After the Arab Spring uprisings, Tunisia's new democratically elected government has the task of attracting investment to the country and creating jobs for its youthful population. Its Jasmine Plan, which heavily involves the private sector, is intended to do just this.
The wind of change sweeping across the Middle East and north Africa (MENA) region today will have momentous and far-reaching consequences in the months and years ahead.
The declaration of the G8 in May 2011 pertaining to the 'Arab Spring' states in its first article: "The changes under way in the MENA countries are historic and have the potential to open the door to the kind of transformation that occurred in central and eastern Europe after the fall of the Berlin Wall. The aspiration of people for freedom, human rights, democracy, job opportunities, empowerment and dignity has led them to take control of their own destinies in a growing number of countries in the region. It resonates with and reinforces our common values."
Those countries that have engaged in democratic transitions must resolutely implement economic and social programmes that will address the pressing challenges facing their young populations, with regards to unemployment, poverty and inequitable distribution of income. The expectations of their youth are high, and unless a level of prosperity is achieved, the prospect for democratic consolidation may be in jeopardy.
Invest immediately
In order to accelerate economic growth, these countries must resolutely embark on ambitious investment programmes, particularly in the labour-intensive sectors of the economy. They must also draw up intelligent schemes to promote private initiatives and professionalise the business environment in their respective markets. One of the virtues of democracy, if properly pursued, is that it promotes enhanced conditions for private entrepreneurship.
Having ignited the first spark that fuelled the onset of the Arab Spring, Tunisia has a historic responsibility to lead the way in a successful transition towards democracy, as well as upholding a new vision for its future that will bring about hope and prosperity to its people.
In September 2011, the Tunisian interim government established a five-year economic and social programme, called the Jasmine Plan. In the near future, the plan entails job creation to help assuage Tunisia’s unemployment woes, while in the long-term the programme will restructure the national economy.
It is only when it achieves the virtuous circle of enhanced prosperity and consolidated democracy that Tunisia will have definitely succeeded in setting the stage for a promising future for its people.
Jasmine Plan aims
The Jasmine Plan places a decisive emphasis on the critical, yet newly defined, role that the government will play in significantly encouraging the participation of the private sector in carrying out new investments in order to ensure the programme’s success.
The unemployment problem can only be tackled in the medium term through large investment programmes equating to $100bn over the Jasmine Plan’s five-year period. For this purpose, the interim government has already set up a large public fund (the Caisse de Depot et Consignation, or CDC) to finance large infrastructure projects.
The CDC fund will start modestly in terms of equity as it will fund itself from postal deposits to begin with, but will also raise long-term financing with a government guarantee. We think the fund will make investments of up to $5bn over the period of the Jasmine Plan; it is already up and running and we held the first board meeting last week.
The interim government also plans to launch a generational investment vehicle (the Ajyal Fund) with a significant amount of seed-money. The cabinet has already approved the decree law for the creation of the Ajyal Fund, which will likely be published in mid-December. The establishment of the fund will be finalised by mid-2012.
The Ajyal Fund will only invest in projects that meet the investment criteria of private investors. It will aim to help finance large ticket projects with a definite exit strategy from the outset that will ultimately leave the projects in the hands of the private sponsors while ensuring acceptable returns.
The Ajyal Fund, which will be structured as a fund of funds, aims to raise equity of $4bn within three years of its creation. Large investors, both Tunisian and foreign, will be invited to invest in the sub-funds and will be granted a variety of privileges including a participation in the governance of the funds as well as co-investment rights in the projects that will be financed. It is estimated that through the combined leverage and the multiplier effects, the Ajyal Fund should ultimately generate aggregate investments in excess of $30bn during the five-year plan.
Job creation
This level of aggregate investments should bring about the creation of more than 500,000 direct and permanent jobs in Tunisia within the next five yeas, and probably an equal number of indirect jobs. Being the main sponsor of the Ajyal Fund, the government will play a primary role in its governance, but will leave it up to private entrepreneurs to carry out their projects independently. In this way, the government will avoid taking on any additional debt and will limit its exposure to equity participations in the projects.
The Ajyal Fund will engage in socially responsible activities and also adhere to the Santiago Principles – a set of 24 voluntary guidelines that assign best practices for the operations of sovereign wealth funds. The principles were set forth in 2008 through a joint effort between the International Monetary Fund and the International Working Group of Sovereign Wealth Funds – to date 25 countries have signed up to them.
Wider reform
For the Jasmine Plan to be successful there will be a pressing need to initiate sizeable reforms of the public sector and the state apparatus, as well as a significant overhaul of the education and judicial systems. It will also prove necessary to conduct a comprehensive fiscal reform as well as a review of the investment code in order to ensure the success of the plan.
The reform of the financial system in general and the banking system in particular must start immediately. In particular, there will be a pressing need to conduct a complete restructuring of the public banks by cleaning up their problem loans, reinforcing their capital funds, improving their risk management policies and procedures, upgrading their information management systems, enhancing human capital and significantly improving their governance.
The government must, within a reasonable timeframe, disengage from its involvement in the management of these banks and set forth the proper conditions for them to align themselves to, and compete on equal footings, with the private banks. The government must also firmly engage in the promotion of the financial system in general, and the capital markets in particular.
Of particular importance to Tunisia is the creation of fully-fledged capital markets promoting such activities as fixed income, corporate and project bonds, commodities, long-dated foreign exchange and interest rate swaps, new hedging techniques covering the different markets and the emergence of new asset classes. The emergence of an efficient capital market will help mobilise long-term savings, and will offer new investment opportunities to institutional investors such as insurance companies and pensions funds.
Tunisia is writing a new and illustrious chapter in its history. Tunisians, particularly the youth, who successfully put an end to tyranny and despotism, are now eager to build a better and promising future for their country and themselves
Bolstering innovation, research and development (R&D) and investment in human capital are essential elements for the success of the plan. They include the development of a technological infrastructure, for example e-governance, and encouraging the creation of a knowledge-based economy.
With this in mind, the government plans to launch a National Initiative for Industrial and Technological Development in cooperation with the private sector, setting forth 80 measures and actions aimed at bolstering the technological infrastructure of the Tunisian economy. An investment of $8bn will be necessary to successfully carry out this programme between 2012 and 2016. This, combined with the National Strategy for Research and Innovation Program, will contribute in increasing investments made in R&D to 1.75% of the country's gross domestic product during the timeframe of the plan.
Making history
Tunisia is writing a new and illustrious chapter in its history. Tunisians, particularly the youth, who successfully put an end to tyranny and despotism, are now eager to build a better and promising future for their country and themselves. The highly successful elections held for the Constituent Assembly on October 23, 2011, represent the first historic manifestation of the free will of the people. The political institutional framework that will ensue will bring about optimal conditions for Tunisians to make their choices in designing their future and pursuing their dreams.
Tunisia is endowed with the necessary ingredients to successfully conduct its democratic transition. The prospect of future prosperity should help safeguard the path to achieving democracy. Prosperity will lead to a tangible improvement in the quality of life and well-being for all Tunisians. This, in turn, will strongly consolidate the democratic process and will set in motion a virtuous cycle of economic growth and political stability.
In pursuing the objectives set forth in the Jasmine Plan, Tunisia aims to reduce regional disparities and poverty and enhance human and cultural development through offering equal opportunities to all Tunisians.
Jalloul Ayed is the finance minister of Tunisia
