Tunisia was ranked the most competitive business environment in Africa in a report released during the World Economic Forum summit in Cape Town. The 2009 Africa Competitiveness Report, produced by the WEF in association with the African Development Bank and the World Bank, gave the Tunisian economy a score of 4.6 out of 5 for competitiveness, ranking it the 36th most competitive economy globally and the fifth most competitive in the Arab world.
The report, based on hard data and responses to the WEF’s Executive Opinion Survey, singles out the country’s institutions as “one of its most competitive advantages,” resting on “fairly transparent and trustworthy relations between government and civil society.” As a whole, Tunisia’s institutions ranked 22nd globally, with a particularly high placing for efficiency of public spending (2nd), public trust of politicians (16th), low levels of favoritism among officials (14th) and transparency in the policymaking process (15th).
Beyond institutions, in the 11 other “pillars” assessed by the report, Tunisia also ranked highly in infrastructure (34th), health and primary education (27th), higher education and training (27th), goods market efficiency (30th) and innovation (27th). The only area it scored relatively poorly in was labor market efficiency, coming 103rd out of 134 countries assessed. Overall, Tunisia’s ranking places it nine positions ahead of its nearest African rival in the table, South Africa, which came 45th.
In a special chapter on enhancing competitiveness, Tunisia and three other African economies were highlighted for their achievements in ensuring strong growth by adopting development strategies that promote efficient market mechanisms. Alongside Namibia, Botswana and Mauritania, the Tunisian economy was praised as an example that high growth need not necessarily require a large economy. Like Mauritania, Tunisia has had a policy of economic diversification that in the 1970s helped the economy remain internationally competitive.
Flexibly fit
Tunisia’s efforts to integrate its economy into the global market saw it become the first Arab country to complete the steps to enter the European Union’s free trade zone in 2008. Tunisia’s recent policy of exchange rate flexibility was seen as a key factor toward helping the economy reduce tariffs and barriers to entry, enabling the textile sector in particular to compete within the lucrative European market without the need for protective measures. Stable fiscal policy has also contributed to low inflation, another key requirement for maintaining competitiveness, especially in the manufacturing sector.
Tunisia’s success comes despite its paucity of natural resources. Perhaps as a result of this though, some practices that have proved harmful to competitiveness in other African economies have been avoided. The absence of major state-owned conglomerates in the oil, gas or mining sectors means private capital is less crowded. The tax system is also less distortive to business practices, and agricultural efficiency is relatively high due to lower and better targeted subsidies. A consistent commitment to the principle of privatization has seen several major utilities move out of direct government control in recent years, while the proceeds of privatization have often gone toward paying down the government’s external liabilities.
However, while polling highly in many areas, the report nonetheless highlighted some aspects of the economy with room for improvement. Despite ranking second in Africa for technological readiness, in global terms information and communications technology penetration remained low. The figures suggest that, while at the higher levels of the economy Tunisia has largely succeeded in bridging the technology gap, the effects have yet to fully trickle down to the wider economy.
The report will be welcome news to the Tunisian government, which continues to demonstrate its commitment to a liberalized economy. Indeed, the publication coincided with a recent announcement by the cabinet that Tunisia would join six other Mediterranean countries in implementing a full “open-sky” agreement by 2010, a move that will make the country available to low-cost airlines and hopefully boost tourism.
