A speech given by a Tunisian Lorax on donor assistance is very much needed. On February 18th, U.S. Secretary of State, John Kerry, made a "surprise visit' to Tunisia. However, a conversation that goes beyond a congratulations on the new constitution, and an intake on the security situation, would have been more surprising. In fact, a conversation on how Tunisia's donor assistance largely glossed over sectors related to the economy may explain why protests continued in January -- even after the Ennahda ruling party agreed to step down. Below is a conversation that speaks more to the recipient's interests than the various donors' interests.
With Tunisia's new technocratic government taking office as caretaker, economic reform remains one of the legacy challenges since Ennahda won power in 2011. Following the 2011 uprising, Tunisia has received $849.5 million in aid from 25 different donors, according to the report "Inside the Transition Bubble--International Expert Assistance in Tunisia" released by the Institute for Integrated Transitions (IFIT). The report categorized financial and technical assistance into four areas of : Media reform; security sector reform, judicial reform, and youth employment.
Donor Savior Complex?
Despite Tunisia's center-stage role in attracting large amounts of donor assistance, the root causes which prompted Tunisia's revolution, like high unemployment, remain unaddressed while the informal economy and illicit trade have expanded. As a result, "the smuggling of illicit goods now accounts for 40 percent of the Tunisian economy and 30 percent of its jobs" and reflects how little impact international donor assistance has had on the two sectors that received the bulk of aid.
Over the past three years, the transitional government has made little progress on reining in high public spending, one of the key requirements of international financial institutions in receiving further monetary assistance. After calling for reducing subsidies and increasing taxes, the transitional government has suspended energy price increases and taxes, losing tax revenue from its growing illicit trade. According to last month's World Bank report,Tunisia's informal economy has grown to an estimated $1 billion. Consequently, combined with cross border smuggling, the Tunisian government has lost out on an opportunity to extract revenue through value-added taxes on goods coming in from neighboring Libya and Algeria.
In trying to make up for its fiscal woes, the government proposed to levy taxes in an effort to raise $220 million in revenue--a fraction needed to support the $2.59 billion in food and energy subsidy commitments within the proposed 2014 budget. Add to that Tunisia's latest economic challenges. First, renewed protests resurged on January 7 among farmers, January 9 with a public outcry over taxes in Ettaddamon on January 11); and second, The fact that multilateral agencies like the African Development Bank cancelled their $300 million line of credit, and one may wonder what was the purpose of the record number of international NGOs providing assistance to Tunisia. Was it just another case of the Donor Savior Complex fulfilling a need to feel relevant by doling out advice and funds towards secondary challenges?
Although Tunisia represents a version of political success marked by its transitional political period -- or to borrow from Ibrahim Sharqieh's description "sound management of transition process"--, how does one get the upside of political development to spillover into its economic development using donor assistance?
- Targeted donor assistance. In order for financial and technical donor assistance to be effective, it must be targeted to sectors that the host country deems a priority. However, if assistance is provided in areas that do not address the sectors of Tunisian economy that require help, then perhaps that effort was futile. For example, why not offer vendor license training along with micro-loans. At least those who do not received the loans for their small shop have the ability to start small with a cart. Another example: organize and engage farmers who struggle with transportation costs, which is why they protest rising energy prices. Donor donor assistance to Arab transition countries is one solution, but other tools may be used to drive more positive impact to the root causes that brought protesters to the streets.
- Sectoral assistance. After the uprisings and with security deteriorating across the region, the tourism sector was hit hard effecting current account balances. One way for Arab transitional governments to contain political spillover to boost economic growth is by reforming the tourism sector. Sharqieh argues that staying the course of successful political transition will signal 'normalcy', and thereby reignite its tourist industry and boost the economy. Even prior to the 2011 uprising in Tunisia, the sector was disjointed from the growing economic grievances.
Although, the recommendations put forward by the Institute for Integrated Transitions for targeting donor assistance to improve economic productivity are useful, there was overemphasis on the Security Sector & Rule of Law (SSR) sector as opposed to the employment sector--ironically, the very criticism that emerged within the report targeting international experts.
Regardless if one was/is pro-technocratic, or pro-"Islamist," or pro-Ennahda, double-minded, or whatever, four observations highlight how donor assistance missed out on facilitating more impact by glossing over key drivers of Tunisia's revolution:
- Absorptive Capacity: The absorption capacity in spurts mirrors the challenges witnessed in moments of state emergency. As noted in the report, unfortunately, conferences served as the easy way to spend funds while allowing the opportunity to claim accomplishments, e.g., training, publicity, and overall "territory marking".
Unlike Yemen and Libya, foreign donor assistance targeted low-impact issues, like social media training, rather than addressing economic reform and development areas that have triggered protests in Tunisia again. Meanwhile, the upswing of Tunisian's smuggling magnify the economic -- not security -- concerns that preceded its revolution. Had donor assistance ventured into the youth employment sector, as deeply as the security sector, to identify growth sectors, the informal economy "opportunities" (smuggling) may have been averted. Moreover, it would also bolster other Maghreb countries' intra-regional trade opportunities. Tunisia is not only the first of the transition economies in the Arab world, but proves crucial in leveraging its own economy to bolster intra-regional trade, a key challenge shared by Libya, Algeria, and Morocco.