Conference Report: “Economic Priorities of the Incoming Government”

Conference Report: “Economic Priorities of the Incoming Government”
Thu, 11/21/2019 - 13:25
Conference Report: “Economic Priorities of the Incoming Government”

Thursday October 24, 2019

Dr. Radwan Masmoudi opened the conference by setting out the general context in Tunisia, which has been experiencing a deteriorating economic situation that poses the greatest challenge the country has seen after having overcome two major challenges – the first ofending dictatorship and establishing a democratic system in which power is peacefully transferred through free and transparent elections. The second challenge is victory over terrorism, which Tunisians have managed to largely eliminate, or at least significantly reduce, as a threat. Now, the biggest challenge is to achieve a strong and rapid economic revival, especially as this is one of the most important demands on which the Tunisian revolution was based: development and employment.

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In his speech, Dr. Masmoudi outlined four main axes to achieve economic recovery:

1) Encouraging investment and reducing unemployment

2) Improving the purchasing power of citizens and reducing inflation

3) Reducing the trade deficit and public debt, and negotiating international agreements

4) Planning for the new draft budget for 2020, particularly the issue of subsidies and funding forpublicly-ownedenterprises

Dr. Khalil Amiri, Secretary of State for Scientific Research and coordinator of the electoral program of the Ennahdha Party:

Dr. Khalil Amiri began by outlining the state’schallenges in terms of high levels of public debt and the inability of the state budget to respond to popular needs and the demands of the revolution. He pointed out thatthe majority of this budget goes to paying public sector wages, which reduces the scope for investing in development, especially in the absence of a precise and effective balance between the private and public sectors.

Dr. Amiri called for launching an emergency three-year plan to revive macro-indicators to enable Tunisia to regain its attractiveness to domestic and foreign investment, as well as the ability to make public and private investments. The final two years of the government’s mandateshould be dedicated tosectorial reforms as well as transversal structural reforms that affect the economy as a whole.

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Mr. Mohsen Hssan, Economic Expert and Former Minister of Trade:

Mr. Mohsen Hssan argued that Tunisia, despite its democratic transition, is still far from achieving the demands of the revolution, given the crippling economic crisis, particularly in light of the ongoing Libyan crisis. The social challenge is also very significant, especially since social peace is based on four pillars: the legislature, the executive, political parties, and national organizations. In order to achieve the desired social peace, the relationship between these four elements must be one of collaboration, guided by the national interest. In his view, the political challenge is just as important as the economic challenge.

Mr. Hssan argued that the economic and social challenges can be divided into six main challenges. The first challenge concerns balancing the public budget, including through tax reform, combatting tax evasion and trafficking, as well as reducing the trade deficit, especially by reducing inflation.The second challenge is to promote growth and investment. Political parties must fulfill their promises by achieving dignity, creating jobs and developing the marginalized interior regions. He argued that development could only be fostered through public-private partnership and international cooperation.

The third challenge is the question of the efficiency of markets. Mr. Hssan argued that the stock market must be developed, and large institutions as well as medium and small enterprises should be encouraged to participate in the stock exchange. He also called forfacilitating foreign investment in the direct financial market and reforming the indirect financial market and the banking system.

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The fourth challenge is the development of sectorial and banking policies and production systems. Tunisian industry is declining and losing its position in the Tunisian economy. Mr. Hssan argued for implementing the industrial development plan as wellas strengthening theagricultural sector, which has long been neglected, in order to achieve food security. It is essential to reform the agricultural, servicesand tourism sectorsgiven their importance in the Tunisian economy.

The fifth challenge Mr. Hssan highlighted is economic policy governance.He presented a number of priorities including strengthening the independence of the National Institute of Statistics, establishing a treasury agency to deal flexibly with public debt management and establishing a specialized body to evaluate public policies, as well asmaking progress on the Economic and Social Council.

The final challenge Mr. Hssan highlighted is the need for the state to resume its social role. He pointed to the possibility of ratifying the proposed Zakat Fund, which could provide economic and social assistance.

Professor Ridha Chkoundali, Professor of Economics:

In his intervention, Mr. Chkoundali argued that trust between the government, parties and state institutions is the most important factor in the success of any reforms. According to Mr. Chkoundali, despite Tunisia’s economic problems and lack of competition in the domestic and global economy, it seems that Kais Saied’s election has begun to restore trust between the citizen and the state.However, at the same time,public institutions have entered a cycle of having to borrow in order to make debt repayments and many public institutions are at risk of bankruptcy. The situation is made worse by the growth of the informal economy, with transactions in the formal economy shifting to the informal economy to evade taxes, further weakening the publicsector. The state has not taken any real measures to reduce the size of the informal economy.

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Mr. Chkoundali also argued that the state has abandoned its social role, negatively impacting the quality of education, health and transport significantly and burdeningordinary Tunisians who have to pay forsuch services from private providers. Mr. Chkoundali pointed out that whilethe International Monetary Fund has estimated Tunisia’s growth rate at 1.5 percent, the Tunisian government an estimated growth for 2019 of 3.1 percent. He argued that the Tunisian people have given politicians the last chance to overcome all these problems but with a new approach and new faces that draw a line under the failure for the last nine years.

Professor Aram Belhaj, University Professor and Economic Expert:

Mr. Belhajbegan his intervention by outlining the scale of the economic crisis that Tunisia has experienced since 2011. Despite the relative recovery of the phosphates and tourism sector, the industrial sector is experiencing negative growth rates, which is in itself worrying.

Secondly, fiscal balances are declining, inflation levels are high, growth is weak, and there is a large trade deficit.The third challenge is the lack of coherence in public policies.The fourth challenge is the country's developmental model.

Mr. Belhaj set out a number of solutions, including the need to make clear choices with regards to Tunisia’s economic model, amending the Finance Bill 2019-2020, and the revival of phosphate and gas production.

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Open discussion:

In conclusion, the discussion was opened up to members of the audience, who came up with a number of recommendations, the most important of which are the following:

• Review the subsidies system.

• Amend the civil service law to develop greater efficiency.

• Auditthe status of public companies.

• Simplify taxes and implement them fully.

• Establish a unified plan of public projects to boost the public sector.

• Encourage public-private partnerships.

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• Establish an education and vocational training system that responds to the needs of the labor market.

• Recover ill-gotten assets that belong to the Tunisian people.

• Combat trafficking.

• Combat tax evasion.

• Establish apractical plan to fight corruption.

• Abolish public sector privileges.

• Support economic diplomacy.

• Support, protect and provide financing for SMEs.

• Introduce mechanisms for more efficient management of public funds.

• Establish public investment funds.

• Reform the banking system.

• Establish a national economic council.

• Review laws on currency exchange

• Integrate the informal sector through a comprehensive program