Sunday, January 23, 2011

The Lead Up and Possible Consequences of the Tunisian Turmoil

Foreign Policy: Suicide for a Cause
US Department of State: Background Note: Tunisia

The current Tunisian unrest is the topic of much concern in the MENA (Middle East and Northern Africa) region given the political and economic implications for Tunisia and surrounding countries. Commentators generally agree that similar political revolts are unlikely in countries like Egypt, Jordan and Algeria, yet those countries and others in the region face similar conditions as those that have culminated in the ousting of Tunisia’s leader of 23 years, Abidine Ben Ali. While the removal from power of an authoritarian leader is a positive development, short-term civil unrest and a slowing of the economy may undermine long-term development.

Ben Ali came to power in a peaceful coup in 1987, just as Islamist political movements were increasingly becoming violent throughout Northern Africa. Ben Ali removed the President and authoritarian leader of the last thirty-one years, Habib Bourguiba, and thwarted a radical Islamist movement. Neighboring Algeria was fighting a violent civil war at the time, and Ben Ali was championed with preventing a similar war in Tunisia. However, within a year of becoming President, Ben Ali established a single-party rule, limiting both centrist Islamic parties and other secular parties from participating in elections.

Despite the rampant corruption, human rights violations, and an unequivocally authoritarian rule, Tunisia enjoyed warm relationships with European countries, European Union as a whole, and the United States. The World Bank and IMF continuously praised the regime for its stable economic growth, which has averaged over 5% for the past decade.

However, much of the wealth generated over this period was pocketed by the elite, particularly Ben Ali’s family. In hindsight, the situation war ripe for upheaval. Because of the international recession, real growth in Tunisia declined to 4.6% and 3–4% in 2009 and 2010 respectively. Prices for goods increased and unemployment averaged 14% (31% for young Tunisians). Last month, a 26-year old Tunisian vendor who was college educated but who was unable to find work burned himself to death in protest after authorities shut down his vegetable stand and rejected his demands to speak with the local government. He later died of third degree burns. His protest sparked similar actions of protest in the region and led to the ousting of Ben Ali and the current political vacuum.

The political and economic consequences of the upheaval are unclear, as the opposition government has not established control. The revival of the banned Islamist party (who pledge greater secularism than Iran or Saudi Arabia and greater women’s rights) is a source of concern for the future government. Currently, Standard & Poor’s lowered Tunisia’s credit rating to BBB+, and Fitch Ratings placed the BBB foreign currency debt rating on a negative watch— effectively increasing the country’s cost of borrowing for new and existing projects. Moreover, the Tunisian economy will likely experience a decline in tourism, a sector that employs 12% of the active workforce.

However, without nepotism and corruption, there is a potential that growth rates could increase up to 3 percentage points according to Philippe Dauba-Pantanacce, a senior economist at Standard Chartered. Furthermore, multinational companies have stated that they do not intend to cut back investments or operations, and commentators have stated that they are “cautiously optimistic” on the effect of the revolution on Tunisia’s economy.

Discussion Questions

1. Will the tourism industry be able to recover? If not, what will the consequences of a sharp decline in the industry have on Tunisia’s economic and political landscape?

2. Where should the new government focus its efforts in reviving the economy?

3. Does the simple threat of an Islamist movement, no matter how unfounded, affect Tunisia’s chances of economic development?

No comments: