Le sixièmes Journées Economiques et Financières Appliquées JEFA’21 " Penser l’après COVID 19 est une urgence; Quelles leçons pour l’avenir ?" Mahdia , 19 & 20 Novembre.

1. UNLOCKING TUNISIA’S ECONOMIC POTENTIAL:
AN URGENCY AFTER THE COVID-19
MAHMOUD-SAMI NABI
Les sixièmes Journées Economiques et Financières Appliquées - JEFA’21-
"Penser l’après COVID-19 est une urgence; Quelles leçons pour l’avenir ?"
Mahdia, 19 & 20 Novembre.

2. 2
OUTLINE
1. IMPACTS OF THE COVID-19 ON THE TUNISIAN ECONOMY
2. SOME RECOMMENDATIONS FOR AN INCLUSIVE RECOVERY
3. STRUCTURALLY ! OUR ECONOMY IS TRAPPED IN THE LOW-PRODUCTIVITY LEVEL
4. THE FAILURE TO CONDUCT THE ECONOMIC TRANSFORMATION
5. DIGITAL TRANSFORMATION: THE OPPORTUNITY NOT TO MISS !

3. 3
1. IMPACTS OF THE COVID-19 ON THE TUNISIAN ECONOMY
‒ The COVID-19 crisis exacerbated the socioeconomic difficulties of the Tunisian economy
2018 2019 2020 2021 (e)
Real GDP Growth (%)
2.7 0.9 -8.8 3,9
2.0
(AfDB)
Investment (%GDP) 18.4 18.3 13.3 14.0
Saving (%GNI) 10.2 9.2 4.0 6.4
Unemployment (%) 15.5 14.9 17.4 18.4
(T3/INS)
Fiscal Balance (% GDP) -4.8 -3.6 -10.4 -6.6
Public Debt (% GDP) 77.9 72.5 84.3 90.2
(IMF)
Current Account (% GDP) -11.1 -8.4 -6.5 -4.1
Source : Central Bank of Tunisia (annual report 2020); otherwise mentioned

4. 4
‒ T3 2020 : temporary closure of 7.7% of the firms, and the shut down of 5.4% (1.5% due to COVID-19)
(IFC and INS, 2020).
‒ During 2020: net destruction of 133 thousands jobs :
Net creation of jobs
(in thousands)
Tourism - 30.5
Transport -12.3
Electric and mechanical industries -7
Extractive industries (5.7) -5.7
Textile & clothes (-1.8) -1.8
Source : Central Bank of Tunisia (annual report 2020)

5. 5
MDCI & PNUD (2020)
1) Estimates the impacts on the vulnerability of the SVSEs and the monetary and multi-
dimensional poverty.
2) Suggests recommendations to mitigate the negative impacts during the crisis as well as
during the recovery.
METHODOLOGY
1. Construct a CGE Model
2. Calibrate on the Ref Scenario (pre-Covid 19) based on the Finance Law 2020 expecting a GDP real growth of
2.7%.
3. Determine the crisis scenario (3-months confinement)
4. Simulate the effects on the macroeconomic indicators, the sectorial and household levels.
5. Integrate the simulations results within two modules :
i) financial fragility z-score of the SVSEs (sector, size, region, gender of the owner; based on INS (2018)) ;
ii)ii) Monetary and multidimensional poverty index (health, nutrition, education; Alkire-Foster (2011); INS (2015).

6. 6
‒ GDP Growth : -4,4% >> -7,1% taking in account the growth in the reference scenario.
‒ Unemployment : 21,6% : -274 500 net jobs creation (in the absence of any governmental measures)
‒ Increase of the SVSEs’ financial fragility especially those active in the transport/storage, lodging/catering,
textile/clothes/shoes. Differentiated impact according to the region/sector.
RESULTS
>> Financial support (financial cost 17.6% + staff costs 82.4%) of 447,5 M TND (1% State Budget) for each
three months of confinement, differentiated according to the size, sector, and region (in average 636 TND;
min: 385 TND ; max: 2765 TND)

7. 7
‒ Monetary poverty: from 15.2% to 19.1% >> Moving 475 000 households under the poverty threshold
(4.6 USD/day) (without any governemental intervention).
‒ Extreme monetary poverty : from 2.9% to 3.3%.
‒ Multidimentional poverty : 13.2% to 15.6%.
‒ Distinction is also made according to the gender.
Pauvreté
monétaire
avant le
choc
Pauvreté
monétaire
après le
choc
Pauvreté
extrême
avant le choc
Pauvreté
extrême
après le choc
Ouvriers non agricoles 21,8 27,3 3,7 5,2
Exploitants agricoles 21,4 26,8 4,8 6,3
Ouvriers agricoles 38,3 45,1 9,5 13,7
Chômeurs 35,6 41,7 11,7 16,4
National 15,1 19,2 2,9 4,0
>> Financial support to the most exposed households evaluated at 1 830 M TND for each 3 months of confinement.

8. 8
Social &
solidarity
economy
A MIX OF (COMPLEMENTARY) DEVELOPMENT APPROACHES: a market economy which
also favors the development of cooperatives, microfinance, and regions-focused
development programs.
Regional contribution to the GDP (2015)
Source : INS (2021)
Poverty rate by delegation (2015)
Source : INS (2020)
2. SOME RECOMMENDATIONS FOR AN INCLUSIVE RECOVERY

9. 9
‒ Positive and significant correlation between the DFS adoption & i) Women participation in the labor
market; ii) unemployment in the developing countries (Lederman, 2019).
●..IN PARTICULAR, ENABLE MOBILE FINANCIAL SERVICES !
‒ Efficient tool of financial inclusion of the rural population of developing countries.
‒ High penetration of the mobile phone : ~ 70 % of the 20% the most poor of the developing countries have
mobile phones (>clean water and electricity) :
► M-payment: payment services via the mobile phone/device > Sub-Saharan Africa: In 2017, 21% of adults
with an e-money/m-money account (x2 relatively to 2014) .
IMPROVE FINANCIAL INCLUSION THROUGH THE DIGITAL FINANCIAL SERVICES (DFS)

10. 10
Sources : PNUD and MDICI (2020) ; Nabi (2019, 2020, 2021)
‒ Targeted public investment (with exit strategy) to drive regional value chains according to the characteristics of
each region; leveraging on the potential of digital technologies, the cooperatives and the circular economy.
‒ Develop the e-commerce and catalyse the PPP for the logistics of the last mile (including the delivery services;
the warehouses; and the rural road (plan national 2021-2025).
‒ Develop a national strategy to reduce poverty based on G2P conditional transfers (linked to objectives in
relation to education, health, etc.); completing the offer of the microfinance institutions (micro-saving; micro-
insurance,…).
‒ Enable new instruments for financing regional development and social cohesion (social impact bonds, diaspora
investment bonds; crowdfunding, modern mobilizing of philanthropy).
‒ Accelerate the implementation of the “Stratégie Nationale d'Inclusion Financière 2018-2022” and incentivize
the formalization of the informal sector.

11. 11
DIGITAL FINANCIAL SERVICES (DFS : 2.6) ARE STILL WEAKLY USED IN TUNISIA
‒ Financial inclusion strategy (2018-2022) with a digital financial services axis.
‒ DFS played an important role during the COVID-19 crisis:
► Rapid support of the vulnerable groups ,
► extension of the social protection systems : emergence of the digital portfolio.
‒ Willing of the CBT to develop the digital payment and fintech ecosystem (regulatory sandbox, de-cashing,
interoperability, G2P).
‒ Main constraints :
i) Unsuffisient development of the legal framework.
ii) Limited and expensive offers.
iii) Luck of trust.
iv) Resistance to change.

12. 12
Sources : Gévaudan et Lederman (2020) & BIS (2021)
% population
endowed with
banking account,
% population having
realized a digital
payment transaction
using a payment card.
% population having
realized m-payment
or prepaid card.
37%
19%
2%
0%
25%
50%
75%
100%
6 7 8 9 10 11 12
Ln (GDP) per capita, PPP (current USD)
7%

13. 13
‒ Failure to reallocate the production resources to high-return activities and escape the low-
productivity trap  Relatively low rate of GDP growth and insufficient and low quality jobs
creation.
‒ More than 50% of Tunisia's highly educated workers are employed in the public sector,
mainly in health and education. Around 16 % of employees of the private sector had a high
level of education.
‒ FDIs are concentrated in labor-intensive and low-value added activities (textile, tourism,
call centers) which do not require high skills (despite the presence of many foreign firms in
electronics, aerospace activities)
3. STRUCTURALLY ! OUR ECONOMY IS TRAPPED IN THE LOW-PRODUCTIVITY LEVEL

14. A STILL UNDERDEVELOPED PRIVATE SECTOR…DESPITE THE SLOW KNOWLEDGE-INTENSIVE DYNAMIC
‒ Tunisian economy : 771 032 firms in 2017.
‒ 97.3% are SVSEs : 87.7% > {0} employee , 7.1% > {1,2} ; 2.6%, {3-5}.
‒ INS (2018) considered 455 515 SVSEs legally declared but belonging to the informal sector, due to the absence
of adequate accounts.
> contribution to the GDP : 10.9% in 2018 (7.3% >{0-2} ; 3% > {3-5}; 0.6% others).
‒ De Soto (2013): 85% of the Tunisian enterprises have 93 billion USD of extralegal assets ~ 2.3 x GDP //
11 x total stock-market capitalization in 2010 // 4 x amount of FDI since 1976.
(+) Increasing number of knowledge-intensive firms ("Advisory and ICT", "pharmaceutical industry", "Services
to firms" and "Telecommunication“,..).
(+) Exports of ICT services in total exports increased from 6.1% in 2010 to 9.2% in 2017.
Tunisia’s top ICT occupations : Software development and technology > Creative and multimedia; > Sales
and marketing support (Online Labour Index).
14

15. 15
Sources: Economic Freedom Index 2021; Global Innovation Index 2021;
World Bank Logistic Performance Indicators 2018
57 54
50
45 42
30 33
28
23
14
73
22
87
40
29
21
27
0
10
20
30
40
50
60
70
80
90
100
Economic
freedom
Property
Rights
Labor
Freedom
Investment
Freedom
Judicical
effectiveness
Financial
freedom
Customs
International
shipments
Logistic
competence
Business
sophistication
Human
capital
and
research
University/industry
research
collaboration
Domestic
credit
to
private
sector
(%GDP)
Financing
of
SMEs
Venture
capital
availability
Market
capitalization
(%GDP)
Insurance
premium
(/GDP)
UNFAVOURABLE INSTITUTIONAL AND FINANCIAL ENVIRONMENT…CAUSING HIGHER TRANSACTIONS COSTS
Restrcited foreign
exchange
transactions
Unfair fiscal regime

16. 16
1. THE FAILURE TO CONDUCT THE ECONOMIC TRANSFORMATION
4,0
5,3
-2
3
8
13
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Real GDP Growth
(year-on-year)
Tunisia Lower Middle Income
Source : INS & IMF
> Lower GDP growth
> High unemployment (increasing with the education level)
> Increasing public debt
> Depreciation of the Dinar
> Informal economy, corruption and poverty
> Deterioration of the public services quality
> Acceleration of the brain drain.
Brain Drain - A World Overview
Source : OECD
‒ Sentiment that political institutions are (extractive) supportive
of economic policies that benefit to the most representative
classes.
‒ Youth feeled excluded from the political system (non-inclusive)
and their trust in the public institutions is low especially in the
rural regions. >Trust in politics : < 5% in the rural regions & ~
30% in the urban regions.

17. 17
‒ Decrease of the growth potential > 5% in 2000 & 3.2 % in 2019 (OCDE, 2018).
‒ Firms investing in innovative products and services: 28% in 2013 > 14% in 2019.
‒ Productivity of the Tunisian firms > 2013: -4.5% & 2019: -5.1% (World Bank, 2020).
1,7%
5,2%
16,0%
36,6%
20,0%
-5,3%
5,1% 5,7%
9,0%
18,0%
16,4%
-1,0%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
GDP growth (%) Inflation (%) Unemployment rate
(%)
External debt
(%GDP)
Domestic debt
(%GDP)
Overall Fiscal
Balance (%GDP)
Real average TFP : -1%
Simulated avearage
TFP 1.7% (2001-2010)
Source: Nabi (2021) "Tunisia after the 2011’s revolution: Economic deterioration
should. and could have been avoided." Journal of Policy Modeling
What if TFP evolved during 2011-2018 with the same average growth rate as in 2001-2010 ?

18. 18
Acceptance
for the change
Ability to achieve
the change
Accountability
of the change
CHANGE SPACE
SOURCE: ANDREWS ET AL (2010)
‒ Conducting the reforms requires a change management approach where FAIRNESS and TRUST in the
State’s institutions are crucial.

19. 19
WHAT ARE THE COMMON INTERNATIONAL CHARACTERISTICS OF SUCCESSFUL CHANGES ?
Leadership
and
governance
Future
orientation
Efficient
functioning of
the markets
Macro-
economic
stability
Openess to
the global
economy
Sources : Commission on Growth and Development (2008)
Credible commitment to
growth inclusion with
capable administration.
Resources allocation
based on prices and
incentives.
Higher saving and
investments (physical and
human capital)
Knowledge transfer and
tapping into the global
marked demand
Low inflation. sustainable
public finances..

20. 20
INSTITUTIONAL CAPACITY, LEADERSHIP & THE REFORM CONSTRAINTS
‒ Difficulties/inability in reaching a national consensus on the implementation of the necessary economic
reforms.
‒ Difficult coordination and dialogue between the multiple actors of the Tunisian economy even within
the executive.
‒ Lack of institutional capacity to conceive the details of the reforms (The Council of Economic Analysis of the
Presidency of the Government).
‒ Insufficient ability of the State to ensure that the planned objectives are met. The execution of many
planned public investment expenditures was not realized due to the limited implementation
capacity of the government.
>>> INSTITUTIONAL LEADERSHIP AND MODERNIZING THE STATE

21. 21
- The social contract shall includes social progress as an integral part of an (Porter, 2015).
- Monitor the social progress through social performance indicators (SPIs)
Ex: Paraguay at the national, regional and municipal levels to measure social progress and achieve the
targets of its inclusive national development plan for 2030.
> SOCIAL CONTRACT: dynamic
agreement between the state
and the society on their mutual
roles and responsibilities
(OECD/DAC ,2008).
State
Society
Elite will to channel the state’s
resources
+
Capacity to fulfill social expectations
Expectations
about the state’s
role
Capacity to
provide public
services and
secure revenue
FROM WHERE TO BEGIN ?
> INCLUSIVE DEVELOPMENT STRATEGY

22. 22
4. DIGITAL TRANSFORMATION: THE OPPORTUNITY NOT TO MISS !
> The digital transformation is an opportunity to unlock the socio-economic potential of Tunisia
INCLUSION
EFFICIENCY
INNOVATION
Digital capital : source of ~1/3 of global
GDP growth :
Intangible digital assets (2/3) Tangible
digital capital (1/3)
For Tunisia : Digital maturity : (+1/10 -->
1.6% to 2% point of Growth)
Entire Digitalization over 2017-2024
+1,57% annual growth. (IACE, 2016)
Human
capital
Knowledge &
R&D
Labor
Physical
capital

23. 23
Source : BIS (2021)
Source : Nabi (2018)
Jordanie
Maroc
Oman
Arabie
Saoudite
Turquie
Algerie
Bahrein
Iran
Kuwait
Liban
Qatar
Tunise
EAU
Egypte
R² = 0,6271
0
20
40
60
80
100
120
140
160
0 10 20 30 40 50 60 70 80 90 100 110 120 130 140
Efficiency
in
using
public
funds
and
level
of
irrigular
payments
and
bribes
(Rank
over
155
countries)
Availability of last technologies (rank)
‒Digital technologies/payments are highly correlaed with efficient use of public funds and less corruption/informality.

24. Tunisia’s Strategic Plan for Digital Economy (2016-2020)
‒ Guarantee social Inclusion and reducing digital disparities
‒ Promoting the “digital” culture
‒ E-Government
‒ Job creation, entrepreneurship and Innovation
‒ Improve enterprise competitiveness
‒ Transition Tunisia’s economy to encompass all things Digital
July 2020: Vision for the “Plan National Stratégique 2025”
‒ Prosperous, democratic and inclusive Tunisia
‒ A creative economy through innovation and talents
‒ Affordable and cashless digital services
‒ Client-centred E-administration
‒ Smart and modern cities
>> START-UP ACT
24
Ambition, strategic plans and many digital transformation projects are there since many years..
‒ Système d’information « Amen »,
‒ SI Cnam -Smart Card,
‒ Registre National des Entreprises,
‒ Identification Unique du Citoyen,
Interopérabilité des SI (connected -Gov),
‒ Cloud Computing National,
‒ ERP (SI) de l'Etat,
‒ Justice connectée,
‒ Edunet 10,
‒ Gestion électronique des
correspondances, Code du numérique,
‒ Aménagement numérique du territoire,
‒ Loi cybercriminalité
Smart Capital / Caisse des Dépôts et Consignations
(CDC) ANAVAFund of Fund (200 millions EUR) to
strengthen the role of VC in financing Startups' growth.

25. 25
Economic
Growth
Jobs
Quality of
Services
Impact
Digital
transformation
of
public
sector
Digital
transformation
of
private
sector
Digital
Citizens
/
Consumers
Digital Sector of the Economy
Digital Foundations
Non-digital Foundations
(policy and strategic planning. leadership
and institutions. regulatory framework.
human capital. innovations. business
environment. trust and security)
(Digital infrastructure. digital platforms. digital
finance. digital competencies and
entrepreneurship)
(ICT sector and the content and media sector)
Preliminary (1)
Excellent (5)
Developed (4)
Moderate (3)
Emergent (2)
IMPACT 2.4
USAGE 2.4
FOUNDATIONS 2.5
..but the maturity of the Tunisian digital economy is still far (2.4) from the international frontier (5)
Source : MTCEN & DECA (2020)

26. Recommended priority actions to unlock the potential of the Tunisian digital economy
Governance
of the digital
strategy
Digital
sector
(H)
Digital
compe-
tences
Digital
financial
services
Digital
platforms
Innovative
digital
entrepreneu
rship and
R&D
Source : MTCEN & DECA (2020)
26
1. Optimize the governance of the digital strategy
2. Reinforcing the competitiveness of the digital sector
3. Developing and retaining the digital competences
4. Accelerating the developing of the digital financing services
5. Favouring the emergence of digital platforms
6. Favouring the digital entrepreneurship and R&D

27. 27
CURRENT SOCIO-
ECONOMIC
SITUATION
KNOWLEDGE-BASED
& INCLUSIVE COUNTRY
>> Unlock the dynamism, creativity and solidarity.
>> Break out the post-revolution vicious circle
>> Transform Tunisia to a knowledge-based and inclusive country.
NEED FOR AN INTEGRATED DEVELOPMENT STRATEGY
– The COVID-19 crisis offer(ed)s a major opportunity to catalyze a large social adhesion to a
comprehensive development strategy, embedding institutions, politics, economics and individuals in an
interlinked framework

28. 28
Enabling Innovative mechanisms
Leadership
&
Inclusive
institutions
Human
capital, R&D
& Innovation
Economic
management /
Financial
resources
Reeingering
the role of State
Culture and religion
in favor of
development
Unlocking the
economic potential
Smart integration
in the global
economy
Modern
& efficient
State
Efficient
& innovative
market economy
Social
cohesion
Fair and modern
social contract
Social &
solidarity
economy

29. 29
Thank you
msaminabi@ept.ucar.tn