SCD Launch PPT slides

1. Tunisia Systematic
Country Diagnostic
(SCD)
Rebuilding trust and meeting
aspirations for a more
prosperous and inclusive
Tunisia
SCD Launch Event, 10 November 2022

2. Outline
2
About the
Tunisia SCD
Taking Stock
of the Past
Decade
Rebuilding
Trust and
Meeting
Aspirations
Part 1 Part 2 Part 3

3. 3
About the
Tunisia SCD
Part 1

4. 4
The Tunisia SCD takes a ten-year view of trends in Tunisia since 2011, drawing comparisons
with other comparable countries, and suggesting possible future pathways.
The World Bank Group undertakes
SCDs as a diagnostic exercise to
identify key challenges and
opportunities to accelerate progress
towards rebuilding trust and meeting
citizen aspirations, and ultimately to
contribute to the World Bank Group’s
twin goals of ending absolute poverty
and boosting shared prosperity in a
sustainable manner.
The ten-year perspective means that
the Tunisia SCD does not place a
heavy emphasis on recent events, but
rather seeks to situate them in the
context of trends in growth, poverty
reduction, and state capability.
The SCD is intended to become a
reference point for consultations on
priorities for World Bank Group country
engagement, including our forthcoming
Country Partnership Framework (CPF)
2023 – 2027. It has been prepared in
consultation with academia, private
sector leaders, and representatives
of the public administration.
Taking the long view and informing
our engagement

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Taking Stock
of the Past
Decade
Part 2

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Tunisia embarked on a deep social, political, and economic
transition a decade ago, a journey often accompanied by
periods of instability, uncertainty, and contestation.
Yet over a decade after the revolution, Tunisia now stands at a critical juncture, and is
in the process of changing the constitutional order established in 2014.
The political settlement helped secure
a democratic transition, but it has been
too fragmented and unstable to fulfil
the Revolution’s political and socio-
economic promises.
Fragmentation and immobilism has
also stifled the implementation of
decisive measures to reinvigorate the
economy, create jobs, and set public
finances on a more sustainable
trajectory.
Tunisia now faces a twin challenge to
reconfigure both its constitutional
model and find a way of reinvigorating
the economy that can deliver on
citizens’ economic aspirations without
resorting to the costly expansion of
“insider” access to public sector jobs,
untargeted subsidies, and continued
protection of incumbent firms.

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A lost decade for growth:
GNI per capita by 2019 had
declined to pre-2008 levels
GNI per capita, Atlas method
(current US$)
After the 2011 revolution the economy slowed down
relative to the already low pre-revolution pace

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In this low growth
context, the pace of
economic convergence
between leading and
lagging areas, which was
robust between 2000 and
2010, slowed after 2011.
With a weaker economy, Tunisia became even less
capable than during the pre-revolution time of meeting
citizens’ aspirations for more and better jobs.
GDP per capita growth at
the governorate level
(2000-2010 vs. 2012-2018)

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Economic exclusion is facilitated by the continued existence of a legacy bureaucratic and
legal regime for regulating the different economic sector benefitting economic “insiders” (both
private and public)
These include extensive in-built
barriers to entry such as autorisations,
cahiers de charges, conditions
d’exercise, quotas for inputs, and
self-regulation by groupements
interprofessionnels (GIPs).
Economic contestability as measured
by market competition in the Tunisian
economy has further deteriorated
since the revolution. Average market
concentration across sectors has risen
since 2011.
The SCD’s forthcoming sister report
the Tunisia Country Private Sector
Diagnostic (CPSD) will explore this in
more detail.
Economic exclusion is facilitated by
protections for economic “insiders”

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The COVID-19 crisis has
clearly showed that
Tunisia’s policy of social
spending without tackling
the deep deficiencies of the
economic environment is
no longer affordable
The state significantly increased its social
spending to fulfill the social contract in the
absence of growth and job creation
Public debt and the fiscal
deficit are growing (% of GDP)

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Social transfers allowed
Tunisia to reduce poverty in
spite of the poor economic
performance after 2010
Social spending has allowed some poverty
reduction without economic growth
Poverty headcount rates using
the upper poverty line, 2000-19

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However, with low growth and job creation,
vulnerability remains high and many
remain at risk of falling into poverty
But vulnerability to poverty
remains high
Overlapping vulnerabilities
persist and are spatially
concentrated
Around 24 percent of the population remain
vulnerable to falling back into poverty.
Vulnerability is even more pronounced in rural
areas, where 42 percent of residents were
vulnerable in 2019 (compared with 15 percent
in urban areas).
Note: Vulnerability = Living standards +
socioeconomic + access to services - economic
activity - market accessibility

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The 2014 Constitutional reform offered the opportunity
for an overhaul of the governance of public institutions
in Tunisia, promising to introduce a greater degree of
transparency and accountability.
Despite reform efforts, there is an implementation gap
whereby state capabilities remain inadequate to deal
with the growing socioeconomic challenges.
Trends in wage bill
spending (% of GDP)
Yet, there has been a major “implementation
gap” in translating de jure constitutional and
legal reforms into de facto more capable
public institutions.
The country’s rapidly growing civil service
with limited performance orientation has
contributed to weak progress in improving
state capacity.
Moreover SOEs, which play a significant role
in the Tunisian economy and in delivering
services to citizens, have experienced a
considerable deterioration in capability.

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Perception that corruption has been “democratized”
since the Revolution and that it constitutes a major
constraint to the country’s development is widespread.
Freedom of expression and new media
have shone a light on corruption.
Corruption and the rule of
law in the business sector
Proportion who agree that there
is corruption in the government

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Tunisia is expected to experience adverse impacts from temperature increases (estimated
from 1.9°C to 5.3°C by the 2080s), increased aridity, reduced rainfall, and rising sea levels
Tunisia is already dealing with the
severe impacts of climate change,
such as the rising frequency of
climate-induced disasters, increased
number of ecological-migrants,
degrading ecosystems, and pressures
on agriculture.
However, there is also an opportunity
for a more environmentally friendly,
sustainable and resilient future. To
achieve this, government will need to
invest in a low carbon transition.
A particularly promising set of low
carbon investments concern
renewable energy, including wind and
solar power. Scaled-up investments in
renewable energy are one way in
which Tunisia can position itself for
opportunities such as the European
Green Deal.
The forthcoming Tunisia Country
Climate and Development Report
(CCDR) will analyse climate risks in
more detail.
Tunisia is considered highly vulnerable to climate
change and can mitigate its impacts by investing
in a low carbon transition.

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The 2014 Constitutional reform offered the opportunity
for an overhaul of the governance of public institutions
in Tunisia, promising to introduce a greater degree of
transparency and accountability.
Despite reform efforts, there is an implementation gap
whereby state capabilities remain inadequate to deal
with the growing socioeconomic challenges.
Levels of trust in government and
elections have collapsed since the
revolution, 2010 - 2020
Growing sense of public
frustration at limited progress in
expanding economic
opportunities and lowering
socioeconomic vulnerabilities.
This sense of dissatisfaction
closely linked to deep decline in
levels of trust and underlying
economic grievances.
Low levels of trust is substantial
source of risk to the transition.
Contributed to widespread
popular support for July 25
2010 2020

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Rebuilding Trust
and Meeting
Aspirations
Part 3

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The SCD identifies four pathways for
building foundations and meeting
citizens’ aspirations in Tunisia.
Setting the transition back
on track is now more urgent
than ever before if Tunisia is
to preserve its fragile
democratic gains and the
aspirations of its people.

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1. Harnessing the power
of citizen voice
1. Better access to information for citizens on local services
2. Publicizing costs & distributional impact of policies and practices with high
costs for society, and small benefits for narrow groups.
3. Creating institutional arrangements to support work on a medium- to long-
term vision to lay foundations for future crises.
1. Digitizing the economy, society, and the public administration can help
address these challenges, although this cannot be understood to mean
purely technological solutions: the underlying public governance institutions
must change also to adopt a more citizen-centric orientation.
2. This includes, among other interventions: (i) digitization of public services
targeted at citizens (notably education, social protection, health, and
agriculture); and (ii) reforms to support digitalization of Tunisia’s economy.
Foundational pathways: harnessing the power of
citizen voice and building more inclusive institutions
Pathways to build the foundations
for a positive scenario
2. Building more
inclusive institutions

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3. Reinvigorating
productivity led growth
• Decline in productivity and growth signals a loss of economic potential caused by
years of under-investment in productive capital and innovation, limited openness
and competition in markets, and declining trade capabilities.
• Need for deep structural reforms that will remove deep and pervasive barriers to
competition, modernize the financial sector, attract foreign direct investment and climate
finance, and promote innovation.
• In addition, rebuilding Tunisia’s trade capabilities through more modern and efficient
trade services, as well as deeper trade and global value chain integration, would also
be critical.
Pathways to meet citizens’ aspirations:
more opportunities and shared well-being
Pathways to build the foundations
for a positive scenario
4. Increasing inclusion
• Strengthening inclusion is equally crucial for the stability of Tunisia’s transition.
It requires more even access to economic opportunities and improved standards
of living for citizens. This implies improving learning/ skill outcomes, especially in
rural and interior regions, to widen access to the benefits of future growth. Similarly,
measures that support women’s participation in the labor force can limit gender-based
exclusion and bring additional contributions to productivity and growth. Lastly, addressing
discrepancies in connectivity and service provision is also important for improving living
standards, and can lead to better welfare outcomes, increased opportunities, and greater
social cohesion.

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3. Reinvigorating
productivity led
growth
4. Increasing inclusion
1. Raising SME investment and access to finance
7. Increasing labor force participation
2. Increasing firm innovation
3. Strengthening trade capabilities
4. Increasing market contestability
5. Private sector-led growth in lagging regions
6. Sustainable public finances via fiscal consolidation
8. Learning and skills transformation in lagging regions
8. Increasing access to and quality of service delivery
Political space Feasibility Impact
Strategic priorities to meet citizens’ aspirations
Pathways to build the foundations
for a positive scenario

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Thank You.