The privatization of public enterprises has served as a platform for developing the private sector in Tunisia since the 1980s. Privatization has also been a useful instrument in reinforcing the economy’s efficiency and consolidating its opening onto exterior markets. First launched in 1987, the privatization program has since consistently offered noteworthy opportunities for attracting the interest of foreign investors, including many operations for the sale of assets or stock in the capital of semi-public enterprises, as well as concessions to build highways, produce electricity, desalinate water, treat wastewater and solid waste, etc.

The program’s results have encouraged local authorities, who find themselves with a wider margin for navigating the economic difficulties related to speculation and global market mutations. To the present day, 209 public and semi-public companies have been ceded, bringing the imposing sum of $4.6 billion into the public coffers, according to an official balance sheet, which specified that foreign investment accounted for $4 billion of this amount, or 86.9%. This balance sheet highlighted that 104 public enterprises have been completely privatized and 32 partially ceded, with 11 other companies opening their capital for public investment. The privatization program has principally affected the sectors of tourism, services, commercial, and building materials.

Over the course of 2007 alone, four enterprises were sold and three others were ceded, one of which, the Tunisian Electro-Mechanical Construction Company (SACEM), still being in the course of being finalized.

For 2008, the privatization program comprises seven industrial companies: the National Oil Distribution Company (SNDP), the Tunisian Automobile Industry Company (STIA), the Tunisian Tire Industry Company (STIP), the Tunisian Drilling Company (CTF), the Cement Company of Bizerte (SCB), the Company for Producing and Commercializing Fertilizer (Granuphos) and the Tunisian Chemical Fertilizer Company (STEC). The state also ceded 16% of the capital of Tunisie Telecom to the Emirati Group TCom in 2008.

The liberalizing path

As far as macroeconomic policy is concerned, the Tunisian state appears to have resolved to disengage itself from a near totality of economic activities. Such an initiative forms part of a development strategy to build better economic structures and to redeploy the productive apparatus in such a way that will enhance its competitiveness by international standards. The state still retains final control over the privatization program, on account of the sensitive nature of the sectors in which privatizing companies operate.

The industrial sector has provided the lion’s share of privatizable entities. The Tunisian Automobile Industry Company (STIA), for instance, recently ceded its public holdings which make up 99.99% of its capital. Industry experts feel that privatization is in the best interest of the industrial sector, and predict a remarkable improvement in the performance of this branch of activity.

Another case is that of the National Oil Distribution Company for (SNDP), which opened up 35% of its capital to a strategic investor in the sector. In the services sector, the Bank of Tunisia and the Emirates (BTE) ceded public holdings equal to 38.90% of capital. The agricultural and services sectors are also in the process of partially ceding public shares. The Tunisian-Kuwaiti Bank (BTK) ceded a block of shares worth 60% of capital, of which 30% is in public holdings. The Lakhmes Agricultural Development Company (SODAL) also ceded assets and rents on state-owned land.

Privatization operations are resulting in a higher performance of economic indicators. Sahel Mechanical Workshops (AMS) has enjoyed a remarkable post-privatization success, since Groupe Loukil acquired 79% of public holdings in the company’s capital for the sum of $2.5 million. Furthermore, the first privatization in the air transportation sector shed new light on the growth being generated by this liberalizing economy. The international Turkish operator TAV obtained a concession to run the Monastir airport and to build the airport of Enfidha, with provisions to manage these for forty years. The national treasury is swelling with the initial offering of more than $530 million from the Turkish bid for these airports.

Several recent studies show that the pursuit of privatization has resulted in performance improvement in the quasi-totality of privatized companies, as much on the level of turnover and returns on investment as on the level of jobs creation and employment. The World Bank and International Monetary Fund are recommending that Tunisian authorities accelerate the pace of privatizing operations, which are beginning to reach into strategic and highly competitive activities like transportation, finance and telecommunications.

Continuing the success

The overall success of this privatization strategy, which is notably contributing to the evolution of the financial market, relies on a globally optimistic vision towards Tunisian development. This optimism has managed so far to dispatch significant foreign capital towards Tunisia. As concession opportunities multiply and the stock market grows ever more dynamic, we should expect a sizable volume of capital and foreign investment to enter into the next round of privatizations. The experience Tunisia has gained in privatization since the 1980s should shed light on new ways to achieve its objectives of reinforcing the efficiency of the domestic economy, anchoring itself in the global economy, and meeting its goals for growth, investment and employment.

Even as the world’s economy has faltered, Sudan has continued to do surprisingly well. But recent falls in commodity prices have revealed serious structural imbalances. The question remains: has the Sudanese government undertaken enough reforms to make the country’s economic success sustainable?

According to statistics released earlier this year by the United Nations Department of Economic and Social Affairs (UNDESA), Sudan’s growth rate soared to 12.1% in 2006, well above the average for developing countries (7%). This growth rate may have fallen away slightly, on the back of a stagnating world economy, but Sudan still continues to outpace many in the developing world.

A recent survey of the world’s least developed countries (LDCs), published in July by the United Nations Conference on Trade and Development (UNCTAD), highlights the results of Sudan’s recent success. But the report also cautions that much of this success comes on the back of high global oil prices, and without structural reforms, is unlikely to be sustainable.

Unsustainable revenue streams

Junior Davis, one of the authors of the report, said, “Between 2005 and 2006, most LDCs achieved double growth, which was very encouraging for the world economy. But the concern is that such growth is not sustainable. Countries that have enjoyed such growth need to be investing in expanding their productive capacity and alleviating poverty. They need to diversify away from primary commodities and into other areas such as healthcare, education and training. But many are still not doing this.”

The UNCTAD report indicates that 78.8% of revenue from exported goods comes from fuel (principally oil) and 13.1% from agriculture — both sectors of the economy that are significantly prone to price fluctuations.

Espen Villanger, a research director at Norwegian-based policy centre CMI, is pessimistic about the outlook for Sudan. “The high growth rates that Sudan has seen recently would not have been possible without oil reserves,” he said. “Since Sudanese oil is expected to peak in 2012, there is a very narrow window for them to undertake the structural reforms that they need to undertake, and there are not many signs that they are seizing this opportunity.”

Oil prices have been rising steadily for a number of years, reaching a record high of $147.27 a barrel in July, but they have since fallen back. There is a good deal of conjecture about whether the current slippage in oil price is a temporary anomaly or the start of a wider trend.

“Markets have been hit by a double whammy of increased supply and creaking demand,” commented Mike Ritchie, an analyst at Energy Intelligence in the UK. “Some argue that the oil price slide is already coming to an end, while others believe there is further to fall as fundamentals recover a more prominent role in the psychology of the market.”

Sudan is not a member of the Organization of Petroleum Exporting Countries (OPEC), the cartel that regularly intervenes in the oil markets to fix the price, and thus has limited capacity for what it can do about this sudden drop. However, the annual energy outlook for 2008, published by the International Energy Agency (IEA), suggests that non-OPEC producers may enjoy greater influence in the future, as oil supply from OPEC members becomes increasingly pinched. The IEA advocates greater investment in the oil industries of non-OPEC countries, something that Sudan’s government is also keen to see.

The IEA also sides with those analysts that believe a return to high oil prices is probably not far off, as demand from developing countries offsets falling demand elsewhere. But even if oil prices do resume their upward trend, the current dip has highlighted how vulnerable oil-exporting nations are to the whims of the market.

Overreliance on oil is not the only difficulty that Sudan faces. Davis also said that LDCs should look carefully at reforming the agricultural sector, which often suffers from low labor productivity and is prone to fluctuations in the market. Davis would like to see workers migrate out of agriculture into what he terms the “rural non-farm economy.” For those that remain in agriculture, they should seek ways to tap into the regional or even international markets, rather than just produce goods for sale locally, Davis said.

Need for substantive improvements

However, Villanger cautioned that reform must be taken with care. He is particularly critical about a recent attempt to reform the Gezira Scheme in Sudan, an irrigation project that was started by the British in the 1920s to increase agricultural productivity. In 2005, the Sudanese government launched an initiative to encourage private investment into the Gezira region, which would release public funds for use elsewhere. “There have been no efforts to share more of the wealth,” says Villanger. “What you now have are big exporters from Saudi Arabia and elsewhere investing in the agricultural sector, with no signs of any real development in these sectors. The government is relying on foreign involvement, without taking steps to make the country more independent.”

Badr Eldin Suliman, a former finance minister and Sudan’s chief national negotiator to the World Trade Organization (WTO), strongly refutes suggestions that economic growth in the country is not sustainable. “The positive political economic conditions in Sudan will continue to drive the engine of growth,” he said. “Economic reform is getting deeper and wider in scope, sustaining the liberalization and in particular extending the role of the private sector.”

But he rejects claims that public funds are being diverted from the agricultural sector. “Major public investments are already targeting the declining irrigated farming sector infrastructure and these will continue,” Suliman said.

Suliman also suggested that a developing country such as Sudan may be able to weather the economic downturn better than others, since the country is not directly plugged into Western financial institutions such as the World Bank and the International Monetary Fund.

Sudan still holds out hopes of joining the WTO at some point in the future, but negotiations have been frustrated by those countries which are not yet willing to see the African nation admitted into their ranks. “Certain members are abusing the rules and pursuing sanctions as a tool of their foreign policy,” lamented Suliman.

Davis believes that there are a number of positive characteristics of the Sudanese economy, which could provide an opportunity to graduate from its status as an LDC — something that Botswana was able to do in 1994 and Cape Verde did in 2006.

In many LDC countries, domestic savings are extremely low, providing little capacity for dealing with shocks to the economy. This is not the case in Sudan, though. According to the UNCTAD report, only one third of LDCs had domestic savings above 15% of GDP — Sudan’s stands at 26%. Moreover, there is a concerted effort in some quarters to boost domestic savings.

Last year, the Bank of Sudan launched a microfinance unit in order to look at ways of providing cheap loans and finance to the nation’s poor. The unit is also looking at ways that microfinance can be used to encourage people throughout Sudan to save more.

“Micro-savings are not new,” said Ishraq Dirar, who heads the unit. “It is a deep-rooted culture in both rural and urban areas. Most of the poor use this to earn money for emergencies.”

But Davis cautioned that, to benefit the economy, savings must be reinvested wisely and is worried that Sudan may be overlooking this opportunity. “The main problem that LDCs have to deal with is how to raise their productivity,” he said. “They can do this by investing in appropriate infrastructure and diversifying their portfolio into social areas that improve labor productivity, such as health, education and training.”

Challenges of diversification

Davis accepts that diversifying away from their existing economic model is not an easy thing for countries to do or for politicians to accept, and usually requires government backing. He added that, in general, there has been greater political will in Asian LDCs than in African ones, with governments more willing to stump up public funds. “In those poorer countries where there is a high level of conflict or civil unrest, we have found that a lack of government involvement does become a problem,” Davis said.

For now, the Sudanese economy remains awash with capital, both from oil reserves and from foreign investment. Due to the political sensitivity of the industry, reliable oil statistics for Sudan are hard to come by, but the Bank of Sudan puts oil earnings in 2005 at $4.8 billion (a figure that Villanger is happy to quote). UNCTAD says that foreign direct investment (FDI), mainly from China, brought $3.5 billion to the country in 2006.

The danger, as Villanger sees things, is that too much of this money is drifting back into foreign hands and not being reinvested in sustainable growth. “This is a huge problem,” he said. “Here is a perfect opportunity to train the local population to take part in the growth, and foreign workers are benefitting all the time.”

Sudan’s minister of labor, Mohammed Yusuf Ahmed, was recently reported as complaining that it is too easy for foreign laborers to get permission to work in Sudan. He said that the checks to determine whether a person had the right to work in the country were often inadequate.

UNCTAD was established in 1964 to promote the integration of developing countries into the world economy. It publishes a report each year which considers how close the LDCs are from migrating out of poverty. UNCTAD recognizes 50 LDCs. Only two countries have so far graduated from LDC status: Botswana in 1994 and Cape Verde in 2004. Samoa may become the third country to graduate; a decision is expected on this small island by the end of the year. Countries who give up their LDC status often have to put up with a reduced level of foreign aid, although there is usually a transition period to allow the country to adjust.

Sudan’s future as an LDC is inevitably tied up with politics — not just because there is an absence of political will to address some of the fundamental problems with the Sudanese economy, but because a vast amount of the country’s oil wealth lies in disputed regions, where both the north and south stake a claim. In 2011, the South gets a chance to vote on whether to secede from the North and become an independent country. If it does, Sudan’s economy will certainly take a hit, as Khartoum moves to defend its mineral wealth.

In 2003, a string of deadly suicide bombings in Casablanca sent a shock wave through the relatively stable kingdom of Morocco, which maintains close ties to Europe, Israel and America, and which is working to make tourism a keystone of the economy. The attacks on Jewish and European targets killed 32 and injured more than  100 people, and were followed by a series of suicide bombings in April of 2007, this time targeting the US consulate in Casablanca and two other American institutions. In the wake of these attacks, businesses from a broad variety of sectors have been turning to private security firms for protection and peace of mind. But are local security agencies really making businesses safer?

Over the past decade, the private security industry has enjoyed rapid growth, both in conflict regions and globally. Private security firms are increasingly being called upon to take part in military conflicts. Some developed countries deploy private security firms in conflict zones, as the US has in Iraq, and private security firms have also been accused of carrying out coups d’etat, as in Sierra Leone. According to the Institute for Security Studies, “Private security companies have diversified their activities to include military advice and training, arms procurement, intelligence gathering, logistical and medical support and in limited instances, combat and operational support.” Although international and domestic laws regarding mercenaries do apply to private security companies, their non-state actor status acts as a kind of loophole. Private security contractor Blackwater drew global criticism last year in the wake of an incident in Iraq that left 17 civilians dead.

Demand for protection

Security companies that operate in non-conflict zones offer a variety of services, including bodyguards, funds transport and surveillance. In Morocco, whereas before 2003 security guards were only present at banks and multinational companies, they have since become an essential fixture of hotels, clinics, hospitals, nightclubs, boutiques, restaurants and housing complexes in various regions of this developing North African country. As demand for security services waxes in the Moroccan market, many clients and company executives are troubled by shortfalls in the sector.

“When you talk about security in Morocco, you’re really talking about gardiennage,” says one French security expert, who abandoned his plan to open a private security firm in Casablanca after encountering numerous setbacks. “Gardiennage is what you do when you watch over a parked car. Security is completely different, because it brings you into a notion of safekeeping of goods and persons. Security is, above all, prevention: guards are supposed to diffuse dangerous situations.”

All security guards are expected to have a minimum level of basic training, covering first-aid, the proper use of a fire extinguisher, as well as how to alert authorities or call for help in a crisis situation. At a higher level, certain guards may be proficient in martial arts or crisis resolution techniques.

In Morocco, the private security sector has become something of a crisis itself. Security experts paint an alarming picture of guards who do not know how to use a fire extinguisher, have no means of communication to contact authorities, have metal detectors but no batteries, and often do not know how to read. And while lack of training and professional demeanor is a source of dissatisfaction among most clients, some are on the lookout for guards with too much training. Banks in particular are wary of entrusting their safekeeping to individuals with outstanding training in surveillance, self-defense, and security systems.

Few professionals

Security guards in Morocco are not armed and until recently there was no regulatory framework for companies providing security services. Authorities estimate the current number of agencies in the country at about 500. Only about ten of these are considered to operate according to professional standards. Higher-end private security in the country currently consists of a handful of top-notch international companies, such as Groupe 4, Securicor, Brink’s, RMO, and Jamain Baco. These top tier companies receive contracts to provide security to large markets such as airports, electricity centers, gas companies, hotel chains, and embassies.

The increasing visibility of the sector since 2003 has created tension between competing security agencies. Due to the lack of regulation, just about anyone can go into the security business in Morocco. Companies who invest in training and a high level of professionalism find themselves in competition with smaller enterprises that cut costs by eliminating training and radios, and by paying salaries well below the minimum wage. A smaller firm might offer three uniformed guards and a dog for the same price as a single trained guard from a respected company. Since many businesses perceive security more as an appearance than an activity, these small firms draw clients away from serious agencies, and keep market prices very low.

The average price of a mid-level security guard on the Moroccan market ranges around $440-$500. The minimum wage is $290, and when you add the cost of the standard three-month training, uniform, social security and radios, the profit margin is negligible. Furthermore, most guards work 12-hour shifts, often with no shelter and nowhere to sit down and rest for a moment. With minimal pay and little to do, guards are notorious for harassing women and asking for bribes.

The problem amounts to a vicious circle: until clients are willing to pay higher prices for properly-trained guards, companies cannot afford to invest in the training and decent working conditions needed to bring security services up to speed. Small companies that hire illiterate guards for a fraction of the minimum wage keep market prices too low for trained guards to be commercially competitive.

As the sector acquires new visibility and social importance however, movements are stirring on the side of government and civil society to impose higher standards on the industry. After the 2003 bombings, representatives of the major security companies banded together to form the Moroccan Security Companies Association (AMEG). Karim Chaqroun, president of the association, said at the time, “The Casablanca attacks were a turning point for the activity of private security in Morocco. They gave rise to a crisis of conscience concerning the need to organize the sector.”

In December 2007 the only law regulating the industry, a 1941 dahir that prohibited anyone other than “the forces of order” from carrying arms, was finally updated. The new Law 27-06 will permit guards to carry “arms” for the first time, although the category will be restricted to teargas, batons and other light weapons of this sort for the time being. The state seems to view this move as a means for keeping a watchful eye on the private security sector. Most security guards are undeclared by their employers to save costs. Under the new law, each guard must register with the state, which will enable the screening out of convicted criminals. The law also foresees a state-mandated training level.

But many in the security sector are concerned that this new law is a move to reign in the industry. They also point out its failure to offer concrete proposals for achieving a higher level of organization throughout the sector. The Professional Association of Moroccan Security Companies (APASM) held a colloquium on the topic in Marrakech in July 2008. They congratulated the Minister of the Interior and other government agencies for taking an interest in organizing the sector, but urged that private sector security representatives be present in the formulation of laws for applying the new text. Rachid El Mounacif, founding member of APASM, told local press at the time of the law’s passing that his organization had not been consulted, and that he was not even aware that such a law was being considered. The association asked that the government pay special attention to certain problems, particularly eradicating the 12-hour shift, ensuring that all salaries reach the minimum wage level, providing insurance for guards and creating training institutions.

The state is, of course, right in intervening and in building bridges with this growing group of private security forces, even if they are, for the time being, more like parking attendants than police officers. But the government might want look beyond its own interest and lend its support to civil society organizations working to improve the quality of services. The government could, for instance, invite a delegation from representative organizations, like APASM or AMEG, to collaborate on the application of the new law.