the Islamic Party, Ennahdha, which obtained
41.7% of the vote, formed a coalition with
the centre-left Party, CPR, and the Social
Democratic Party, Ettakatol. The initial aim
was to draft a new Constitution in one year.
2.1.3 The Troika, which won 63.6% of
seats in the National Constituent Assembly,
formed a government in December 2011
headed by the Secretary-General of Ennahda.
The office of President of the Republic is held
by the CPR Chairman and the Chairman of
Ettakatol is the ANC President.
2.1.4 However, the unrest that occurred
between end-2012 and November 20131
influenced the political process in 2012-
2013. In March 2013, tensions led to the
formation of a new government. Independent
personalities were appointed at the helm of
four key ministries2 to meet the expectations
of opposition parties. Security has become a
central issue and many actions have been
carried out to restore confidence.
2.1.5 In January 2014, the adoption of the
new constitution and the announcement
of a new government ended the Tunisian
political crisis that lasted more than 6 months.
Indeed, the national consensus signed by the
main political parties in October 2013 resulted
in the appointment of a new Prime Minister
in December, and the announcement of his
government in January 2014, the day following
the adoption of the new Constitution.
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2.1.6 These two political events haveconsiderably lessened uncertainty and
lack of political visibility which had affected
donors’ intervention, and impeded economic
recovery. Following the vote of confidence
for the new government, the Tunisian Stock
Exchange closed on a positive note, the dinar
appreciated against the Euro and the U.S.
Dollar, and the IMF announced a disbursement
of $ 500 million of its support program.
2.1.7 In addition, the transition process in
Tunisia remains one of the most stable in
the region. The announcement of a new
government of technocrats and independents
as well as the holding of the forthcoming
elections scheduled for October 2014 could
husher a new positive impetus.
B. Economic Context3
2.1.8 Tunisia has for long been considered
as an economic success story in the region.Since independence, the Tunisian economy
has undergone profound restructuring.
Its domestic production, which was initially
dominated by agriculture and raw materials
(phosphate, oil and gas), is directed towards
services and, to a lesser extent, the manu-
facturing industry.
2.1.9 The decade preceding the Revolution
was a period of transition for the Tunisian
economy plagued by many challenges. The
objectives of the reforms included in the9th (1997-2001), 10th (2002-2006) and 11th
(2007-2011) Plans were to increase growth
from 4.8% to 6.1% and to reduce the unem-
ployment rate from 14.2% to 13.4% by 2011.
During this period, the country experienced
moderate, but steady, growth of 4.9% annually,
raising GDP (PPA) per capita to a little over
USD 4 200, despite the shock of the 2008
financial crisis. This growth contributed to
reducing poverty in rural and urban areas4
and improving health and education indicators.
Despite the global economic crisis, downswing
effects and the Recovery Plan helped to
implement a counter-cyclical policy without
worsening the budget deficit (less than 3% in
2009). However, despite the good perfor-
mance recorded, the set objectives in terms
of employment, social equality and regional
development were not achieved.
u Macro-economic Developments
2.1.10 After the Revolution, the Tunisian
economy has been affected by social
movements, political developments and
the fragile global economic context.
However, the economy was resilient to the
two shocks of the 2011 Revolution and the
Euro zone crisis, indicating that Tunisia’s
economic fundamentals are still good, despite
economic uncertainties. The impact of
the European crisis on the key sectors of
manufacturing and textile industries (-8%) and
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mechanical and electrical industries (-2%)was offset by a strong rebound in refining
(+142.8%), chemical (+15.9%), agricultural
(+5.7%) and hotel and catering (12%) activities
(Fig. 1). FDIs which increased by almost 80%
compared to 2011 (thanks particularly to the
privatization of two seized assets), the vitality
of domestic demand and tradable (transport
and hotel and catering) services were the main
drivers of growth in 2012.
2.1.11 In fact, after recording a negative
growth (-1.9%) in 2011, the Tunisian economy
experienced an upswing in 2012 with a
3.3%5 growth rate which is expected to be
between 2.6% 3% in 2013 (Fig.2).
2.1.12 The budget deficit rose from 3.4%
of GDP in 2011 to 4.9% in 2012 and is
expected to stand at 6.5% in 2013. Tax and
non-tax revenues increased moderately in
2012.
2.1.13 The increase in public consumption
expenditure was relatively significant,
thus accelerating the deterioration of the
budget deficit. In particular, grants expenditure
increased sharply due to rising food and
oil prices, coupled with the depreciation of
the dinar6. Furthermore, the increase in civil
servants’ salaries and the recruitment of new
workers raised the public wage bill significantly
in 2013 (+40% compared to 2010). However,
this expenditure which has stimulated overall
demand partly explains the rapid cushioningof the shock caused by the January 2011
Revolution. It should be noted that interest on
debt rose by 6.9% in 2012 and 4.9% in 2013.
2.2.1.14 Regarding investments, budget
execution in 2012 and 2013 was less
expansionary than envisaged. Development
expenditure included in the Supplementary
Finance Law increased by 18.7% in 2012.
However, constraints on implementation
capacity at the regional level and on procu-
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A f r i c a n D e v e l o p m e n t B a n k
-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
2008 2009 2010 2011 2012
Chemical
Hotel and catering
Transportation
Textile, clothing and leather
Mechanical and electrical
Figure 1: Contribution to the Growth of Key
Sectors of the Economy (MDCI)
Figure 2: Macro economics (AfDB)
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rement led to a budget execution rate of 74.4% in 2012.
2.1.15 In 2014, debt will remain sustainable7,
provided the budget deficit is reduced and
growth is revived (Annex 13). According to
the standards of rating agencies and interna-
tional institutions, the debt/GDP ratio of mid-
dle-income countries like Tunisia must not
exceed 50%. The country’s public debt/GDP
ratio dropped from 44.6% in 2011 to 43.8%
in 2012 and is expected to stand at 46.8% in
2013. Sixty-three percent of public debt is
held abroad for a seven-year average repayment
period and a low average annual cost of
about 3.5%, excluding the repayment of the
principal before 2017. The budget deficit is
expected to fall to 4.3% in 2015.
2.1.16 However, the State’s financing
needs are huge and estimated at USD
3.9 billion in 2013 (8.5% of GDP) and USD
4.3 billion in 2014. Following developmentpartners’ interventions of, Tunisia has mana-
ged to bridge the financing gap in 2013.
Negotiations with the IMF on a precautionary
standby arrangement led to the approval –
on 7 June 2013 - by the IMF Executive Board
of a USD 1.7 billion programme for the 2013-
2015 period at a 1.07% interest rate (Annex
6) which is subject to the implementation
of reforms to restore macro-economic
stability.
2.1.17 The Central Bank of Tunisia (BCT) has continued to implement a flexible
monetary policy to support the revival
policy. The structural liquidity deficit which
characterized the cash position of banks in
2011 continued in 2012, necessitating greater
BCT intervention on the money market
through the injection of about TND 5 billion
during the first 10 months of 2012. Total
deposits decrease by 7.8 in 2013 compared
to 10.7% in 2012 (5.1% in 2011), while
lending to the economy increased by only
8.7%, as against 13.4% in 2011.
2.1.18 Increasing inflationary pressures
prompted the BCT to gradually tighten its
monetary policy and implement a neutral
intervention strategy in line with changes in
autonomous bank liquidity factors. In fact, on
average, inflation stood at 6.4% in 2013 as
against 5.4% in 2012 and 3.5 % in 2011 due
mainly to8 : (a) rising world market prices of
some imported products; (b) the depreciationof the dinar (from 0.52 dinars for TDN
1.90/EUR 1 on 1/12/10) to TDN 2.22/EUR 1
on 10/10/13); (c) increase in the wage bill; (d)
weakening price control, dysfunction of
distribution networks and the smuggling of
some products into neighbouring countries
(Libya).
2.1.19 The current account deficit rose
from 7.3% of GDP in 2011 to about 8.2%
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in 2012 and 8.3% in 2013, despite anincrease in revenue accruing from tourism
and remittances from Tunisian workers
abroad (34% and 22%) and the depreciation
of the exchange rate (12% against the Euro
in 20139 and 16% since 2010).
2.1.20 Hence, foreign exchange reserves,
though substantial, declined in 2013. The
agreement for the deposit of USD 500
million into the BCT by the National Bank
of Qatar at end-December 2013 helped to
stabilize the reserves at USD 7.1 billion,
representing 107 import days. Likewise,
foreign exchange reserves attained their
2010 level in 2012 (USD 8.5 billion) following
an increase in FDIs10 (Fig. 3) sustained parti-
cularly by the sale of ill-gotten property,
bilateral and multilateral loans and access to
financial markets (with the U.S. Treasury and
JBIC guarantee).
2.1.21 Tunisia’s sovereign rating was revised downwards in this context marked by the
relative deterioration of macro-economic
balances. Since 2011, Standard & Poor’s
has progressively reduced Tunisia’s sovereign
rating by six notches from BBB to B in August
2013 (Annex 5). This has reduced Tunisia’s
sources of financing and increased their cost
at a time of growing needs. However, Tunisia
has never defaulted on its financial commitments
to the Bank or other donors and such scenario
is unlikely in the short- and medium-term
(Annex 13).
u Gouvernance
2.1.22 Before the Revolution, poor public
and private sector governance impeded
civil society participation in the running of
the country and also hampered private
sector development 11. It is said that poor
governance cost the Tunisian economy two
growth points. In 2012, however, governance
indicators continued to portray Tunisia as the
most advanced country in Africa in terms of HDI and sustainable economic development.
In contrasts, regarding the rule of law, Tunisia’s
score remained very close to the average of
African countries in 2012 (Fig. 4). Supplementary
and sustained efforts should be made to restore
the confidence of entrepreneurs and investors,
particularly in the judicial system.
2.1.23 During the post-Revolution period,
the authorities implemented several
initiatives to improve transparency and
good governance. This resulted in the
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A f r i c a n D e v e l o p m e n t B a n k
1% 1% 5%
8%
4%
2%
36%
3%
40%
Miscellaneous industries
Agro-food
Building materials
Mechanical-Electrical-Electronic Chemical, Rubber and Plastic
Textile, Clothing, Leather and
Footwear
Energy
Tourism and Real Estate
Services and others
Figure 3: Distribution of FDI Flows by
Sector, 2012 (IFAP)
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creation of a Ministry in charge of Gover-nance in 2012. An action plan was prepared
following the conduct of a governance
evaluation and a diagnosis of the extent of
corruption in Tunisia. This led to (i) the lifting
of reservations allowing the entry into force of
the United Nations Convention against
Corruption, 2003 and (ii) the revitalization of
the Independent National Anti-corruption
Authority in April 2012. In 2013, the Government
also carried out the OECD integrity scan
which constitutes an important milestone.
2.1.24 Tunisia has also made substantial
progress12 in establishing a legal and
institutional framework for public trans-
parency. The analysis of the Tunisian control
and audit system in 2013 underscored the
need to reform auditing as the basis for
corruption control. The reform of the financial
system is underway with the application of
objectives-based budget management which
ensures greater efficiency in resource mana-gement. These achievements, whose impact
is still to be assessed, should be strengthened
by putting in place a robust legal framework.
2.1.25 Measures have also been taken to
improve Government’s accountability to
control institutions13. The Audit Office also
plans to reform its internal structures in order
to adapt the organization of its services,
particularly the pole centred around the
General Secretariat, and its operation to good
governance requirements. This structural reform
will therefore include the modernization of
tools placed at the disposal of magistrates
through the development of computerized
auditing and the use of computerized audit
techniques on the one hand, and the esta-
blishment of an information system adapted to
the needs of the Audit Office on the otherhand.
2.1.26 Corruption remains the centre of
attention. According to Transparency Inter-national, Tunisia’s corruption perceptions
index declined in 2011 and 2012 compared
to 2010 and 2011 (Fig. 5). However, despite
the establishment of the National Corruption
and Embezzlement Investigation Commission
and the National Committee on the Recovery
of Ill-gotten Property Abroad, anti-corruption
measures are inadequate. Furthermore, the
report on the self-assessment of the national
procurement system conducted in 2012
highlighted a major weakness in the integrity
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62.7
81.7
54.1
68.6
51.2
56.7
53.3
47.3
0 10 20 30 40 50 60 70 80 90
Governance Index (Mo Ibrahim Index)
Human Development Index (HDI)
Security and Rule of Law
Sustainable economic development
Africa Tunisia
Figure 4: Governance Index 2012: Tunisia’s
Score, Compared to Africa (AfDB)
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and transparency of the Tunisian publicprocurement system.
2.1.27 Since Revolution, major efforts
have been made to promote access to
information, civil society development and
greater citizen control 14 (Fig. 5). These
include, for example, the enactment of the
2011 law on associations. The Tunisian
Government enacted a law on access to
information in May 2011 and also starteddisseminating key statistical and financial
data such as budget implementation reports,
complete Audit Office reports, as well as
household and labour force surveys. This
is facilitated by the Bank’s support to
e-Government.
u Business Environment andCompetitiveness
2.1.28 Tunisia has become less attractive
to investors since the Revolution. It has
thus slipped 5 places in the Doing Business
2013 ranking (from 45th to 50th ), declining in
all indicator rankings (Fig. 6). According to
the latest Global Competitiveness Report,
bureaucracy is the most problematic business
climate factor. Tunisia fell from the 23rd rank
in 2010 to 41st rank in 2011 in terms of the
quality of public institutions. According to
foreign investors, there are major disparities
among sectors, whether these sectors are
open or not to foreign investment, and
requests for prior authorization, particularly
in the service sector, are limiting factors.
Tunisia has become less attractive to investors
since the Revolution. It has thus slipped 5
places in the Doing Business 2013 ranking
(from 45th to 50th ), declining in all indicator
rankings (Fig. 6). According to the latest GlobalCompetitiveness Report, bureaucracy is the
most problematic business climate factor.
Tunisia fell from the 23rd rank in 2010 to
41st rank in 2011 in terms of the quality of
public institutions. According to foreign
investors, there are major disparities among
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A f r i c a n D e v e l o p m e n t B a n k
9.95
35.68
42.65
4.3 3.8 4.1
2010 2011 2012
Freedom of Expression and
Accountability
Corruption Perceptions Index
Figure 5: Trends in Freedom of Expression
and Accountability and Corruption Perception
Indices (IMG and Transparency International)
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sectors, whether these sectors are open ornot to foreign investment, and requests for
prior authorization, particularly in the service
sector, are limiting factors.
2.1.29 ITCEQ’s Competitiveness Survey
2012 revealed that the business envi-
ronment is one of the main challenges
for corporate development, particularly
regarding corruption and insecurity
(Fig. 7).
2.1.30 Total factor productivity remains low compared to those recorded in other
middle-income countries such as Morocco
and Romania, Tunisia’s main competitors
(Fig. 8). Although the country’s annual growth
rate rose from 1.2% (2000-2005) to 1.5%
(2006-2010), this performance is said to be
due only to a drop in the real effective exchange
rate owing to greater trade openness and
worsening terms of trade15.
2.1.31 A more knotty issue is that Tunisia
lost 43 places and was ranked 83rd in the
World Economic Forum’s Global Competi-
tiveness Report in August 201316 (Fig. 9).
Nevertheless, it has continued to honour its
commitment regarding the implementation of
reforms to improve the business environment
(new investment code, simplification of
administrative formalities and implementation
of administrative reforms). According to its
main partners, however, there is need to
accelerate the implementation of reforms.
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A f r i c a n D e v e l o p m e n t B a n k
10497
3130
39
8793
5466
4550
6470
7778
6062
4649
38
0 50 100 150
Ease of doing business
Starting a business
Obtaining building permit
Obtaining credit Acquisition of property
Investor protection
Taxation
International trade
Contact compliance
Closing a business
2012 2013
Figure 6: Business Environment:
Comparative Ranking with 183 Countries
(Doing Business)
0.733
0.719
0.713
0.657
0.61
0.587
0.568
0.547
0.493
Infrastructure
Human resources
Macro-economic uncertainties
Administrative procedures and system…Contracting parties
Bank financing
Social security contributions
Corruption
Insecurity
0 0.2 0.4 0.6 0.8
Figure 7: Business Climate:
Competitiveness Survey 2012 Results
(ITCEQ)
1.2%1.5%1.4%
1.1%
2.7%
0.4%
5.5%
1.4%
2000-2005- 2006-2010-
Tun isi a Mor oc co Tu rk ey R oma ni a
Figure 8: Overall Factor Productivity
Growth for the 2000-2005 and 2006-2010
Periods (AfDB)
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u Financial Sector
2.1.32 The already fragile financial sector
has been affected by the transition17 . Before
the Revolution, it was already plagued by
structural vulnerabilities such as undercapita-
lization, poor asset quality, fragmentation,
poor banking supervision or underdeveloped
stock markets. The banking sector has been
affected by the Revolution owing to its
exposure to risks related to sensitive sectorssuch as tourism as well as companies owned
by the former President’s family. Bad debts
have been maintained artificially at their
pre-Revolution levels and profits do not
reflect the low level of banks’ provisions and
equity. State banks are the most vulnerable
because they were used as economic policy
instruments. According to the BCT, the rate
of non-performing loans of State banks was
17.8% at end-2012 and would be more than
20% if rescheduled debts (in line with theJune 2011 BCT circular) are taken into
account18. Furthermore, the banking system
does not support SME and micro-enterprise
development.
2.1.33 The banking sector is at the core
of the reforms included in the IMF programme.
According to the recent assessment of financial
system soundness, the cost of restructuring
the public banking sector could reach 2.6%
of GDP over the next two years. The reforms
supported by the IMF include the improvement
of banking information, bank recapitalization,
the management of non- performing loans
(especially those related to tourism), improved
management of public banks, better banking
supervision and the establishment of a crisis
management system.
u Trade and Regional Integration
2.1.34 The Partnership Agreement betweenthe EU and Tunisia has enabled the country
to reach important milestones regarding
liberalization and integration. However, this
has been achieved at the expense of heavy
dependence on the European economy
which was the destination of 73% of Tunisian
exports in 2012. The top ten destinations
include Libya, Algeria, Morocco and the United
States which absorb 16.4% of Tunisian
exports (Fig. 10).
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A f r i c a n D e v e l o p m e n t B a n k
0 50 100 150
Global Competitiveness Index 2011-…
Institutions
Infrastructure
Macro-economic environment
Health and primary education
Higher education and training
Contracting effectiveness
Technological maturity
Innovation
Turkey Brazil Tunisia
Figure 9: GCI 2012-2013 Ranking (WEF)
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2.1.35 However, integration in the sub-
region and with sub-Saharan Africa is a
source of significant, but untapped,
potential growth. Tunisia exports much more
to France (26.3%) than to Cameroon (0.14%)
(Figure 11). Nevertheless, the merchandise
trade complementarity index shows that its
exports are more complementary with Came-
roonian (0.457) than French (0.433) exports
(Fig. 13). Thus, the Tunisian Government has
designed a roadmap in conjunction with theprivate sector and market research consulting
firms to ease access to African markets. Tunisia
is also negotiating free trade agreements with
WAEMU and the establishment of free trade
zones with Libya and Algeria.
C. Social Situation
2.1.36 Transition is taking place in a social
environment marked by labour unrest. In
the first quarter of 2013 alone, the country
witnessed 23 strikes, of which only 11 were
legal (affecting 21 enterprises, 4 of them
public) that caused the loss of 4 000 working
days. Labour unrest has sometimes led to
acts of violence.
u Poverty, Inequality and Polarization
2.1.37 Wide socio-economic disparities
remain one of the main social challenges
faced by Tunisia, despite the alleviation of poverty over the last decade (from 32.4% in
2000 to 15.5% in 2010)19. Global inequalities
have reduced, with a decline in the Gini Index
from 0.37 in 2000 to 0.35 in 2010 (Figure 12
– Annex 8). Despite the decrease in inequalities
at the national level, regional disparities have
continued to increase, further polarizing the
society.
2.1.38 The authorities are concerned
about the poor performance of social
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26%
16%
9%8%
4%
37%France
Italy
Germany
Libya
Spain
Rest of the World
Figure 10: Tunisia’s Main Trading Partners
(% share of total exports) (INS)
0.14
26.28
0.15
9.39
0.06
2.99
0.11
0.457
0.433 0.430
0.4190,410
0.405 0.401
0.380
0.370
0.390
0.400
0.410
0.420
0.430
0.440
0.450
0.460
0.470
0.00
5.00
10.00
15.00
20.00
25.00
30.00 % Share of Total Export
Complementarity
Figure 11: Main Destinations of Tunisian
Exports and Complementarities
(UNCTAD)
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transfers 20
. In fact, to alleviate poverty andpreserve food security, Tunisia has implemented
social policies based on direct and indirect
transfers (food and energy subsidies) since
independence so as to promote inclusive
growth-driven development. However, analyses
of the efficacy of food subsidies have shown
that despite their significant redistributional
effects (without subsidies, the poverty rate
would have reached 19.1% in 2010), the uni-
versal nature of these subsidies undermines
the efficacy of this tool as a mechanism
for reducing inequalities and poverty. Poor
households which represented 15.5% of the
total population in 2010 receive only 12% of
food subsidies.
u Unemployment and Education
2.1.39 Despite the growth rebound in
2012, employment remains the major
preoccupation of Tunisian policy-makers.
During the third quarter of 2013, the average
unemployment rate and the unemploymentrate of graduates rose to 15.7% and 33.5%
respectively (Fig. 13). The effect of the recession
coupled with the massive influx of Tunisians
repatriated from Libya21 explain these rates
which remain high despite a slight decrease
compared with the previous year (particularly,
following recruitments in the public sector).
This structural unemployment, is a result
of a quantitative (between higher education
and private sector needs) and qualitative
(graduates lacking the required skills to enter
the labour market) mismatch. The distribution
of unemployment is also an important indicator
of regional and social disparities. The authorities
are also concerned about the informal sector
(36.8% of employment in 2007).
u Gender Issues
2.1.40 The Bank conducted a gender
diagnosis in 2012-2013. As regards gender
equity, the 1956 Personal Status Code
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A f r i c a n D e v e l o p m e n t B a n k
23.3
34.8
61.9
15.5
32.7
62.5
Poverty rate Global inequality
Polarization
2005 2010
Figure 12: Poverty, Inequality and
Polarization in 2005 and 2010 (INS)
.
.
.
. .
.
. .
.
.
.
.
.
.
.
.
.
.
..
..
.
.
Figure 13: Trends in the Overall
Unemployment Rate among University
Graduates and Women 2006-2012, in % (INS)
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places Tunisia at the vanguard of the Arabworld with respect to the status of women in
society. Nevertheless, there are still reservations
at the CEDAW concerning the law of succession,
the Nationality Code and the concept of
patriarchy. During the transition period, there
were a lot of tensions during which achieve-
ments were sometimes threatened.
2.1.41 Concerning human capital,
Governments’ efforts have borne fruit,
although some disparities remain. There
is a higher female enrolment in universities
with a 62.3% rate in 2013. However, in basic
education, the illiteracy rate in 2010 was
26.4% for girls as against 11.5% for boys. In
rural areas, women sometimes lack access
to specific health (gynaecological) care.
2.1.42 Regarding economic inclusion,
women’s labour market participation is
irregular and declines from the age of 30
years. Women represent less than a quarterof an active population of 3.2 million and their
unemployment rate is higher than that of
men. Sectors characterized by job insecurity,
underemployment and major differences in
remuneration are dominated by women. A
better women labour market positioning
would increase GDP by 0.7 percentage
points.
2.1.43 Women’s participation in the three
branches of government has improved
significantly. Women hold 22.6% of
positions in decision-making bodies. Theadoption of the gender equality principle
during the first ANC elections resulted in the
election of 49 women out of 217 seats and
the Vice-President of the ANC is a woman.
Although this representation seems is low in
absolute terms, it is remarkable in the sub-
region.
D. Environment and Climate Change
2.1.44 During the post-revolutionary
period, the management of environmental
issues has deteriorated. This degradation
is related to the difficulties encountered
by the government in applying the law 22.
2.1.45 However, the renewed involvement
of civil society, which is clamouring for
better natural resource and environmental
management, is visible. The demands concern
improvement of the quality of life and natural
resource management, reduction of publichealth disparities between regions and also
within towns through equitable access to
drinking water and sanitation and improved
waste management.
2.1.46 Like in most North African countries,
water is a precious commodity in Tunisia.
More than half of available water is surface
water and about 44% is derived from water
tables. Although all available water reserves
have not been harnessed, the excessive
consumption of groundwater is increasingly
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disquieting. On average, water reserves areextracted at 146% of their recharge rate23.
2.1.47 Tunisia is implementing an aggressive
policy in the area of energy conservation
and new and renewable energy (wind,
solar, sludge from sewage treatment plants)
which should be encouraged. Energy intensity,
which is 0.08 ktoe per USD 1 000 of GDP,
is less than the world average of 0.13 as
well as the average of 0.18 in the MENA
region.
2.1.48 In addition, climate change may
have a significant impact in Tunisia. Tunisia
is expected to experience a warmer and
more variable climate by 2030. These expected
changes will have considerable impacts on
water resources, agriculture and natural
resources. In 2050, the impact is expected to
represent about 0.3% of GDP.
2.2 Strategic Options
A. Country Strategic Framework
2.2.1 Soon after the Revolution, Tunisia
stopped the preparation of five-year
development plans implemented since the
sixties. In a context of transition, the authorities
have opted for a flexible strategy aimed at
appeasing social and economic demands
while preparing necessary structural reforms. The I-CSP is based on Government’s
guidelines which were presented in March
2013 and on (i) the September 2011 Jasmin
Plan and (ii) the October 2012 Letter of
Development Policy. These guidelines provide
for a series of structural reforms and investments
aimed at creating conditions for accelerated
growth and job creation to ensure regional
balance and inclusive development. They
build on five pillars, namely: (i) economic
reforms; (ii) infrastructure modernization; (iii)
strengthening of the social sectors of education
and employment; (iv) regional balance; and
(v) promotion of sustainable development.
There is, however, no detailed plan for its
operationalization.
2.2.2 The authorities intend to formulate
a development plan in 2014. In this
connection, the I-CSP proposed by the Bank
would cover the period of the formulation of
this new plan.
B. Challenges and Weaknesses
u Delays in the political agenda
and the sub-regional context
2.2.3 The relative slow pace of the political
transition process impedes the return to
a sustainable growth model. Economic
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actors are awaiting the implementation of aclear political agenda, far-reaching structural
reforms and a coherent public investment
programme.
2.2.4 Geopolitical uncertainties in the sub-
region also weigh heavily on stability. The
Libyan crisis has had a direct impact on the
Tunisian economy resulting, inter alia, in the
return of workers, and heightened insecurity,
particularly in border regions24. The crisis in
Europe, Tunisia’s main trading partner, has
also affected the Tunisian economy.
u Need for more resources
2.2.5 The implementation of a recovery
policy and creation of conditions conducive
to democratic transition entail more financing
which calls for the mobilization of more
resources. However, the use of these
resources should not jeopardize macro-
economic stability. Besides the internationalcommunity’s role in providing such financing,
technical support should be intensified to
carry on the structural reforms presented
below.
u Accelerating the structural
transformation of the economy
2.2.6 The persistent dependence of the
economy on low-cost production and
export sectors with low value added make
it uncompetitive and vulnerable 25
. Thesophistication of Tunisian exports has not
improved since 1960 (Fig. 14). The structural
transformation of the economy should build
on: (i) the substantial contribution of exports
to growth; (ii) the greater contribution of
the service sector to growth26 (health27, air
transport or telecommunication28 ) and (iii )
the orientation of production towards
sectors with higher value added by moving
from a subcontracting to a co-contracting
economy29.
2.2.7 Furthermore and as indicated above
(2.1.30), the business climate should be
significantly improved. Micro-economic
policies and inefficient institutions hinder
investment, particularly foreign investment,
which offers a huge potential for bridging the
technological gap as well as enabling Tunisian
businesses to become competitive by supplying
export enterprises or exporting directly. Thus,
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Figure 14: Evolution Index
sophistication of exports (EXP) for Tunisia
and some Asian countries
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additional efforts should be made to improvethe business climate and strengthen the
competitiveness of businesses by simplifying
procedures. In this regard, regional consultations
on the Investment Code, which were initiated
on 25 May 2013, will be conducted before it
is tabled before the ANC for approval.
2.2.8 It is also necessary to continue
to develop infrastructure for economic
transformation 30. The level of infrastructure
is relatively satisfactory. Good economic
performance was achieved over the last
decade thanks to investments in, and regular
upgrading of, new infrastructure. However,
Tunisia faces the challenge of maintaining,
during the transition period, an ambitious
public investment level to support economic
transformation (developing and improving the
management of trade infrastructure, particularly
ports31- or developing green energy).
2.2.9 It is necessary to redefine relation- ships between the public and private
sectors. Although the outlines of public-
private partnerships (PPPs) are being defined,
it is obvious that the structural transformation
of the economy can only be achieved by
increasingly using them32.
u Reducing Regional Disparities
2.2.10 Regional disparities in Tunisia
primarily affect the quality of public
services 33,34
. As regards primary education,tests conducted worldwide have shown that
schools in small towns are unable to give
their pupils the same level of skills acquired
by pupils of schools in big towns. In the same
vein, the knowledge index developed by the
authorities shows that the level of knowledge
is 30 times higher in Tunis than in Kasserine,
thus limiting the region’s participation in the
country’s economic transformation. Likewise,
the quality of health services is six times better
in Tunis than in Kairouan and eleven times
better than in Sidi Bouzid35. Citizens’ access
to water and sanitation, roads and energy in
disadvantaged regions is sometimes difficult
(Fig. 15).
2.2.11 These disparities are also reflected
in economic attractiveness 36 . Low levels
of private investment reflect imbalanced
development in terms of employment oppor-
tunities, underscoring the need to improve
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0.70
0.33
0.68
0.41
0.20
0.39
Wealth and employment Health and population Knowledge
Coastal Governorates Inland Governorates
Figure 15: Indices of Regional Disparities in
Terms of Wealth, Health and Education
(MDCI)
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the business climate in regions with regard tothe quality of public services provided to
enterprises (Fig. 16).
2.2.12 There is need to continue to build
infrastructure to support regional integration.
Ambitious public investment will help to
reduce regional disparities by linking under-
served regions, thereby inducing a ripple
effect on the private sector so as to stimulate
growth while enhancing its inclusiveness. Thus, besides providing support to techno-
logical hubs, special attention should be paid
to all basic infrastructure assets, be they
transport (including rural roads), logistics,
telecommunications, education or social
services.
2.2.13 However, these two components
can be achieved only by carrying on with
the reorganization of the State 37 . There is
need for Tunisia to implement urgent reformsto make centralized State procedures more
flexible and upgrade institutions pending the
implementation of the necessary structural
reforms. In this regard, it is necessary to
strengthen the decentralization of the State
in regions and improve the implementation
of investment budgets in the short term.
Secondly, it is essential to formulate regional
development plans rapidly and to transfer
powers to councils, divisions and regions.
u Improving training-employment
dynamics in an inclusive manner
2.2.14 The reduction of unemployment
entails more efficient training-employment
dynamics 38. Tunisia is suffering from major
structural unemployment, hence the need to
initiate the structural reform of the educational
and training system. Concerning basic
education, the aim should not only be to
undertake pedagogical reforms, but also toensure that these reforms have an impact on
learning. With regard to vocational training,
there is a threefold objective: (i) to build the
capacity of the vocational training system; (ii)
to improve its quality and adaptation to
the economic fabric; and (iii) to improve its
governance through increased private sector
involvement. Concerning higher education,
there is need to give a boost to the sub-
sector’s reform by focusing the reform
3323
7396
10619
4194 4358
8552
0
2000
4000
6000
8000
10000
12000
Public Private Total
Coastal Governorates Inland Governorates
Figure 16: Per Capita Investment in TND
for the 1987 – 2010 Period (MDCI)
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strategy on excellence, quality assurance andmanagerial accountability of schools through
partnership with the private sector in terms of
research and innovation to meet economic
needs.
2.2.15 Lastly, it is necessary to ensure
coordination between training actors and
sectors so as to adopt a common human
capital development vision. New entrants
are trained and encouraged to join the public
sector, which is the main source of employment.
Thus, there is a mismatch between the skills
available on the labour market and corporate
needs (Fig. 17). Nevertheless, the quality of
training is put into question (OECD PISA
tests).
2.2.16 Furthermore, the growth diagnosic 39
highlights the rigidities of the Labour
Code which do not facilitate transition from
training to formal employment and job creation.
These may be overcome only through the –ongoing–renegotiation of the social contract40.
C. Strengths and Opportunities
u Strong central administration
2.2.17 Thanks to its strong central admi-
nistration, Tunisia still has the capacity
to formulate economic policies in the
context of transition. The authorities are
carrying on dialogue with key development
partners. Similarly, the central administration
continues to design investment projects in all
sectors.
2.2.18 However, the transition has slightly
affected the capacity of the central adminis-
tration. There are some slippages in the
implementation of projects. The effective
implementation of reforms, particularly within
the framework of multi-donor budget support
operations, is sometimes considered to betimid (Annex 10)41. Delays are due to relative
political instability, occasional conflicting
visions of policy-makers (belonging to different
political parties) and schooling in participatory
decision-making.
u Diversified economy
2.2.19 Tunisia has a relatively diversified
economy. In 2011, agriculture accounted
for 8.8% of GDP, manufacturing industries
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9.6
12.4
32.4
26
26.1
25.4
27.4
10.5
5.7
13.9
6.3
15.9
Certificate before the Baccalauréat
Senior TechnicianBaccalauréat
Master’s degree in Letters and Social Sces
Master’s degree in hard sciences
Master’s degree in hard sciences
Other certificate
Medicine or Pharmacy
Certificate in Engineering
Master’s Degree or equivalent certificate
Doctorate
Other certificate
Figure 17: Rate of Youth Unemployment
(Aged 18 – 30 Years)by Type of Certificate
(2010) (INS)
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17.6%, non-manufacturing industries 12.9%,tradable services 42.5% (tourism 6.3%) and
non-tradable services 18.2% (public adminis-
trative services 17.8%). Though Tunisia was
mainly an agricultural and mineral product
exporting country in the 1970s, textiles, elec-
tronics and chemicals now occupy the
largest share of its export basket. Since the
dismantling of the Multifibre Agreement, the
share of textiles in total exports has declined
over the past five years, while that of mecha-
nical and electronic products rose from
23.1% in 2005 to 36.6% in 2012 ( Fig. 18).
2.2.20 Tunisia has a number of sector
with huge potential (tourism, agriculture42 ,
manufacturing industries and services)
to support growth and employment. In this
regard, the current structure of the economy
provides a solid base for initiating economic
transformation.
u Sound international integration
2.2.21 Tunisia strengthened its integration
in the international economy in the late
1990s. Its openness to the external world has
made foreign trade and foreign investment the
engines of its growth. Its proximity to and
agreements concluded with the European
market are an asset for sustainable growth,
despite the tumultuous European economic
situation.
2.2.22 At the same time, Tunisia has
succeeded in exploiting export opportunities
in North Africa – although the Maghreb is
one of the world’s least economically integrated
regions43. Tunisia also benefits from numerous
bilateral trade agreements signed in 1999
and agreements concluded with GAFTZ
and AMU countries. It collaborates with sub-
Saharan African countries and developsinvestments projects in the industrial and
service sectors (see 2.1.26).
2.2.23 However, Tunisia must find new
markets to reduce its heavy trade dependence
on a limited number of countries (France -
26.6% and Italy - 16.1% of total exports).
Greater integration with Africa and Asia could
create new sources of growth.
46.6
37.7
22.3
16.5
23.1
36.6
2000 2005
2012
Textiles, clothing and leather Mechanical and electronic industries
Figure 18: Share of Textile, Mechanical and
Electronic Products in the export
Basket % (INS)
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2.3. Aid Coordination/Harmonizationand AfDB Positioning in the Country
2.3.1 Tunisia signed up to the Paris
Declaration on Aid Effectiveness which
advocates, in particular, the conduct of a
survey on the monitoring of related indi-
cators. It did not participate in the global
surveys carried out by the OECD, but the
internal survey conducted by the Bank in
2012 shows that the aid provided is aligned
with national priorities. Concerning the har-
monization of procedures, projects financed
by the Bank and key partners in Tunisia are
implemented mainly by ministries and public
institutions, thus helping to limit the establish-
ment of parallel entities.
2.3.2 In 2012, the Government initiated,
with Bank and World Bank support, an
auto-evaluation of its national procurement
system by a national committee (open to
all public procurement stakeholders). Thisauto-evaluation gave rise to an evaluation
report and an action plan which were validated
by the Government in August 2012. This
is the first step towards the use of country
systems by the Bank (Annex 12).
2.3.3 Given its adequate management
capacity, the Tunisian Government takes
responsibility for planning and coordinating
donor operations. Some attempts to formalize
the coordination framework have been made
without much success to date. These includein particular an “employment and regional
development” group steered initially by the
Swiss Cooperation. However, coordination is
rather carried out on an ad-hoc basis, in the
form of information sharing and consultations
among the partners involved in similar
areas/operations. In this respect, the Bank
has prepared a series of distribution lists to
facilitate discussions among actors and
improve its dialogue with civil society.
2.3.4 Collaboration and coordination
with other donors are well-developed for
programmes co-financed in accordance
with the Paris Declaration. The partners: (i)
conducted joint budget support missions
giving rise to joint matrices of measures and
aide-memoires negotiated in a coordinated
manner; (ii) shared analytical works before
their publication; (iii) co-finance technical
assistance and investment programmes44.
2.3.5 Tunisia’s traditional donors’ speciali-
zation is based on their comparative
advantages and possible synergies and
complementarities. The IMF is supporting a
series of structural reforms helping particularly
to strengthen the financial sector and is coor-
dinating international support to stabilize the
macro-economic framework. The support of
AFD, JICA and KfW is focused on the private
sector, sanitation, local and agricultural develop-
ment and transport. For their part, multilateral
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donors provide multi-sector budget support45
. The WB and EIB give priority to the private and
transport sectors, while the EU is interested in
education and justice. Methods of intervention
have evolved and increased recourse to
technical cooperation is discernible. In this
respect, the Bank has continued to position
itself in sectors where its comparative advan-tage is recognized in Tunisia (improvement of
basic infrastructure in the regions or vectors
of innovation and sophistication, the education
sector, governance support for private
sector development) or in sectors where it is
developing expertise such as PPP (Table 1).
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Table 1: Key Partners’ Active Portfolio by Sector (2013 - in USD million)46
Agr. Human
Dev.
Transp. Ener.
/Env.
Reg.
Int.
Private Water &
San.
Loc.
Dev.
Re-
forms
Fin. Total %
AfDB 84 84 815 214 176 1013 138 2524 26,3
EIB 696 905 332 4 72 100 2109 22,0
WB 47 44 20 44 197 1059 54 1492 15,6
AFD 117 45 53 11 140 185 197 246 993 10,4
EU 115 63 40 73 75 79 545 990 10,3
AFESD 11 151 216 277 54 709 7,4
KfW 86 565 651 6,8
USAID 1 97 18 2 118 1,2
Total 286 440 1799 1600 40 696 1201 366 2865 292 9585 100,0
% 3 5 19 17 0 7 13 4 30 3 100
2.3.6 In addition, the Bank is coordinating
its activities together with other IFIs within
the framework of the Deauville Partnership.
In this connection, it hosted its secretariat in
2012. This partnership has helped to mobilize
additional resources in the form of grants,
share knowledge and coordinate operations.
2.3.7 The Bank has for long been a
preferred development partner of Tunisia.
The Bank’s portfolio (the institution’s second
largest) comprises 16 projects (of which four
non-sovereign) and 24 technical assistance
operations financed with grants to the tune
of UA 1.36 billion. Furthermore, in 2011 and
2012 UA 659.9 million was allocated for two
budget support operations. The road sector
represents 36% of the portfolio (in value),
followed by the multi-sector (26%) and the
private sector (16%) (Annex 4).
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2.3.8 The 2013 portfolio review showed that the portfolio in Tunisia remains
efficient with a score of 2.6 (out of 3) and
a public portfolio financial performance of
71.8% in 2013. However, delays in loan
implementation have increased since the
Revolution and the good performance is
attributable to the presence of two aged projects
and the disbursement in a single tranche of
the budget support approved in November
2012. The level of grant disbursement, in
particular, remains modest with a rate of
40.1% (Annex 4).
2.3.9 The main recommendations of the 2013 portfolio review concerned audits,
disbursement timeframes and public
procurement procedures (Annex 3). The Bank
is continuing dialogue to enable the Audit Office
to implement projects with external financing. To
strengthen portfolio-related services, the Bank
has transferred three procurement experts to
the MDIC for an 18-month period to help speed
up disbursement for operations. Furthermore,
the Bank is supporting the public procurement
system reform which is a prerequisite for the use
of the country system47 (Annex 12).
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3.1 Rationale for Bank GroupInvolvement
3.3.1 The Tunisian authorities have
requested the preparation of a two-year
(2014-2015) I-CSP which is flexible and
adaptable to the changing political, eco-
nomic and social situation. This approach
will enable the organization of major political
events on the one hand and the preparation
of the new development plan on the other.
3.1.2 The operations will be a continuation
of previous operations, but will be well-
targeted to enhance their effectiveness
(Annexes 2 and 7). A flexible approach
based on a permanent dialogue with theauthorities and on the regular review of strategic
thrusts will be given priority.
3.1.3 The operations were identified
following discussions with the Government
and development partners during the
June and September 2013 missions. Since
2011, the Bank has organized monthly
meetings to exchange ideas with civil society,
private operators and the administration on
challenges of the country and the region. In
addition to bilateral meetings with the private
sector, a workshop was organized with civil
society in September 2013 to discuss the
strategy (Annex 11). External peer reviewers
(including development partners) were also
involved. The document was also discussed
with the new authorities in 2014.
3.1.4 Furthermore, the Bank’s strategic
positioning has been enhanced by the
growth diagnosis conducted with Tunisian
III. Bank Group Strategy
Box 2: Choice of the I-CSP Tool
1. The existence of sustained dialogue with
the authorities promotes the formulation of
a new strategy whereas the lack of visibility
underpins its interim nature.
2. The lessons learned from achievements
in 2012-2013 encourage the refocusing of
activities, necessitating the reformulation of
the content of the two pillars.
3. Existing constraints on the level and
type of AfDB operation necessitated the
establishment of sustained dialogue during
conduct of the I-CSP preparation mission.
4. The authorities requested the design of
a I-CSP that gives a clearer signal to other
partners and eases resource mobilization.
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(iv) result indicators should be reviewed; and(v) reform support and investment operations
should be combined.
u Approach and instruments
3.1.9 The I-CSP prioritizes the principles
of alignment with Government’s priorities,
complementarity with other partners and
consolidation of the achievements of
previous operations. The I-CSP focuses on
the Bank’s 2013-2022 Strategy, particularly
“governance” and “infrastructure” operational
priorities and incorporates the green dimen-
sion in their implementation. In accordance
with the Bank’s private sector development
strategy, the I-CSP will ensure permanent
dialogue between the Tunisian Government
and the private sector and promote PPPs.
3.1.10 In particular, the CSP recognizes
the key role played by the IMF in stabilizing
the macro-economic framework and thefinancial system. Additionally, the I-CSP
focuses on two major challenges: (i) the
business climate and the competitiveness of
the economy and (ii) regional disparities.
3.1.11 In view of the transitional situation,
planned activities under the I-CSP will be
carried out within two time horizons: (i) a
short-term horizon for activities carried out to
meet urgent needs or to enable rapid economic
and social improvements (“quick wins”) and(ii) a medium-/long-term horizon for activities
aimed at laying the foundations for a new
economic and social development model.
3.1.12 To support the transition process,
in particular and given financing challenges,
the Bank will lay special emphasis on tech-
nical assistance operations. The objectives
of such operations will be to conduct strategic
or pre-investment studies in order to enable the
authorities to focus on medium- and long-term
objectives during the transition period. The
technical assistance operations may also help
to identify reforms to support inclusive private
sector development in the short-term.
3.1.13 Depending on the development
of its commitment capacity, the Bank will
consider financing (public and/or private)
investment and budget support operations
(see section 3.2). In this connection, priority
will be given to investment operations thatpromote public-private partnerships and
where the leverage effect of Bank resources
will be established. In this respect and in
order to facilitate progressive commitment
(in parallel with the development of its commit-
ment capacity), an approach based on the
financing of several small- and medium-size
operations (rather than a very small number
of large-scale operations) will be given
priority.
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u 2014-2015 Intervention Component
3.1.14 To promote the creation of high
value added jobs for young graduates and
the economic attractiveness of regions,
emphasis will be laid on support for inclu-
sive private sector development within the
framework of this strategy. This support
entails the improvement of (i) private sector
output (by improving governance) and (ii) the
provision of production factors (by improving
infrastructure). Based on these factors and in
line with the I-CSP 2012-2013, the I-CSP
2014-2015 will focus on two pillars in keeping
with the Ten-year Strategy to obtain a blend
of governance and infrastructure domains.
3.1.15 Governance and infrastructure
improvement support helps to address
Tunisia’s major challenges (Table 2 – Annex 2) while remaining consistent with
the Government’s policy framework. In
particular, Government’s thrusts: (i) Economic
Reforms and (ii) Infrastructure Modernization
are backed by actions carried out under the
I-CSP governance and infrastructure pillars
to: (a) improve the business climate and
competitiveness and (b) increase value
added. On the other hand, Government’s
thrusts: (iii) Regional Rebalancing and
(iv) Strengthening of the Social Sectors of
Education and Employment are supported
under the I-CSP governance and infra-
structure pillars through actions to (c) improve
public service delivery in the regions and
(d) ensure access to employment by
developing skills and opportunities in the
regions.
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u “Governance” Pillar
3.1.16 Governance improvement will
entail the provision of support for reforms
and capacity building to improve the
business climate at the national level and in
the regions. This support will focus on the
“governance” operational priority of the Bank’s
2013-2022 Strategy. In this respect, the Bank
will continue to support the priority thrusts of
the reform programme at the national level,
namely: (i) the establishment of a transparent
process of reviewing regulations and adminis-
trative procedures for businesses so as to
simplify procedures and limit discretion in the
application of regulations; (ii) the improvement
of the performance of private sector support
entities by defining strategic studies; (iii) the
development of PPPs; and (iv) the improvement
of governance in institutions responsible for
education and vocational training to provide
skills necessary for the development of an
innovative private sector. At the local level, theBank will, in particular, support efforts to
upgrade and decentralize the administration in
order to improve public service performance
and, thus, attract investments to the regions
and promote more inclusive growth in Tunisia.
3.1.17 Regarding technical assistance,
“quick wins” may be carried out to improve
the business climate by supporting adminis-
trative reforms and implementing the Public
Procurement Reform Action Plan. Technical
assistance activities could also be carried outto prepare the implementation of medium-term
actions by supporting the decentralization
strategy (including training), implementation
of the industrial strategy