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Maplecroft Tunisia Risk Briefing: Political and economic instability persists as elections loom on the horizon

09/08/2011

Image courtesy of nassernouri - flickr

Tunisia remains politically and economically volatile and under an ‘indefinite’ state of emergency almost six months following the removal of former President Ben Ali from power. Ongoing protests and strikes persist while the economy remains battered. A large number of Tunisians feel that little progress is likely to be made this year and next in addressing long-term challenges such as extreme regional economic disparities and double-digit unemployment. Many Tunisians are now sceptical about whether the ‘Jasmine Revolution’ can bring about the social and economic changes they hoped for.

The results of the 23 October 2011 constituent assembly elections will have a significant impact on investor confidence. Nonetheless, sluggish voter registration (merely 39% of eligible voters registered as of 08 August 2011) partly as a result of poor logistical management is a cause for concern. Although polls suggest approximately 95% of eligible voters plan to cast their ballot, a lower turnout may reduce the perceived legitimacy of the constituent assembly.

Public debate over the role of religion in politics continues to be a destabilising factor in Tunisia’s transition to democracy, with both secular and Islamist parties involved in perpetuating fear and paranoia about the other in their bid for power. Although the short term outlook continues to be negative, there are significant grounds for optimism in the long term.

Elections and the struggle for power

• Mutual paranoia between secularists and the Islamist al-Nahda party continues to hold back political progress, but the relative level of support enjoyed by the Islamist party may help contain the level of friction between the two groups. No recent polls indicate that al-Nahda will win an outright majority in the elections, even though the preliminary surveys suggest that it will secure between 14% - 35% of the vote (the largest number of votes for any one party). Poll results from July indicate that two-thirds of Tunisians have not decided which party to vote for, yet two-quarters of Tunisians say they do not trust al-Nahda.
• This is not to dismiss the likelihood that al-Nahda will yield significant if not strong political clout in the future. Having been outlawed under the rule of Ben Ali, al-Nahda is building a strong grass-roots network. Whilst comparing itself to Turkey’s pragmatic Justice and Development Party (AKP), secularist opponents say that al-Nahda either downplays or emphasises its conservative credentials according to the audience. Many secularists are worried that al-Nahda seeks to impose an Islamic state, implement Islamic (Shari’a) law and undermine the country’s liberal values.
• Much of the political wrangling that persists in Tunisia is based on fear, distrust and the simple pursuit of power. In this respect, both the ‘secularist’ and ‘Islamist’ camps are involved in perpetuating falsehoods and exaggerating the risks posed by the other side. In a sign that the differences between parties are increasingly unworkable, al-Nahda originally opposed the postponement of the constituent assembly elections from the original date in July to October. The party realised that a later date would benefit its political opponents by giving them more time to organise. 
• There is little to suggest that differences between the Islamist and secularist camp will be bridged in the short term and this remains a source of concern for investors who hope for a process of political normalisation. Notably, in June, al-Nahda withdrew its support from the High Council for the Realisation of the Goals of the Revolution. The Council, which was created on 5 April, comprises 12 parties, a multitude of national figures as well as 17 civil society and professional organisations. It is mandated to oversee the country’s interim political transition. Al-Nahda has criticised the council for being un-representative and unfairly dominated by leftist and secularist parties. Nonetheless, by withdrawing from the council, al-Nahda has curtailed its connection and potential influence (no matter how constrained) over the halls of power prior to the elections. The move may have also fuelled popular mistrust of the political process.
• Credible, fair and open elections are the only way that Tunisia will begin to overcome the past and forge a new republic. Currently low voter registration and confusion amongst the electorate regarding the purpose of the election are causes for concern however. According to a July 2011 report published by the International Foundation for Electoral Systems (IFES), seven million Tunisians are eligible to vote (including one million Tunisian expatriates living abroad). Yet, 400,000 of these individuals hold outdated national ID cards which are required to vote. Whilst a survey conducted by IFES found that 95% of Tunisians are either “likely” or “very likely” to vote, only 43% of respondents correctly identified the forthcoming election as a constituent assembly vote (the assembly will only enact a new constitution, with parliamentary and presidential elections likely to be held in 2012). A startling 31% did not know what they would be voting for.
• Concerns meanwhile persist that voter registration and turnout will disappoint, thereby reducing the perceived legitimacy of the constituent council.  Although the original window for voter registration was between 11 July and the 2 August, only 27% of people registered in this timeframe. As such, the High Electoral Commission (ISIE) was forced to extend the registration period to 14 August. The failure of the ISIE to properly carry out the process meant that on 15 July the interim government dismissed the ISIE’s administrative staff and transferred logistical control of the elections to a newly created ‘Liaison Committee’. Despite the shift, the election results may be open to criticism and this may trigger further political instability.

Economic and social disparities unchanged

• Demonstrations and strike actions in the birthplace of the Tunisian revolution, Sidi Bouzid, as well as Sfax, Kasserine and the Gafsa mining basin are continuing. Strikes and protests are exposing decades of uneven economic development. Whilst protests have calmed significantly in the capital and urban coastal areas, Tunisia’s neglected interior continues to be disturbed by unrest and will continue to be a source of instability for the foreseeable future. On 18 July clashes between police and rioters in Sidi Bouzid led to the death of a 14-year old boy. This comes weeks after the outbreak of violence between two rival tribes over the allocation of jobs in the town of Melaoui (in the Gafsa basin), leaving 11 people dead and 100 injured. More than 60 individuals were arrested.
• High levels of unemployment will likely continue to fuel discontentment and protests, despite the lack of a quick fix to the problem.   Growth is expected to contract by 2.5% in 2011, according to the Institute of International Finance, and this will make it all the more difficult to generate new jobs. Unemployment is unofficially estimated to be 55% within the 400,000 strong population of Gafsa. The ‘interim’ nature of the government coupled with the fact that the issues provoking unrest (such as unemployment, corruption, chronically poor public services and infrastructure) cannot be addressed in the short term mean that unrest will likely continue. The indefinite extension of Tunisia’s state of emergency on 26 July attests to the severity of the situation.
• In addition to unemployment, a multiplicity of related economic challenges persists. These will continue to preoccupy the newly elected government. Official figures show that tourism, a major employer, is down 42% year on year in July. Foreign direct investment was down by 24.1% in the first four months of the year. FDI amounted to US$420m between the beginning of January and the end of April as foreign investors have remained cautious about committing large capital investments to a country which is still in flux. The civil war in neighbouring Libya is also estimated by Tunisian Central Bank Governor Mustapha Nabil to have cost between US$1-2bn in lost earnings from trade, tourism and remittances.
• Although the economy has been severely damaged by the uprising, it has the potential to rebound should political instability diminish. Notwithstanding economic problems in the US and Europe and concerns over domestic political instability, Tunisian policymakers point to a number of positives. Support from international institutions and multi-lateral banks, the fact that Tunisia has a relatively well educated work force, in addition to a large middle class and a strong export base (particularly in electronic and mechanical goods) will help generate future economic growth and investment. Yet, the rewards of economic recovery will not be distributed evenly. Indeed, the 14.9% expansion in manufacturing exports between January to May will really only be felt in cities such as Sfax and Tunis where most manufacturing is based.

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