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Document of The World Bank
FOR OFFICIAL USE ONLY
Report No. 54341-TN
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
PROGRAM DOCUMENT
FOR A PROPOSED LOAN
IN THE AMOUNT OF US$50 MILLION
TO THE
REPUBLIC OF TUNISIA
FOR AN
EMPLOYMENT DEVELOPMENT POLICY LOAN
May 26, 2010 Human Development Sector Maghreb Department Middle East and North Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
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Tunisia - GOVERNMENT FISCAL YEAR January 1- December 31
CURRENCY EQUIVALENTS (Exchange Rate Effective as of May 6, 2010)
Currency Unit Tunisian Dinar US$1.00 =
TND 1.48
WEIGHTS AND MEASURES Metric System
ABBREVIATION AND ACRONYMS
AENEAS Programme of the EU for financial and technical assistance to third countries in the area of migration and asylum
ALMP Active Labor Market Policy ANETI National Agency for Employment and Independent Work
(Agence Nationale de l’Emploi et du Travail Indépendant) ATFP Tunisian Agency for Professional Training (Agence Tunisienne de la
Formation Professionnelle)BCT Central Bank of Tunisia (Banque Centrale de Tunisie) BFPME Bank for the Financing of Small and Medium Enterprises (Banque pour le
financement de la petite et moyenne entreprise) BPT Business Plan Thesis BTS Tunisian Bank for Solidarity (Banque Tunisienne de Solidarité) CAIP Conversion and Professional Placement Contract (Contrat d’adaptation et
insertion professionnelle)CAS Country Assistance Strategy CCL Central Commission for Layoffs (Commission Centrale de
Licenciements) CCT Conditional Cash Transfer CENAFFIF National Center for the Training of Trainers and for the Science of
Training (Centre National de Formation des Formateurs et d'Ingénierie de Formation)
CES Contract of Employment and Solidarity (Contrat Emploi Solidarité) CFAA Country Financial Accountability Assessment CIDES Placement Contract for Higher Education Graduates (Contrat d’insertion
des diplômés d’enseignement supérieur)CIN National Identity Card (and its number); Carte d’Identité Nationale CNS National Council on Statistics (Conseil National de la Statistique) CNSS National Social Security Fund (Caisse Nationale de Sécurité
Sociale) CPA Classification of Products by Activities (European Union) CPC Central Product Classification (United Nations) CPI Consumer Price Index CPIA Country Policy and Institutional Assessment CPS Country Partnership Strategy CRVA Labor Market Placement Contract (contrat de reinsertion dans la vie active) CSO Civil Society Organization CV Curriculum Vitae
DPL Development Policy Loan EC European Commission ECAL Economic Competitiveness Adjustment Loan ECD Early Childhood Development EMBI Emerging Markets Bond Index EQF European Qualification Framework ESTIME Evaluation of Scientific and Technological capabilities in Mediterranean
countries EU European Union FDI Foreign Direct Investment FSN Fonds de Solidarité Nationale GDP Gross Domestic Product GNP Gross National Product GT Government of Tunisia IBRD International Bank for Reconstruction and Development ICL Integration and Competitiveness Loan IDA International Development Association IDC Inter-departmental commission ILO International Labor Organization IFC International Finance Corporation IMF International Monetary Fund INNORPI Institut for Standardization and National Property (Institut national de la
normalisation et de la propriété industrielle) INS National Statistical Institute (Institut National de la Statistique) IOM International Organization for Migration ISIC International Standard Industrial Classification of all economic activities ISTAT Italian National Statistical Institute (Instituto Nazionale di Statistica) JSDF Japan Social Development Fund LFS Labor Force Survey M&E Monitoring and Evaluation MANFORME Project to Strengthen Lifelong Learning and Employment
(Mise à niveau de la formation et de l’emploi) MDGs Millennium Development Goals MENA Middle East and North Africa MHESR Ministry of Higher Education, and Scientific Research MDIC Ministry of Development and International Cooperation MILES Multi-sector economic Analysis of Macro-framework, Investment climate,
Labor Market, Education system and Social Protection MOE Ministry of Education MOF Ministry of Finance MOH Ministry of Health MSASTA Ministry of Social Affairs, Solidarity and Tunisians Abroad MTEF Medium-Term Expenditure Framework MVTE Ministry of Vocational Training and Employment MWFCS Ministry of Women, Family, Childhood and Senior Citizens NACE Statistical Classification of Economic Activities in the European
Community NCE National Consultation on Employment NDP National Development Plan NGO Non-governmental Organization NIS National Innovation System
NQF National Qualification Framework OECD Organization for Economic Co-operation and Development (OECD) ONEQ National Observatory for Employment and Qualifications
(Observatoire National de l’Emploi et des Qualifications) PAQSET Project for Quality Improvement of the Education System
(Projet d’Amélioration de la Qualité du Système Educatif) PARES Higher Education Support Project
(Projet d’Appui à la Réforme de l’Enseignement Supérieur) PD Program Document PEFA Public Expenditure and Financial Assessment PER Public Expenditure Review PESW Programmatic Economic and Sector Work PFM Public Financial Management PFN Programme des Familles Nécessiteuses PHRD Japan Policy and Human Resources Development Trust Fund R&D Research and Development RCT Randomized controlled trials SDR Special Drawing Rights SMIG Minimum wage (Salaire Minimum Interprofessionnel Garanti) TOR Terms of Reference UGTT Workers’ Union (Union Générale des Travailleurs Tunisiens) UN United Nations UNDP United Nations Development Programme UTICA Employers’ Association (Union Tunisienne de l’Industrie, du
Commerce et de l’Artisanat)
Vice President: Acting Country Director: Sector Director: Sector Manager: Task Team Leaders:
Shamshad Akhtar Françoise Clottes Steen Jorgensen Roberta V. Gatti Rebekka E. Grun/Roberta V. Gatti
TUNISIA EMPLOYMENT DEVELOPMENT POLICY LOAN
TABLE OF CONTENTS
LOAN AND PROGRAM SUMMARY ..............................................................................................i I. INTRODUCTION .............................................................................................................................1 II. COUNTRY CONTEXT ......................................................................................................................2
A. RECENT ECONOMIC DEVELOPMENTS IN TUNISIA ................................................................2 B. MACROECONOMIC OUTLOOK AND DEBT SUSTAINABILITY ........................................13
III. THE GOVERNMENT’S PROGRAM AND PARTICIPATORY PROCESSES ........................16 A. DEMAND FOR LABOR FROM ENTERPRISES AND INNOVATION ...................................17 B. SUPPLY OF LABOR AND SKILLS THROUGH THE EDUCATION SYSTEM .....................18 C. POLICIES TO FACILITATE THE MATCHING OF LABOR DEMAND AND SUPPLY IN THE NATIONAL AND INTERNATIONAL LABOR MARKETS ..................................................19 D. PARTICIPATORY PROCESS .....................................................................................................24
IV. BANK SUPPORT TO THE GOVERNMENT’S PROGRAM .....................................................25 A. LINK TO CPS ...............................................................................................................................25 B. COLLABORATION WITH THE IMF AND OTHER DONORS ................................................26 C. RELATIONSHIP TO OTHER BANK OPERATIONS ................................................................27 D. LESSONS LEARNED ..................................................................................................................28 E. ANALYTICAL UNDERPINNINGS ............................................................................................29
V. THE PROPOSED TUNISIA EMPLOYMENT DPL SERIES ......................................................31 A. OPERATION DESCRIPTION .....................................................................................................31 B. LOAN AMOUNT AND SEQUENCING .....................................................................................31 C. POLICY AREAS ...........................................................................................................................31
VI. OPERATION IMPLEMENTATION ..............................................................................................46 A. POVERTY AND SOCIAL IMPACTS .........................................................................................46 B. ENVIRONMENTAL ASPECTS ..................................................................................................50 C. IMPLEMENTATION, MONITORING AND EVALUATION ...................................................51 D. FIDUCIARY ASPECTS ...............................................................................................................51 E. DISBURSEMENT AND AUDITING ...........................................................................................52 F. RISKS AND RISK MITIGATION ................................................................................................53
ANNEX 1: LETTER OF DEVELOPMENT POLICY ................................................................................57 ANNEX 2: EMPLOYMENT POLICY MATRIX ........................................................................................68 ANNEX 3: FUND RELATIONS NOTE ........................................................................................................74 ANNEX 4: COUNTRY AT A GLANCE .......................................................................................................77 ANNEX 5: COUNTRY MAP IBRD 33500 ...................................................................................................80
The Loan was prepared by an IBRD team consisting of Rebekka E. Grun (Task Team Leader and Senior Economist), Roberta V. Gatti (co-Task Team Leader and Sector Manager), Bénédicte Leroy de la Brière (Senior Economist), Daniela Marotta (Country Economist), Ndiamé Diop (Senior Economist), Leila Zlaoui (Adviser), Diego Angel (Senior Economist), Anas Abou El Mikias (Sr. Financial Management Specialist), Lene Lind (Sr. Social Development Specialist), Ingrid B. Ivins (Statistician), Stefanie Brodmann (Junior Professional Officer), and Emma Paulette Etori (Language Program Assistant). The team worked under the overall guidance of Steen Lau Jorgensen (Sector Director). The legal counsels were Ghada Youness and Jean-Charles de Daruvar and the financial officer Renee Desclaux. The Project Document benefited from excellent comments from peer reviewers: Ana Revenga, Mark Thomas and Daniel Dulitzky and excellent inputs from Michael Hamaide and Eavan O’Halloran. Excellent administrative support was provided by Emma Etori. The team also benefitted from interactions with colleagues from the European Commission (Francoise Millecam, Massimo Mina and Nabil Ben Nacef) and is greatly indebted to many Government of Tunisia officials who graciously contributed their time and knowledge. Special thanks are due to Mr. Ali Sanaa, Ministerial Counselor at the Ministry of Vocational Training and Employment and Mr. Abdelhamid Triki, Secretary of State at the Ministry of Development and International Cooperation and their collaborators for their productive cooperation.
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LOAN AND PROGRAM SUMMARY
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
PROGRAM DOCUMENT
FOR A PROPOSED EMPLOYMENT DEVELOPMENT POLICY LOAN
TO THE REPUBLIC OF TUNISIA
Borrower Republic of Tunisia Implementing Agency Ministry of Development and International Cooperation (MDIC) Financing Data IBRD Loan; amount: US$50 million
Financing terms: US dollar denominated Commitment linked IBRD flexible loan with a variable spread, with a final maturity of 30 years including 5.5 years grace period
Operation Type Programmatic Series consisting of two single-tranche Development Policy Loans (DPL). The tranche for the first DPL (DPL I) is to be disbursed upon effectiveness, following the Bank’s review of policy actions implemented as per the loan agreement, and of the Borrower’s macroeconomic policy framework.
Main Policy Areas
1. Facilitate employment through active labor market policies (ALMP);
2. Enhance domestic and international mobility of the labor force; and
3. Strengthen the monitoring, evaluation and dissemination of employment data and mainstream evidence-based policy-making.
Key Outcome Indicators Increased employment for recent graduates More effective public labor market intermediation Better targeting and coverage of public employment services More efficient provision of employment services through
increased private sector involvement Moving from job protection to income protection More and better matching of migrants to jobs abroad Regular transmission of data from public institutions to the
National Statistical Office from public institutions Increased international comparability of national statistical data.
Program Development Objective(s) and Contribution to CPS
Within the overall program objective of improving the effectiveness and efficiency of job entry in Tunisia, this first Development Policy Loan (DPL) will improve active labor market programs, labor intermediation and the information base for guiding employment policies. The DPL series mainly supports pillar I of the Country Partnership Program (CPS) –“Growth, Competitiveness and Employment” and, to a lesser extent, pillar III “Quality of service delivery”.
Risks and Risk Mitigation
There are four moderate to high risks covering the political, macro, institutional and technical spheres and mitigation measures have
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been set up to address each of these: 1. On the political side, the Government of Tunisia may be
unwilling to undertake reforms that may be perceived as challenging social cohesion. To limit this risk, while promoting greater efficiency and equity, the consensus building process should include wide participation from key stakeholders. The actions supported by this DPL will serve as first steps in building momentum for reform.
2. In terms of macroeconomic risks, Tunisia is still experiencing the aftermath of the crisis and changes in employment opportunities will depend on the business cycle. The program includes measures to mitigate the crisis’ impact on employment in the short and long term.
3. Ensuring adequate institutional and technical capacity to support the implementation of reforms and ensuring cooperation between different ministries is a key challenge. Additionally, ministerial personnel changes at high technical and political levels can happen without prior notice and affect the ownership of the DPL series. The Government of Tunisia is aware of this and has augmented the teams for international cooperation and statistics in the Ministry of Vocational Training and Employment (MVTE), and has formed inter-ministerial commissions with representatives from ministries as well as other concerned parties.
Operation ID P117161
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INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
PROGRAM DOCUMENT
FOR A PROPOSED EMPLOYMENT DEVELOPMENT POLICY LOAN
TO THE REPUBLIC OF TUNISIA I. INTRODUCTION
1. The Government of Tunisia declared employment the number one priority in its XIth National Development Plan (NDP) 2007-2011. Achieving a lower unemployment rate will require demand side interventions, including private sector development, increased competitiveness, and innovation; supply side interventions, including education and vocational training systems; and effective labor market intermediation to match demand and supply.
2. The Government has requested World Bank support for this integrated approach to address employment issues through the Country Partnership Strategy (CPS) (2010-2013) comprising a number of operations. These include, on the labor demand side: (1) the Integration and Competitiveness Development Policy Loan (DPL), Third Export Development Project, and Energy Efficiency Project; on the labor supply side: the (2) Higher Education Quality and Skills Development Projects; and in terms of matching demand and supply (3) this proposed Employment Development Policy Loan (DPL) series (DPL I and DPL II).
3. In particular, this proposed Employment DPL supports the efforts of the Government in generating quality jobs by advancing the structural transformation of the economy and ensuring an adequate institutional setting for efficient matching of labor demand and supply.
4. The Government has invited the Bank and the European Commission (EC) to join forces to support the above objectives on the basis of a shared vision over a five-year perspective. Financial support would be granted first from the World Bank followed by the EC, including the following coordinated instruments over the next five years: (a) reform financing through two-single tranche DPLs in 2010 and 2011 (World Bank) and budget support from 2012 to 2014 (EC), which will support a common set of reforms to improve the functioning of the labor market, especially young graduates’ school-to-work transition; (b) technical assistance from both the Bank and the EC, which will build the capacity for employment intermediation and labor market analysis; and (c) Bank-facilitated trust funds to pilot innovative forms of employment in social entrepreneurship. In addition, the United Nations Development Programme (UNDP) supports the Government’s preparation of several targeted studies that inform actions in DPL II.
5. This is the first time that the Government has requested external support in this area which is largely a result of the trust that has been built gradually between the Government and the World Bank with regards to employment issues since 2000. The proposed DPL follows the pattern of collaboration between the Government and the Bank which has characterized joint work in other sectors: initially cautious and specific steps that were critical in laying the foundation for reliable and sustained reforms in priority policy areas such as competitiveness, infrastructure, and macroeconomic policy. The national political economy in Tunisia requires a gradual, consensus-based approach involving all stakeholders as an effective way to achieve sustainable and far-reaching reform.
6. This Program Document (PD) summarizes the program agreed during the last 12 months during various missions, by the Bank, the EC, and representatives of the Government. The identified
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policy matrix covers: (i) short-term measures supported by this first proposed DPL (DPL I), to be realized by May 2010, (ii) potential medium-term measures, to be realized in a second DPL (DPL II) by mid 2011, and (iii) a shared vision of achievements, to be realized by the end of this 5-year program. It also contains performance indicators to be achieved by May 2012 (one year after the end of DPL II).
II. COUNTRY CONTEXT 7. Tunisia’s main challenges for the future are to ensure the generation of quality jobs, the supply of an adequately skilled workforce, and a dynamic and efficient matching between jobs and workers. Despite an excellent macroeconomic track record, the pace of job creation has not kept up with the growth of the labor force and has been aggravated by the recent economic crisis. Furthermore, the gap between the rising share of new labor market entrants holding university degrees and the number and type of available jobs needs efficient labor market mediation. A. RECENT ECONOMIC DEVELOPMENTS IN TUNISIA
Growth and Employment
8. In the past decade Tunisia has shown consistent economic growth as a result of sound economic policies and steady structural reforms. Tunisia experienced an average annual growth of 4.8 percent in GDP over the last eight years, placing the country among the leading performers in the Middle East and North Africa (MENA) region and in emerging economies, more generally, where average growth rates in GDP were around 4.5 percent and 4 percent, respectively. Tunisia’s growth performance reflects the positive effects of macroeconomic stability coupled with a gradual but steady opening to trade and foreign investment. This dynamic growth has been driven by increased exports and foreign direct investment (FDI) inflows, and by large public investments and vigorous private consumption (the largest component of real GDP). Overall, Tunisia’s macro-economy is consistently sound. The fiscal deficit is modest (-1.2 percent in 2008), public debt decreased from 59.7 percent of GDP in 2004 to 47.1 percent in 2009, inflation is low (3.5 percent in June 2009), external debt has dropped significantly in recent years (below 52 percent of GDP in 2008 from 71.4 percent in 2004) and reserves are currently at healthy levels (approximately 5.5 months of imports in 2009).
9. The economy grew by 3.1 percent in the third quarter of 2009 compared with the same period in 2008, as a result of strong growth in agriculture and steady expansion in public and commercial services which more than offset a contraction in the manufacturing industry induced by the crisis-driven slump in exports (down by 22 percent in 2009) .
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Table 1: Key Economic Indicators 2005 2006 2007 2008 2009 2010
(est)
Real sector
Real GDP growth 4.0 5.5 6.3 4.5 3.1 4.0
Real GDP per capita growth 3.0 4.5 5.3 3.5 2.3 2.8
Agriculture 11.2 10.8 10.3 9.7 10.0 9.5
Industry 28.9 29.2 29.6 28.4 30.0 30.0
Services 59.9 60.1 60.0 60.7 60.0 60.5
Money and prices
CPI inflation 2.0 4.5 3.2 5.0 3.7 4.5
Money (M3) 10.3 11.0 11.4 9.9 12.1 10.5
Investment & saving
Total Investment 21.8 23.4 23.9 24.9 25.9 26.4
Gross Domestic Savings 21.4 22.4 23.2 23.6 22.6 23.1
Government finance
Revenue (excluding grants & privatization) 23.7 24.1 24.6 24.8 24.6 24.7
o/w: tax revenue 21.0 20.6 21.3 21.6 21.4 21.8
Total expenditure and net lending 26.9 27.0 27.5 27.8 27.7 27.8
Current 20.5 20.0 20.3 21.4 21.5 21.2
Capital & NL 6.5 7.0 7.3 6.4 6.2 6.8
Overall balance (deficit(-), commitment basis) -3.2 -2.9 -2.9 -1.2 -3.3 -3.5
External sector
Current account (million US$) -304 -619 -910 -1605 -1092 -1103
Exports FOB(million US$) 10488 11707 15164 19217 14428 17202
Imports FOB(million US$) 12456 15052 19093 24586 19040 20373
Net non-factor services and transfers(million U 1,664 2,726 3,019 3,764 3,520 2,067
Gross reserves(million US$) 4,448 6,773 7,851 9,476 9,895 10,045
Gross reserves (months of imports GNFS) 3.6 4.9 4.5 4.2 5.5 5.2
Current account balance (% of GDP) -1.1 -2.0 -2.6 -4.2 -2.8 -2.9
Total External Debt
Total Debt Stock (million US$) 17,662 18,480 20,300 20,700 20,132 19,856
Medium & long term(million US$) 14,596 15,144 16,636 16,963 16,990 16,600
Short term(million US$) 3,066 3,336 3,664 3,737 4,305 4,782
Debt to GDP Ratio (%) 61.0 59.7 55.2 51.9 52.5 52.3
Debt Service Ratio (%) 12.9 14.4 13.3 9.3 11.2 9.5
Memorandum items:
Nominal GDP (in million TD) 37,767 41,408 45,629 50,325 53,419 55,501
Exchange rate, average (TD/US$) 1.297 1.329 1.280 1.23 1.34 1.3
GDP (in million US$) 29,110 31,148 35,650 40,885 39,865 42,693 Source: Official data and World Bank staff estimates Note: GNFS= Goods and Non Factor Services; CIF= cost, insurance and freight; FOB=free on board
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10. The financial crisis has had a moderate effect on the financial sector, but a deeper and more profound effect on the real economy. Macroeconomic stability was relatively unaffected in the initial stages of the global financial crisis. This was due to a number of factors including: (i) the absence of a “sub-prime” problem: real estate loans represent only 10 percent of GDP (compared with close to 90 percent in the US); (ii) little foreign exposure of local banks; (iii) relatively low (28 percent) foreign participation in the stock market; (iv) limited public debt (48.2 percent in 2008) and prudent macroeconomic management; and (v) non-convertibility of the dinar for most capital-account transactions. The main channel of transmission of the crisis has been trade. Depressed external demand (particularly from the EU, which is the destination of 76 percent of Tunisian exports) resulted in a drop of over 25 percent in export value in the first seven months of 2009, showing a slight recovery only towards the end of the year (total drop in export values was 18 percent). This eventually translated into a reduction in manufacturing output. Overall the Index of Industrial Production dropped almost 6 percent in 2009 alone and over 15 percent from 2007.
Figure 1: Index of Industrial Production - Annual Change
Index of Industrial Production‐ annual change
‐10
‐5
0
5
10
15
2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: INS (National Statistical Institute) data 11. The sharp decline in industrial production resulted in the loss of 38,000 manufacturing jobs between 2008 and 2009 (second quarter). In addition, officials believe that a similar number of jobs (30,000) were not created during the year as a result of the global crisis. The annual unemployment rate, however, seems to have only slightly increased by a one-half of a percentage point to reach 14.7 percent of the active population in 2009, according to the latest official data. A more severe impact on unemployment was not experienced largely as a result of labor market regulations which have made firing difficult; and as a result of payroll tax relief provided to companies most likely to be facing market pressures. It should be noted, however, that the official employment data do not take into account employment and earnings adjustments in the informal sector or employment of individuals with term-contracts that were not renewed. The latter is likely to affect mostly young workers not completely established in the labor market, who in large part, hold term-contracts.
12. The Government has taken several short term stimulus measures to support the real economy in response to the slowdown. These have included steps to: (1) increase public investment by 20 percent with the 2009 Budget Law; (2) assist exporting firms through measures such as providing: (i) subsidies towards the employer’s cost of social security (50 percent for firms witnessing a dramatic fall in exports to Europe; 100 percent for firms that have had to cease production and run down stocks); (ii) a subsidy of 50 percent of the cost of export insurance; and by modifying existing and adopting new
5
procedures, including: (iii) an acceleration of procurement procedures for public contracts granted to the local private sector; and (iv) selected reforms to enhance integration as well as improve the business climate and strengthen the financial sector.
13. After inflationary pressures in mid-2008, which ended with the Consumer Price Index (CPI) reaching 5 percent, inflation eased to 3.7 percent in 2009 as a result of a decrease in the price of basic products (food and oil) and an appropriate monetary policy. The CPI is expected to increase in 2010 to 4.5 percent, due to external factors (larger imported inflation from higher commodities prices but also inflationary pressures coming from a depreciation of the exchange rate to raise competitiveness) and internal pressures (as the planned annual rises in public-sector pay and the minimum wage—which will also drive up non-agricultural private-sector wages by almost 4 percent a year). It will, however, remain contained as a result of appropriate monetary policy. The Central Bank of Tunisia (BCT) reduced the key inter-bank rate from 5.25 percent to 4.5 percent in February 2009 for the first time in 30 months to control excess liquidity and introduced “new instruments" to ease credit flow and liquidity in the banking system1. The authorities reaffirmed the objective of a freely floating exchange rate, which have since been delayed by the global financial crisis. During 2009, the dinar (which is pegged to a basket of currencies, of which the euro accounts for around two-thirds) depreciated by 1.9 percent against the euro and remained almost stagnant against the US dollar.
Figure 2: Evolution of the Consumer Price Index
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 proj
Source: World Bank projections and official historical data provided by INS
14. The pace of the transformation of Tunisia’s production structure has been slow and not adequate to move the economy up towards high value-added sectors. Domestic commercial services (except for tourism) dominate the economy, representing almost 48 percent of GDP (and 38.8 percent of total employment) in 2008. The manufacturing sector (19.7 percent), the largest exporting sector, is quite diversified with textiles and clothing (4.7 percent of GDP), agro-industry (4.7 percent) and mechanical and electrical engineering (4 percent of GDP) sectors being the most prominent. Agriculture also remains important in size, accounting for a little less than one-tenth of GDP and 18.3 percent of total employment. The evolution of the domestic private investment rate, in contrast to that of FDI, followed a declining trend in the most recent years from over 11 percent of GDP in 1 These instruments include: i) an increase of the capital base of the bank for small and medium-sized enterprises (Banque de financement des petites et moyennes enterprises) by TDN 30 million (US$24 million); and (ii) a reduction in the reserve requirements for all banks from January 2009.
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2003 to 8.9 percent in 2008. Further, employment-output elasticities have gone up since 1995 (excluding the agricultural sector), reflecting lower labor productivity and a growth in lower value-added jobs.2 A longer term challenge will be to change the structure of the economy and this is currently being addressed by the Integration and Competitiveness DPL that was approved by the Bank in FY09 in support of Tunisia's trade, business climate and financial sector reforms program
15. In spite of solid growth, unemployment remains a persistent problem. Tunisia has a relatively high unemployment rate at 14.7 percent (compared to 6.4 percent for all middle income countries, 2008). The overall rate masks a striking divergence by age, with younger groups of the labor force being more affected (see Figure 3). Unemployment increasingly affects the better educated, although low- and medium-skilled workers still make up the bulk of the unemployed. As Figure 3 shows, the unemployment rate of higher education graduates, which was below 5 percent in 1994, has increased significantly to 23 percent in 2009. However, among the stock of the unemployed, 40 percent have completed secondary education, 35 percent have completed primary while only 20 percent have a university degree.
Figure 3: Unemployment Rate by Age and Education Level, 1994-2009
By age, 1994-20073 By education level (all ages), 1994-2009
0%
5%
10%
15%
20%
25%
30%
35%
40%
1994 1999 2004 2005 2006 2007
15-19
20-24
25-29
30-34
35-39
40-44
45-54
55+
Total
0%
5%
10%
15%
20%
25%
1994 1999 2004 2005 2006 2007 2008 2009
Primary
Secondary
Higher
None
Average
Source: INS (National Statistical Institute), 2009. 16. In the near future, unemployment numbers will likely worsen, especially for university graduates, because of still growing labor supply, insufficient demand, and a poorly functioning labor market leading to long unemployment spells, on average. With the labor force projected to grow at an annual rate of above 2 percent until 2012, between 70,000 and 80,000 new jobs would be needed each year only to absorb the new entrants (i.e., without taking into account the current stock of the unemployed).4 Furthermore, a large and growing share of new labor market entrants will hold university degrees (from 60,900 in school year 2006-2007 to 79,900 in school
2 Robalino et al. (MILES I) (2007). “Skills Development, Social Insurance and the Labor Market: towards an Integrated Strategy”, World Bank Policy Note. 3 Note that more recent years are only available with a different and broader age cut. However, the trend of divergence between younger and older cohorts in terms of their experience in this regard continues in 2008 and 2009. 4 Robalino et al. (MILES I) (2007). “Skills Development, Social Insurance and the Labor Market: towards an Integrated Strategy”, World Bank Policy Note.
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year 2010-11), while only a limited number of jobs (about 30,000) at university graduate level are typically created every year (see Table 2).
Table 2: Destruction and Creation of New Jobs by Education Attainment
2003 2004 2005 2006 2007
Illiterate (2,800) 100 6,800 (9,700) (16,800)
Primary Education 26,100 (32,800) (800) 21,100 37,400
Secondary Education 38,700 55,100 50,900 41,700 26,600
Higher Education 30,300 36,500 21,300 23,200 32,000
TOTAL 92,300 58,900 78,200 76,300 79,200
Source: Staff calculations based on INS (National Statistical Institute) data
17. In addition, the education system does not respond to the needs of the labor market, leading to simultaneous over-supply of graduates and shortages of vocational technicians. University graduates who do work often find themselves over-qualified or in jobs that do not match their acquired skills. Approximately 28 percent of graduates are not working in jobs using their levels of education three and a half years after graduation, while 15 percent are matched to a job outside their area of training.5 Reform of the education system is being supported by the World Bank through the Education, Higher Education and Skills Development projects.
18. Movement in- and out of jobs is low and unemployment spells are long. Between 2002 and 2008, the number of layoffs reached only 0.3 percent of total employment, while the comparable figure for Organization for Economic Co-operation and Development (OECD) countries is 10 percent (OECD 1996). The average duration of search for the first job or between two jobs is long. One-half of the workforce report having searched between 10 and 24 months (Labor Force Survey, 2007).6 It is not surprising that in this context, newcomers, such as the young and women (women’s unemployment rate is close to 18 percent vs. 13 percent for men), face a more difficult labor market situation. In addition to higher unemployment rates, women are considerably less active in the labor market than men. In 2008, the labor force participation rate among women aged 15 to 64 was 28 percent, compared to 74 percent among men (ILO, 2009).
19. Informal employment and fixed term contracts are increasingly more widespread than open-ended contracts (see Figure 4). Fifty-four percent of those in the workforce do not have a contract, and over 40 percent of graduates in their first job have a fixed term contract only.
5 Grun et al. (MIILES II) “Labor Demand, Skills Supply and Employment”, 2008. 6 Up until 2009 the Labor Force Survey (LFS) was carried out on an annual basis. Quarterly surveys are currently being tested and results are not published. World Bank has access to LFS micro data tabulations for 2007 for a limited set of variables.
8
Figure 4: Structure of Job Contracts in the Workforce
Graduates, 3.5 years after graduation
Salaried workers Employed workforce
Other contracts (ALMP etc) 13 0 0
Open Ended 26.1 47.1 33.37
Fixed Term 40.5 17.65 13.06
Does not have a contract 20.5 35.26 53.57
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Source: Labor Force Survey 2007
20. These labor market dynamics are most likely attributable to rigidities and transaction costs of formal employment required by the Labor Code. Flexibility in formal employment is very limited. Tunisia scores the highest in the region on the difficulty of firing index, which relates to the notification and approval requirements for termination of a redundant worker and existing obligations to reassign or retrain redundant employees. For instance, an employer typically needs to request authorization from and notify the regional board or central commission for dismissal control prior to laying off any open-ended worker for economic reasons. Further, temporary assignments, labor leasing and the use of temping agencies are forbidden. The Labor Code also requires sector-wide collective agreements between employers and employees to determine further details of contractual (hiring and layoff) procedures, as well as salary scales according to professional category.
9
Figure 5: Employment Regulation Indicators (Tunisia in the International Context)
80
0 20 40 60 80 100
South Asia
Sub‐Saharan Africa
Middle East & North Africa
Eastern Europe & Central Asia
Latin America & Caribbean
OECD
East Asia & Pacific
Tunisia
Egypt, Arab Rep.
Jordan
Iran, Islamic Rep.
Morocco
Syrian Arab Republic
Algeria
Djibouti
Lebanon
Yemen, Rep.
Iraq
Qatar
Turkey
West Bank and Gaza
Difficulty of redundancy index (0‐100)
40
0 10 20 30 40 50 60 70
Sub‐Saharan Africa
Eastern Europe & Central Asia
Latin America & Caribbean
OECD
South Asia
Middle East & North Africa
East Asia & Pacific
Morocco
Djibouti
Algeria
Tunisia
Turkey
West Bank and Gaza
Iran, Islamic Rep.
Egypt, Arab Rep.
Lebanon
Iraq
Jordan
Yemen, Rep.
Syrian Arab Republic
Israel
Oman
Qatar
Saudi Arabia
United Arab Emirates
Kuwait
Rigidity of employment index (0‐100)
Source: Doing Business (2010)
21. In addition, the Labor Code stipulates that centralized wage-setting determines the default private sector wage scales. Currently, in each sector, centralized employer and employee representatives agree to a pay-scale with wage ranges for different professional levels. Countrywide, the overarching collective agreement ‘Convention Collective Cadre’ between the UTICA7 (employer representation) and the UGTT8 (general trade union) determines the default framework. Individual companies can deviate from the Convention if needed, within a regulated negotiations protocol9, but only in agreement with their worker representatives. According to the Labor Inspection, the application of the Convention is enforced. 22. Centralized wage setting can lock in an exogenous rise in unemployment. This might occur, for example, as a result of an oil-price or demographic shock. More specifically, this will occur when on the employee side, wages are monopolistically negotiated by unions whose members are all employed. The unemployed, who would profit from a wage reduction against an increase in jobs, do not typically have a voice in this process. As a consequence, the negotiations rarely result in stagnating or lower wages, even if this would reduce the 7 Union tunisienne de l’industrie, du commerce et de l’artisanat 8 Union générale des travailleurs tunisiens 9 Convention Collective Cadre (1973), Article 3
10
unemployment rate.10 This situation is not unique to Tunisia. However, the results of this process can be particularly severe if the unemployed are largely first time job-market entrants as is the case in Tunisia.
23. At the same time, only permanent workers laid off for economic reasons are entitled to unemployment assistance. This leaves many unprotected and reinforces the dual nature of the labor market. The unemployment assistance program in Tunisia is currently financed by the Caisse Nationale de Sécurité Sociale (CNSS) and administered by the CNSS, the Ministry of Social Affairs, Solidarity and Tunisians Abroad (MSASTA) and the Ministry of Vocational Training and Employment (MVTE). The potential benefit duration is 12 months, and the level of the benefit is equal to the minimum wage (salaire minimum interprofessionnel garanti, SMIG). The benefit is only available to workers who have been laid off for economic or technological reasons and who have three or more years’ tenure with the former employer.11 Other laid-off workers, regardless of whether they have open-ended or fixed-term contracts or are in the informal sector, are not eligible for unemployment assistance12 (but they may be covered through Active Labor Market Policies, ALMPs). As a result, the program currently provides benefits to only a small number of eligible participants. In 2008, 1,441 individuals received benefits, equivalent to only 28 percent of those who had lost an open-ended contract job during that year. And according to the latest figures (2007), only 5.4 percent of all dismissed workers had been laid off for economic or technological reasons, i.e., were eligible at all.13
24. In sum, the Tunisian labor market displays high and persistent unemployment, limited mobility and income protection for vulnerable workers, and a dual structure. In this context, informal and term employment (i.e. jobs not covered by open-ended contracts and/or social security and often without long term career prospects) has increasingly provided a needed flexibility valve for the private sector, affecting disproportionately women and youth.14
25. Finally, there remains ample room to capitalize on the positive externalities of international migration. According to government sources, approximately 9 percent of Tunisia’s population lives abroad. Of those, 85 percent live in European countries, predominantly in France.15 Emigration rates are particularly high among Tunisians who are young and male. Approximately 23 percent of new entrants to the labor force emigrate.16 Migration can ease pressure on the labor market in the short term and provide benefits to Tunisia
10 See, for example, Benassy, Jean-Pascal (May, 1995): “Nominal Rigidities in Wage Setting by Rational Trade Unions”, The Economic Journal, Vol. 105, No. 430, pp. 635-643; and Gaertner, Manfred (June 1981): “A Politico-economic Model of Wage Inflation”, De Economist, Springer Netherlands, Vol 129, No. 2, pp 183-205. 11 Dismissed workers and their family members are guaranteed the continuation of the right of health care and family allowances for one year from the date of termination. If the dismissed worker has not resumed gainful employment after the expiration of these benefits, needy families can receive free medical assistance and low income families have access to medical assistance at a reduced rate. 12 The existing system gives the Minister of Social Affairs the possibility to grant exceptional aid in those situations in which workers do not meet the conditions required. 13 International research suggests that the case of Tunisia is not unique, as countries with less developed social systems to protect individuals against unemployment risks are more likely to also have protective employment regulations, See Heckman, J., Pages, C. (2004) “Introduction”, in Law and Employment: Lessons from Latin America and the Caribbean. J. Heckman, Pages. C. (Eds.) Chicago, NBER. 14 Please note that Tunisian labor law institutes the principle of gender equality, including equal pay (e.g., article 5 of the Labor Code). 15 Schramm, Christoph (2009). “Migration from Egypt, Morocco, and Tunisia. Synthesis of Three Case Studies.” World Bank. 16 Martin, Ivan (2009). “Labour Markets Performance and Migration Flows in Arab Mediterranean Countries. A Regional Perspective.” Final Report. Robert Schuman Centre, European University Institute, Florence, Italy.
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in the long term. Currently, however, the lack of proper regulation of agencies that offer international employment intermediation, resulting in potentially fraudulent practices, the non-equivalency of diplomas leading to migrants struggling to signal their skills abroad, and the lack of data hamper the optimization of migration benefits.
Fiscal and Current Accounts
26. After a marked improvement in the country’s fiscal position in 2008 (with a deficit of 1.2 percent of GDP), fiscal deficit rose to 3.3 percent in 2009. This level of deficit can be considered contained, considering the boost in expenditures the Government authorized an increase in investment and stimulation of consumption in the supplementary Finance Law approved in July 2009. Public investment increased by 20.5 percent during the year and the measures introduced in January 2009 to support exporting firms hurt by declining exports were maintained for the entire year. The public debt ratio declined from 50 percent in 2007 to 47.5 percent in 2008. It continued to decrease despite the stimulus measures17 amounting to 47.1 percent of GDP in 2009, well below the 49.4 percent level budgeted in the complementary Budget of July 2009, as a result of increased fiscal revenues and decreased cost of subsidies.
Table 3: Fiscal Performance 2001-2009
2001 2002 2003 2004 2005 2006 2007 2008 2009*Fiscal revenues (% GDP) 21.6 21.5 20.6 20.6 21 20.6 20.8 22.5 21.9Non-fiscal revenues** (% GDP) 3 4.2 3.7 4.2 3.7 5.1 4.3 3.8 3.8Primary expenditures (% GDP) 25.1 25.1 24.7 24.2 24.4 24.2 24.9 24.2 24.9Interest expenditures (% GDP) 3.1 3.1 2.8 2.8 2.8 2.7 4.6 -3.3 3.3Fiscal deficit excl. gr. and priv. (% GDP) -3.5 -3.3 -3.4 -2.8 -3.2 -2.9 -2.9 -1.2 -3.3Primary deficit excl. priv. (% GDP) -0.4 0 -0.4 0.2 -0.2 0 0.6 1.8 -0.7Memo: Public debt (% GDP) 62.4 61.6 60.4 59.7 58.4 53.9 50.0 47.5 47.1Source: Official data, IMF and World Bank data * Results for 2009 are preliminary Non-fiscal revenues (*) include oil royalties, revenues from public participations to private oil companies, receipts from Algeria-Italy gas pipeline, grants and privatization receipts. 27. The current account deficit widened considerably to -4.2 percent in 2008, due to a sharp decline in the volume of exports (1.1 percent against 14.1 percent in 2007). The slowdown in export growth was generalized, with textiles, mechanical and electrical goods, agricultural products, and energy and phosphates, all either declining in value or showing significantly slower export growth. Imports also slowed slightly from 12.1 percent in 2007 to 6 percent in 2008 primarily as a result of much cheaper oil, but slowing domestic demand meant that key
17 The Government has taken several short term stimulus measures to support the real economy in response to the slowdown. These have included steps to: (1) increase public investment by 20 percent with the 2009 Budget Law; (2) assist exporting firms through measures such as providing: (i) subsidies towards the employer’s cost of social security (50 percent for firms witnessing a dramatic fall in exports to Europe; 100 percent for firms that have had to cease production and run down stocks); (ii) a subsidy of 50 percent of the cost of export insurance; and by modifying existing and adopting new procedures, including: (iii) an acceleration of procurement procedures for public contracts granted to the local private sector; and (iv) selected reforms to enhance integration as well as improve the business climate and strengthen the financial sector.
12
imported consumption items also decreased. In 2009, the deficit was reduced to -2.9 percent, as a result of a decreased trade deficit, increased tourism receipts (+2.1 percent) and workers’ remittances (8 percent) which balanced the trade deficit on the services side. The improved trade balance was due to a fall in the import bill of US$3.3 billion (15 percent) that more than offset the fall of US$3.1 billion (17.6 percent) in export earnings. The capital account registered a surplus of US$2.7 billion surplus, which was primarily the result of a 43 percent increase to US$2.6 billion in public and private overseas borrowing that outweighed a 32 percent fall to US$1.7 billion in foreign direct and portfolio investment. Overall, the external account registered a surplus of US$1.6 billion in 2009, slightly higher than the surplus for 2008. Tunisia remains in a solid external position, with comfortable reserves level of US$ 9.8 billion (approximately 5.5 months of imports, 2009).
Figure 6: Current Account Deficit and Gross Official Reserves (Months of Imports)
3 .4 3 .6
4 .94 .5
4 .2 5 .5
‐2 .0‐1 .1
‐ 2 .0‐2 .6
‐4 .2
‐2 .8
‐ 6 .0
‐ 4 .0
‐ 2 .0
0 .0
2 .0
4 .0
6 .0
2 004 200 5 200 6 20 07 2 008 200 9
G ro ss r e se r ve s (m o nt hs of im p or ts GN F S )
C ur ren t a cco un t de fi ci t ( % o f G DP ) Source: World Bank projections and official data
Financing of the Economy
28. The Tunisian financial sector has only been moderately affected by the international crisis. The Government has continued their long-term strategy of reinforcing the banking sector, which has led to a decline in the ratio of non-performing loans to total loans from 17.6 percent in 2007 to 15.5 percent in 2008 and an increase in the provisioning ratio from 53.2 percent in 2007 to 56.8 percent in 2008. The authorities intend to continue this effort even after they reach their targets of 15 percent and 70 percent, respectively, in 2009. Tunisia’s sovereign spreads (Emerging Markets Bond Index (EMBI) Global spreads) have increased to more than 600 basis points as of December 1, 2008, (with a 12-month high of 656 which is also an all-time high for Tunisia), reflecting a higher country risk resulting from the volatile global financial environment. Still, Tunisia’s sovereign spreads remain below the MENA regional average (close to 900 basis points). The main international rating agencies (S&P, Fitch, R&I) reaffirmed the rating for Tunisia in 2009 and 2010, keeping it stable with respect to the past year, reflecting confidence in the ability of the country to maintain steady economic and fiscal management which will contain the worst effects of the financial crisis.
13
29. To address financing needs without crowding out the private sector in the domestic market and without having to issue new bonds in the international market, the Government decided to reduce domestic financing and increase external borrowing from official sources. In the first half of 2009, Tunisia raised US$600 million from official sources for an Integration and Competitiveness DPL (including US$250 million from the World Bank). The proposed Employment DPL series, with a first loan of US$50 million, also contributes to this objective. B. MACROECONOMIC OUTLOOK AND DEBT SUSTAINABILITY
30. Real GDP growth is expected to rise to 4 percent in 2010 and increase to 5 percent from 2011. With the economy of the EU, Tunisia’s main trading partner, expected to start its recovery (+1 percent in 2010 and 1.6 percent in 2011, source World Economic Outlook 2010), Tunisia’s growth will also pick up in 2010. Agriculture and energy are expected to contribute positively to growth, as are most services sectors (notably trade and telecommunications). Manufacturing industries (which account for 19 percent of GDP) should start their, albeit slow, recovery in 2010. Accelerated and expanded public investment will also contribute to an increase in the pace of growth in 2010. Internal demand, especially private consumption and public investment, will act as the main driver of growth, supported by the Government’s stimulus plan. However, the effect of the Government stimulus plan on the economy will be constrained by the erosion of fiscal space.
31. Inflation (CPI) will most likely rise to 4.5 percent in 2010 due to both external factors (larger imported inflation from higher commodities prices but also inflationary pressures coming from a depreciation of the exchange rate to raise competitiveness) and internal pressures (as the planned annual rises in public-sector pay and the minimum wage - which will also drive up non-agricultural private-sector wages by almost 4 percent a year). Inflation, however, will remain at reasonable levels, thanks to efficient monetary policy and targeted interventions to reduce excess liquidity and keep inflation under control. Further, the inflation rate will begin to recede in 2011 as external conditions start to stabilize.
32. Tunisia’s external position will remain positive and stable in 2010. The current account will remain around -2.9 percent of GDP. The trade balance will not change considerably, as export earnings will increase more than the import bills, which will be affected by the increase in commodities prices. The service surplus will widen modestly thanks to tourism receipts and remittances from abroad as the world economy recovers. FDI will most likely recover with a return to the availability of funds. Overall, Tunisia will remain in a solid external position, with a comfortable level of reserves (around 5 months of imports).
33. The Government intends to continue pro-active public debt management through: (i) early repayment of high-interest debts; (ii) active management of the risk related to the interest rate (in 2008, only 8 percent of external debt had a variable rate); and (iii) active management of exchange and refinancing risks (in part through issuance of long maturity bonds in local currency). Keeping debt increases below the rate of growth of the economy will help reduce debt-to-GDP ratios, freeing foreign exchange reserves and allowing the maintenance of reserves at a comfortable level through 2011.
34. In summary, Tunisia’s macro policy framework can be considered adequate for the purposes of this Development Policy Loan (DPL I).
14
Table 4: Macroeconomic Monitoring Indicators
Actual Estimate2008 2009 2010 2011 2012
Growth of Real GDPMP 4.5% 3.1% 4.0% 5.0% 5.6%Inflation (GDP deflator) 5.0% 3.7% 4.5% 3.3% 3.2%Nominal Exchange Rate (TD/US$) 1.231 1.340 1.340 1.223 1.225
Gross Domestic Investment (real growth rate) 6.4% 7.4% 6.4% 5.1% 2.9%Gross Domestic Investment (% of GDP) 27.0% 27.0% 27.4% 27.1% 26.1%Gross Domestic Savings (%GDP) 23.6% 22.6% 23.1%
Growth of Real Exports GNFS 3.5% -1.6% 1.4% 5.7% 6.8%Growth of Real Imports GNFS 8.3% 6.7% 6.0% 3.9% 3.9%Current Account Balance (% of GDP) -4.2% -2.8% -2.9% -3.1% -3.2%Gross Foreign Reserves (in months of imports of G&NFS) 4.0 5.5 5.0 4.9 5.0Gross Foreign Reserves (millions of US$) 9,476.3 9,895.4 10,045.0 10,707.2 11,492.6FDI 2561.72 2587.50 2600.00 2650.00 2700.00
Total (current) Revenues 11141.4 10240.3 10571.6 12278.9 13426.8Total (current) Expenses 8,527.1 8,293.6 8,743.8 10,339.0 10,923.5Primary Balance (excluding grants and privatization, % of GDP) 1.8% -0.7% -0.9% -0.6% 0.4%Fiscal Balance (excluding grants and privatization, % of GDP) -1.2% -3.6% -3.5% -3.3% -2.8%
Outstanding Domestic Debt (% of GDP) 18.6% 19.6% 20.9% 21.5% 21.0%Outstanding Debt, Total (% of GDP) 70.3% 72.1% 72.3% 61.8% 64.0% of which: Public (% of GDP) 47.5% 47.1% 46.3% 45.2% 43.0% Private (% of GDP) 22.8% 20.2% 18.6% 16.6% 14.7%Outstanding Foreign Debt (millions of US$) 20,700.0 20,131.6 19,856.0 19,350.9 19,104.3Outstanding Foreign Debt (% of GDP) 51.9% 52.5% 52.3% 45.6% 43.0%
Debt
Projection
Output and Prices
Savings and Investment
Balance of Payments
Public Sector Finances
Source: World Bank projections
15
35. In the medium-term, Tunisia will remain vulnerable to shocks in growth and employment partly as a result of the country’s strong trade ties with the EU. Its growth cycle is strongly correlated with that of the EU18, even if not one-to-one. For example, a 1 percent reduction in the EU growth leads on average to a 0.66 percentage point reduction in Tunisia’s growth, all else being equal.19 As Europe approaches a period of fiscal austerity, following the critical debt position of some of its members, and the fading of the fiscal stimulus, the growth prospects for 2010 could change and deteriorate during the year. Some analysts believe that there is a risk of a W shape of recovery for both the US and Europe which would mean a delayed recovery also in developing countries with close trade relations.
36. Fiscal consolidation must therefore continue to secure the fiscal space to respond to shocks on the economy and the budget. The fiscal deficit will remain around 3.5 percent in 2010 as increased expenditures will be attenuated by a planned and announced phase out of the subsidies (particularly on energy) and balanced by increased revenues in particular from taxation. Public debt will continue therefore to decline, with a target of 40 percent by 2012.
37. Policies supported by the DPL series would contribute to preserving macroeconomic and fiscal stability and help mitigate current shocks.
In the short term, some of the policies supported by this DPL series focus on facilitating job creation in areas of market failure, improving the portfolio of Active Labor Market Policies (ALMP), and tapping managed migration as a safety valve for skilled unemployment. The proposed short term policies would also help to create fiscal space through more efficient ALMP management. At the same time, better data production, management and accessibility would help sharpen accountability tools for employment policy.
These short-term policies lay the groundwork for longer term reform on strategic issues with far-reaching impact, some of which will require extensive public consultation. Gradually increasing labor market flexibility and enhancing income security will contribute to a more dynamic labor market and to employment growth in the longer term. Specific measures include changes to the Labor Code and the design of a comprehensive unemployment safety net with the objective of enhancing and accelerating labor mobility. Improved labor mobility would be productivity enhancing by allowing an easier reallocation of the workforce to areas of higher productivity.
Introducing these far-reaching policies in the short term, in a crisis context, would not be productive. Therefore, the proposed policy matrix takes into account the adequate phasing of such policies, and includes their strategic preparation and the needed inter-ministerial consensus-building and social partners’ consultations as actions in their own right.
18 As Europe approaches a period of fiscal austerity, following the critical debt position of some of its members, and the fading of the fiscal stimulus, the growth prospects for 2010 could change and deteriorate during the year. Some analysts believe in the risk of a W shape of recovery for both the US and Europe and this would mean a delayed recovery also in developing countries with close trade relations. The risk of such scenario is however rather small. 19 For more details, see Diop and Abdallah (2009). “Can Fiscal Policy Help Short-Term Growth? The Dynamic Effects of Fiscal Shocks on Output in Tunisia”, mimeo.
16
The measures supported by the proposed DPL I are highly complementary to the Government’s short-term crisis response. The Government's actions aim mainly at stabilizing employment through subsidies, especially in the crisis-affected export sector. This DPL prepares the groundwork for phasing out the Government's temporary actions, by: (i) modernizing the portfolio and the administration of ALMP: the people eventually laid off during the crisis would find better employment services, at the central and at the local level; (ii) mobilizing new job creation: expanding self-employment and innovative public-private partnerships to provide under-supplied services nationally, and managed migration internationally; and by (iii) preparing the first steps to modernize and expand Tunisia's safety net for the unemployed, so that a basic revenue can be protected during unemployment spells. In addition, the proposed DPL (iv) paves the way for a review of the Labor Code towards an easier adjustment of firms’ workforce. This may rekindle some dynamism lost during short term crisis-response measures which aimed at stabilizing employment.
III. THE GOVERNMENT’S PROGRAM AND PARTICIPATORY PROCESSES 38. The Government recognizes that addressing the employment challenge is critical and agrees that the way forward is to accelerate the structural transformation of the economy in order to increase productivity and generate a sufficient number of skilled jobs. The Government will therefore seek to: (i) stimulate labor demand through private sector led investment in high-value added and innovative enterprises; (ii) increase the availability of skills through a lifelong education and training system; and (iii) improve matching between demand and supply in the labor market. The Government’s key strategic documents (summarized in Box 1) show that the Government and its social partners have chosen an integrated perspective of employment, recognizing interdependencies and complementarities of three main pillars of policies reflecting the issues above: (i) labor demand, (ii) labor supply, and (iii) a well-functioning labor market both nationally and internationally (migration), notably through a modern legal framework encouraging hiring, active labor market policies, and a social safety net that protects workers’ income between jobs. Across the three themes, the Government’s strategy also calls for better monitoring and evaluation (M&E) of policies and key labor market trends, as well as better dissemination of this information to concerned actors.
39. The Government explicitly chose separate though conceptually integrated Bank instruments for the different sectors featuring in its pro-employment policy. The initiatives that will be supported by this DPL as well as those that will be supported by other Bank instruments, include on the demand for labor: The Second Integration and Competitiveness DPL, and on the supply of skills: a proposed DPL (FY2010) for vocational education, an investment loan for basic education (Project for Quality Improvement of the Education System (PAQSET II)) (FY2011), and an investment loan for higher education (Higher Education Support Project (PARES)) (FY2012). Each of these is described in Section C below.
17
Box 1: Recent Strategic and Planning Documents
1. The XIth National Development Plan (2007-2011) (NDP) is the major strategic document of the Government of Tunisia. The key priority of the XIth NDP is employment, in the form of an increased number and better quality of jobs. The NDP assembles all macroeconomic and sectoral policy strategies for the period 2007-2011, and is articulated around five axes: (i) international integration and acceleration of growth and employment; (ii) sustainable development including social, generational and regional equilibrium; (iii) structural transformation towards a knowledge economy; (iv) investment in human resources; and (v) implementation of sectoral policies that support the modernization of the economy towards a higher share of value-added activities.
2. The report of the National Consultation on Employment (2008) (NCE) summarizes the results of the consultation conducted by an integrated central committee with the key stakeholders, including universities, experts, employers of diverse sectors, representatives of the social partners (employers and trade unions), non-governmental organizations (NGOs), political parties and the civil service. The recommendations of the report focus on the three key themes listed above.
3. Presidential Program (2009-2014). The electoral program of President Zine El Abidine Ben Ali, which covers: (i) enhancing social protection, especially assistance for vulnerable groups at risk of poverty, and a pension reform; (ii) making employment a national priority, and exploring the expansion of under-provided public services as a means of job creation; (iii) fostering innovation, competitiveness and structural adjustment for higher productivity; and (iv) enhancing quality in higher education, also through greater autonomy for universities.
A. DEMAND FOR LABOR FROM ENTERPRISES AND INNOVATION 40. Previous and on-going analyses (see Table 5 on page 30) have highlighted the need for the Tunisian economy to identify new sources of growth, create more and higher value-added employment and to absorb the higher number of university graduates in the context of sharper national and international competition.20 Accelerating the transformation of the Tunisian economy towards higher productivity and creation of qualified jobs encompasses: (i) policies for innovation, science and technology, and (ii) incentives for entrepreneurs and investors to innovate, invest and create higher value added. Policies for Innovation, Science and Technology 41. For more than two decades, the Government has actively supported the development of key elements of the national innovation system (NIS), including scientific research, technology diffusion, education and industrial upgrading (“mise-à-niveau”). Notable progress towards key input indicators, such as the share of public investment in research and development (R&D), the share of researchers per capita, and qualifications of the workforce, demonstrate Tunisia’s commitment to technological progress. In addition, a coordinated infrastructure of agencies and programs has been established to support innovation and research.
20 See objectives of the XIth plan and links to the knowledge economy, and high value-added sectors, notably in services.
18
42. Despite these achievements, the research sector contributes little to the creation of a strong technology basis and has limited partnership with the industry.21 The Government has embarked on an evaluation of the Tunisian innovation system, to understand reasons for the negligible amount of private sector R&D activities and for low take-up of public resources allocated to research and innovation.22 Incentives for Entrepreneurs and Investors to Innovate, Invest and Create Higher Value Added 43. The Government acknowledges the need to improve the business climate for onshore enterprises and to augment the rate of private investment to reach the average of emerging markets similar to Tunisia23 and has thus embarked on undertaking a series of relevant reforms, including: (i) a prudent macro policy, resulting in macro-economic stability; (ii) continuous reduction in tariffs to increase trade openness; (iii) gradual liberalization of utility and service sectors; (iv) easing of some business procedures, including for start-ups, tax payments, land acquisition; and a (v) gradual alignment of the legal frameworks for the onshore and offshore sectors
44. The Government recognizes that investments in physical capital and innovation need additional reforms and a report of the National Consultation on Employment (NCE) (see Box 1) has emphasized deregulating certain professional services, integrating the onshore and offshore sectors, and accelerating the opening up of key infrastructure sectors as important means to foster the creation of higher value-added jobs.
B. SUPPLY OF LABOR AND SKILLS THROUGH THE EDUCATION SYSTEM 45. A well-functioning labor market hinges on an adequate supply of skills. To improve responsiveness of the education system to the demands of the labor market, the Ministry of Education (MOE) and the Ministry of Higher Education, Research and Technology (Ministère de l’Enseignement Supérieur, et de la Recherche, MHESR) are taking important steps to develop an integrated strategy around basic and higher education, as well as vocational training.
46. A key pillar of this integrated strategy is the orientation of education contents around competencies. In basic education, following a pilot phase from 1995-2001, a competency-based curriculum was introduced in all primary schools in 2005-2006. (‘Ecole de Demain’). In higher education, the new Higher Education law includes basic principles24 that reflect the current strategy of the Government and that the Bank supports through PARES II. In vocational education, a reform project to strengthen lifelong learning and employment (Mise à niveau de la formation et de l’emploi, MANFORME), was financed by the Bank and the EC (among others) 21 Project ESTIME of the European Union, 2007. The project aims at the description of the scientific and technological capabilities in 8 research partners countries of the Mediterranean by providing precise indications on research, technological development, and innovation. 22 Ibid. 23 Phases of strong growth and productive transformation of emerging economies show usually a private investment share of 25 percent of GDP, compared to about 15 percent in Tunisia. 24 Those principles include: (i) increase universities’ managerial autonomy; (ii) improve the quality and relevance of study programs for the labor market, fostered by a competitive allocation of funds; (iii) introduce a quality assurance system; and (iv) develop a durable financial strategy, which would introduce cost-sharing mechanisms and ensure grants and credits for poorer students.
19
and implemented in 1997 in order to satisfy the demand of enterprises for more and higher order competencies.25 The Government is currently developing the second generation of MANFORME, which will require: (i) generalizing a quality assurance system for training centers; (ii) strengthening training in firms; (iii) encouraging an entrepreneurial culture in the training centers; and (iv) implementing new financing instruments. C. POLICIES TO FACILITATE THE MATCHING OF LABOR DEMAND AND SUPPLY IN THE NATIONAL AND INTERNATIONAL LABOR MARKETS 47. The proposed Employment DPL series (DPL I and DPL II) will support the development and adoption of policies to facilitate the matching of labor demand and supply in national and international labor markets. Policies which will be the focus of this DPL (DPL I) articulate around three main axes:
(i) Labor market policies, which include ALMPs, as well as public employment services;
(ii) Policies that facilitate labor force mobility, domestically and internationally, which includes labor legislation that will allow employers to adjust to the economic environment, a social safety net that ensures consumption smoothing during periods of unemployment, and facilitation of domestic and international labor mobility through legal and institutional interventions; and
(iii) Monitoring and evaluation (M&E) of employment policies’ for evidence-based policy making, which includes the coordination and harmonization of employment data production in Tunisia according to international best practice, as well as increased data sharing among public bodies.
Labor Market Policies 48. The Government’s objective in reforming the ALMPs is to facilitate successful labor market insertion, in a cost-efficient manner. The Government is monitoring the labor market situation (described in Section II) and addressing these challenges at the forefront of policy making efforts. During 2008, the NCE was held with key stakeholders (government, universities, private sector, trade unions and some NGOs) which resulted in a series of recommendations going forward, which are summarized in the NCE’s final report (see Box 1) which forms part of the Government’s employment strategy.
49. ALMPs have always been a priority within Tunisian labor market policy. Tunisia spends approximately 0.7 percent of its GDP on ALMPs, close to the OECD average of 0.9 percent, and well above comparable Eastern European countries.26 Until 2009, the National Agency for Employment and Independent Work, ANETI (Agence Nationale de l’Emploi et du Travail Indépendant) managed over 20 programs, to which access was virtually unconditional for all categories of unemployed and employers, with little to no targeting of beneficiaries or
25 The program identifies three pillars, (i) development of dual programs, actively involving the enterprises, (ii) implementation of a decentralized management model, and (iii) the adoption of a competency-based curriculum. 26 Martin, J. and D. Grubb (2001). What works and for whom: A review of OECD countries’ experiences with active labour market policies”, Swedish Economic Policy Review 8
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employers. From the Bank’s analytical MILES27 work28 (see Section V) it emerged that the lack of targeting and conditions was likely to entail substitution effects and deadweight losses29, and, as a result, inefficient spending.30 This view was shared during the NCE.
50. In response to the public debate, and informed by the World Bank’s analytical work, the Ministry of Vocational Training and Employment (MVTE) undertook a reform of the portfolio of ALMPs beginning of 2009. The reform bundled the then 20+ ALMPs into six generic programs, facilitating their management and financial control. All ALMPs contain a small monthly income-assistance, and have stricter eligibility rules for both job-seekers and employers. This action is supported by the proposed DPL (DPL I). (For details see the description of Prior Action 2 in Section V.)
51. ANETI manages the ALMPs. ANETI provides traditional public employment intermediation without case management. The agency focuses on two goals: (i) bridging the information asymmetry between employers and hard-to-employ job-seekers, and trying to match them: and (ii) supporting new business start-ups, as self-employment, which has become a priority for the Government.
52. ANETI’s present internal capacity is not prepared to face the growing employment challenge. According to a process evaluation31 commissioned by the World Bank, each one of ANETI’s 91 employment offices faces an overwhelming workload, which has led them to use their entire counselor staff on a polyvalent basis, to use all resources to the maximum. The evaluation estimates that, on average, each counselor deals with 700 active job-seekers per year. (Compared to, for example, an average of 75 job-seekers per counselor in Germany and 150 in the UK, respectively).
53. These circumstances do not facilitate personalized case management on a large scale. Instead, the process job-seekers go through is very standardized and follows average criteria and quantitative rather than qualitative objectives. ‘Qualitative management’ as it applies to employment services, i.e. individual evaluation of competences, profiling of job-seekers, and counseling by specialists is virtually absent in ANETI. 32
54. ANETI is well known among unemployed higher graduates, but not among other jobless groups. According to the graduate tracer survey 2007 (of class 2004), 92 percent of graduates are registered at ANETI. But according to the LFS (Labor Force Survey, 2007), only 21 percent of the total unemployed are registered. This may be, in part, attributable to the fact that ANETI enjoys visibility as a result of its presence in bigger towns (where its offices are located) and not in the countryside, particularly in the Southern and Western areas of the country.
27 MILES is the acronym for multi-sector economic analysis of the: Macro-framework, Investment climate, Labor market, Education system and Social Protection regime. 28 MILES I: Skills Development, Social Insurance and the Labor Market (Policy Note, FY07); MILES II: Labor Demand, Skills Supply and Employment (Policy Note, FY09/10) 29 Substitution effects arise when subsidized jobs replace non-subsidized jobs, and deadweight losses occur if programs finance jobs that would have been created anyway. 30 “MILES II: Labor Demand, Skills Supply and Employment” (Policy Note, FY2009/10) and “A new menu of ALMP for Tunisia” (Technical Note, World Bank, December 2008 in French) 31 Institut fuer Sozialforschung und Sozialwirtschaft e.V. (2009): La reforme organisationnelle d’ANETI en Tunisie – Rapport 2009 32 Ibid.
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55. Higher graduates, however, are more difficult to place than those individuals with less than a university education. The university graduate tracer surveys (2005 and 2007) and a Vocational and Educational Training (VET) graduate tracer survey (2005) suggest that vocational graduates find work more easily and more quickly than university graduates.33 Similarly, ANETI’s management reports that those job-seekers for which the agency has records, and who have less than a university education are easily placed once they acquire a vocational degree.
56. In January 2009, the Government in cooperation with the World Bank held a consultation workshop on potential Active Labor Market Policies (ALMPs) reform measures and other labor market policies. The MVTE led the workshop with participation of the Ministries of Development and International Cooperation, Social Affairs, Solidarity and Tunisians Abroad (MSASTA), Finance (MOF), Higher Education, Science, and Research (MHESR), Education (MOE), representatives of the universities, employers (UTICA) and the national trade union (UGTT). The workshop discussed international experience to date with regards to various policy measures, including the introduction of new ALMPs to create jobs in under-supplied public services (e.g. childcare); reforming the working processes of employment services; intermediation in private employment; and other related labor market policies.
57. In the context of the challenges described above, and the consensus achieved among various stakeholders, the Government has identified three avenues of reform to address the situation:
Launch of ALMPs that allow for the creation of new jobs. For example, the XIth Plan calls for an improvement and expansion of the ALMP for self-employment.
A reorganization of the ALMP management, both centrally and regionally. This would include a re-structuring of the ALMP portfolio and a reorganization of ANETI’s work processes, with a greater emphasis on the personalized management of priority customers (both beneficiaries and firms) and outsourcing of non-core services, as well as increased regional implementation.
58. The detailed actions which will be taken to achieve each of these in the context of the proposed DPL I, are described in Section V.
Policies that Facilitate the Mobility of the Labor Force, Domestically and Internationally 59. The Government’s objectives in this domain are to develop policies that facilitate labor force mobility, which will entail the development of legislation that allows firms to adjust their factor inputs in times of shock, establishes a social safety net that will ensure consumption smoothing for workers during spells of unemployment, and legislation that facilitates legal migration to benefit the country’s economy.
60. The Labor Code was instituted in 1966 and last revised in 1995. While a cornerstone of the employment pact, some of its provisions may yield adverse effects on overall productivity as protecting jobs instead of incomes can reduce labor mobility and affect productivity and employment. Empirical studies show that: (i) excessive job protection reduces entry to and exit
33 MILES II: Labor Demand, Skills Supply and Employment (Policy Note, FY2009/10)
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from employment and leads to longer unemployment spells; and that (ii) greater labor mobility is associated with a structural transition of the economy towards more productive activities. A more mobile labor force allows for reallocation of economic resources from less productive sectors to more productive ones and, thus, increases total factor productivity. Several countries in Europe and Central Asia (ECA) and Latin America and Caribbean (LAC) Regions have revised their social policies in this respect, moving from protecting jobs to protecting workers’ income. The Government and its partners acknowledge the constraints related to the Tunisian labor code. The NCE noted the bias of the Labor Code towards protecting existing jobs rather than promoting new employment; and the rigidities it generates for a small open economy, which needs to adapt flexibly to the demand of the global markets. Given the sensitivity of these issues, dialogue between the stakeholders will need to be gradual to ensure successful reforms.
61. The lack of flexibility and security in the labor market is impeding Tunisia’s competitiveness and, therefore, hampering growth. In addition, existing safety nets are not explicitly geared to provide effective mechanisms for protecting workers against employment shocks. While a number of social programs exist,34 evidence on their effectiveness and coverage is still scant. Ongoing analytical work on Social Safety Net Assessment will contribute to fill this gap.
62. The relatively limited international mobility of the country’s labor force represents a loss in terms of employment opportunities and income for the country. At present, international migration is an under-tapped source of jobs for the country’s labor force, especially for those with qualifications. For example, Tunisia only managed to send 1,546 national workers to France in 2009, despite a bilateral agreement allowing for 9,000 work visas. Over the next 20 years, demographic changes will lead to a decline in the labor force in Europe and the Gulf countries and to an increase in job mobility and international migration.
63. The Government has recognized this potential and its objectives are: (i) in the short term, to assess employment opportunities abroad; and (b) in the medium term, to establish a dynamic intermediation system between Tunisian workers and world labor demand, with in-sourcing of international service jobs and work emigration to Europe and other regions. This will require a new regulatory framework to liberalize and set quality standards for private international labor intermediation.
64. A competency-based National Qualification Framework (NQF) that allows for a transparent recognition of qualifications and skills may improve the employability of individuals and enhance the potential to place Tunisians in appropriate jobs abroad. To allow for better recognition of competencies and a better match between the competencies required by foreign employers and those supplied by Tunisian qualified applicants, it would be necessary to implement an updated and competency-based NQF among all public providers of education and to promote it among national and international employers.
65. In the context of the challenges described above, and the consensus achieved by the various stakeholders, the Government has identified three avenues of reform to address the current situation:
34 These include the National Program of Assistance to Needy Families, Programs geared to the creation of employment opportunities, micro-credit interventions, food subsidies, and other housing, health, education and infrastructure programs.
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Increase labor market dynamism to allow for restructuring of the private sector towards higher value-added sectors. This will likely entail a review of the existing hiring and firing dispositions in the Labor Code, using a gradual process in order to develop consensus and to bring on-board all concerned stakeholders.
Strengthen the social safety net for redundant workers. Any changes to the social safety net will be based on an assessment of the existing schemes’ efficiency which will make suggestions for their overhaul.
Improve international mobility of the active workforce. Facilitation of international migration is high on the agenda of the MVTE given the proximity of the EU and the Gulf countries and the existence of bilateral conventions with countries such as France.
66. The detailed measures that will be taken with regard to each of these objectives and that will be supported by the DPL are described in Section V. Monitoring and Evaluation of Employment Policies 67. The Government’s objective in this area is to ensure that employment-related data are collected, harmonized, monitored and disseminated in the most efficient and transparent manner, according to international best practice. Currently, the extent to which statistics, including micro-survey data, are shared is insufficient. As a consequence, systematic evidence-based policy making is limited due to a lack of information flow among agencies and from the National Statistical Institute (INS) to researchers, as well as a lack of regular monitoring of employment-related data. With regard to data collection and dissemination, there is no official procedure for sharing data among public agencies in place, although such a procedure is foreseen by the Statistical Law of 1999 regarding the provision of data from the national agencies to the INS. Currently, there are legal constraints as well as legal sanctions for the unauthorized sharing of micro survey data, as cited in the Statistical Law of 1999, Articles 5 and 28 (Law N° 99-32, April 13, 1999). To achieve consistency and comparability of Tunisian employment data, such as the Labor Force Survey, with international statistics, there is a need to harmonize national methodologies and nomenclature with international standards (such as the EU’s statistical classification of economic activities, NACE, revised in 2006 and the United Nation’s statistical classifications of activities, ISIC, revised in 2006). National adoption of a common classification would also allow for inter-agency comparability of data, such as from the INS and ONEQ, for example.
68. In this context, the Government has identified three avenues of reform to address the above-mentioned challenges:
Coordinate data production. To allow for efficient and transparent production of employment data, this would require establishing the official procedures for data exchange from public agencies to the INS as well as the institutionalization of a technical committee that is responsible for coordinating the production of all employment data.
Harmonize data nomenclature. To advance the process of harmonization in accordance with international standards, the MDIC produced two reports in 2009 with the objective of officially standardizing the nomenclature of Tunisian economic activities, products, and professions (Project for Nomenclature of Tunisian Activities and Project for Classification of Tunisian Products). The nomenclature of activities and products have
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been reviewed accordingly and officially published by the National Institute for Standardization and National Property (INNORPI). So far, the nomenclature of products has been registered, while the registration of the nomenclature of activities is subject to modification or revocation of the decree of 1996. However as the nomenclatures for products and activities go hand in hand, the adoption of the former implies the adoption of the latter.
Mainstream evidence-based policy making. As a starting point, the two on-going pilot experiences of new ALMPs include an integrated rigorous impact evaluation. In order to mainstream a rigorous M&E process, the regular monitoring and impact evaluation of social and labor force policies will be anchored in the relevant legislation.
69. Detailed descriptions of actions which will be taken in accordance with each of the above areas, to be supported by the proposed DPL, are included in Section V.
D. PARTICIPATORY PROCESS 70. The Bank has advised the Government on the importance of consulting the proposed reforms, as per OP.8.60 in a letter sent to the Government on May 24th, 2010.
71. As employment is at the core of the social contract between the Government and the country’s population, a gradual, consensus-based approach involving all stakeholders will be necessary and is essential in ensuring sustainability and in enhancing the development outcomes of the policy loan. In addition, strong inter-institutional coordination among agencies involved in employment issues will be critical in their ability to implement any reforms.
72. The Government has conducted broad strategy consultations within the context of the National Consultation on Employment (2008) (NCE) with key stakeholders including universities, experts, employers of diverse sectors, representatives of social partners (employers and trade unions), NGOs, political parties and civil service workers.
73. In preparing the latest CPS, the Bank team undertook a broad series of consultations in June 2009 with a set of development partners and stakeholders. These meetings, with NGOs, private sector representatives, other civil society organizations (CSO), professional organizations, unions and academics, were organized both at a local and national level.
74. In January 2009 the Government, in cooperation with the Bank held a Technical Consultation Workshop in Sousse on potential ALMP reform measures and other labor market policies with broad participation from relevant Ministries, representatives of the Universities, employers (UTICA) and the national trade union (UGTT). The workshop discussed international experience to date with regards to undertaking a series of policy measures, including, for example, ALMPs to create jobs in under-supplied public services (i.e. childcare), and those which focused on organizational reform of employment services, private employment intermediation and other related labor market policies. The results and recommendations adopted by the workshop are supported by this DPL (DPL I).
75. A one-day technical seminar on managed migration held in Tunis in January 2010 in cooperation with the Government and the Bank, and which was attended by government officials, research institutions, and the press, discussed the findings from two major World Bank migration reports: Shaping the Future: A Long Term Perspective of People and Job Mobility for
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the Middle East and North Africa (March 2009) as well as the findings from the EC-funded World Bank program: Labor Migration from North Africa: Supporting Policies to Maximize Benefits for Exporting and Importing Countries. In line with the major themes of these reports, the introductory speech of the Minister of Employment highlighted the need for more active migration management and for efforts to upgrade skills to better meet the demand of both the domestic and global labor markets. The discussion during the workshop centered on issues pertaining to: sending countries' capacity to absorb their labor force; compensation for the sending countries’ investment in education of their emigrants; and the mismatch between the demand and supply of skills in the domestic and international markets.
Partnerships between the Government and the private sector in Tunisia are as yet limited and official representatives of private employers are often understood as having a quasi-public role as well. Therefore, a Brainstorming Event with selected vocal representatives of the private sector, on Supply and Demand for Skills (education and training, in-sourcing and private intermediation of employment, at the domestic and international levels) took place in Tunis in January 2010. Opinions voiced during this event pointed to the fact that the Government’s employment and learning plans had been developed without sufficient knowledge of the needs of the enterprise sector and that there was a lack of public-private partnerships.
76. ANETI hosted a Round Table Workshop in Tunis in March 2010 with participation from relevant Ministries, universities, UGTT and UTICA about labor market reforms, with particular emphasis on ‘flexicurity’- type reforms which soften barriers against layoffs in labor legislation while simultaneously expanding performance and coverage of the social safety net for laid-off workers. The Bank team presented experience with such reforms in comparable settings (Poland, Turkey and Colombia) and, in particular, highlighted the importance of tri-partite cooperation of the government, employers and trade unions to bring about effective and sustainable reforms. Participants expressed interest in thoroughly understanding these experiences and their impact for the respective countries, as well as the related lessons learned, and engaged in a constructive debate on this. Representatives from the UGTT, who had already started studying the topic of flexicurity, signaled their readiness to accompany the change. At the same time, they criticized the lack of a shared diagnostic of the situation between the government and the social partners. They also lamented that a commission, established for the multi-partite discussion of these matters, had never yet met. Employer representatives further underlined that Tunisia’s current legislation on these issues was not suitable for “the realities of the labor market”.
77. The DPL series addresses each of these concerns, with the objective of axis 2 being to “enhance internal and external mobility of the workforce” in both DPL I and DPL II.
IV. BANK SUPPORT TO THE GOVERNMENT’S PROGRAM A. LINK TO CPS 78. Generating employment and establishing a knowledge-based economy with emphasis on human development are the centerpieces of the XIth National Development Plan and thus supported by the CPS through three strategic pillars (i) employment growth and competitiveness; (ii) sustainable development and climate change; and (iii) improving the
26
quality of service delivery. To address the country’s employment challenge and assist its transition into a knowledge-based economy, pillar I focuses on (i) strengthening the demand for labor and (ii) fostering the employability of labor. The CPS engages (1) on the labor demand side, the Integration and Competitiveness DPL, the Third Export Development Project, and the Energy Efficiency Project, (2) on the labor supply side, the Higher Education Quality and Skills Development Projects, and (3) on the matching of labor demand and supply, this proposed Employment DPL series (DPL I and DPL II).
79. The Employment DPL will support three objectives that fall under the first pillar of the CPS: (1) facilitating employment through active labor market policies; (2) enhancing domestic and international mobility of the labor force; and (3) strengthening the monitoring, evaluation and dissemination of employment data and mainstreaming evidence-based policy-making. The proposed DPL will also contribute to the third pillar of the CPS (improving the quality of service delivery) by modernizing the instruments and work processes of the employment agency ANETI, and by focusing on improving matching processes between the supply of the educational system and the needs of the labor market. This proposed Employment DPL is an integral part of the response to the request of the Government for Bank support in employment generation. As requested by the Government, the proposed DPL focuses strictly on topics pertaining to the labor market, as the area where labor demand and supply meet to determine actual employment. As discussed, labor demand facilitated by the investment climate, and quality of labor supply through the education sectors, are covered by other Bank instruments in the CPS. B. COLLABORATION WITH THE IMF AND OTHER DONORS 80. The proposed programmatic series of two single-tranche DPLs will support reforms in the first two years of a five-year program in cooperation with the European Commission (EC). The Bank and the EC have agreed to jointly support a common policy matrix covering a pro-employment reform program for five years, focusing on the three objectives described above. It is expected that the first two years will be covered by two single-tranche programmatic DPLs, and the last three years by a € 60 million EC budget support grant. The common policy matrix (see Annex 2) currently identifies (i) short-term measures to be taken until May 2010, (ii) potential medium-term measures to be taken until mid-2011 and (iii) a long-term vision to be attained in the last year of the program. Both donors joined forces in the identification mission (October 2009), and in a joint pre-appraisal/formulation mission in March 2010.
81. In addition to the EC team, the Bank DPL team has cooperated closely with the International Monetary Fund (IMF) team, in particular on matters affecting the macro environment and growth as well as employment. The IMF has completed an Article IV consultation in September 2009, with discussions focusing on Tunisia’s exposure to the financial crisis, and the Government’s short-term stimulus measures against it. The consultation broadly supported the Government’s macroeconomic policy while encouraging continued reforms to strengthen the economy’s resilience and improve growth and employment. Specific recommendations included: (i) targeting public expenditure very well in order to allow continued stimulus in 2010 and a faster fiscal consolidation thereafter; (ii) gradual adjustments in monetary policy taking into consideration potential renewed inflationary pressures; and (iii) a continued strengthening of the banking sector.
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C. RELATIONSHIP TO OTHER BANK OPERATIONS 82. The proposed Employment DPL series is complementary to existing and planned Bank activities, including investment loans, economic and sector work (ESW), and technical assistance. The DPL series will provide an instrument for in-depth reform in the labor market and related areas, thereby forming the legal and policy backbone for other accompanying operations (see Figure 7).
Figure 7: Overview of Bank projects supporting employment in Tunisia
83. Regarding the generation of new and high value-added jobs, i.e. labor demand, the Integration and Competitiveness DPL (ICL) supported a first generation of measures to: improve the climate for both foreign and domestic investment; modernize the financial sector; and to facilitate trade. A follow up Integration and Competitiveness DPL will be delivered in FY11. 84. Several education loans provided by the World Bank support the reform of the education system to make it more responsive to the needs of the labor market. In higher education, the PARES investment loan promotes autonomy in university management, improves quality and relevance of programs in response to market needs through the use of competitive allocation of funds, develops a system of external quality assurance and a establishes a sustainable student financing strategy which will introduce cost-sharing mechanisms as well as grants and loans for needy students. In basic education, the PAQSET 2 project aims at upgrading the basic education teaching process with modern procedures, materials and tools. The proposed Skills Development Project will improve the employer relevance of vocational skills, through: (i) strengthening
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employers’ influence over and participation in vocational training provision; (ii) enhancing the accountability of the public training system through a reformed financing system where money follows the individual; and through (iii) better M&E, including the establishment of a quality assurance system.
85. The planned Municipal Development IV Project will support capacity-building for regional and local development planning and budget management staff, which will also benefit the entities implementing the regionally contracted ALMPs.
D. LESSONS LEARNED 86. The Country Assistance Strategy (CAS) completion report, the Economic Competitiveness Adjustment Loan (ECAL) series and the Integration and Competitiveness DPL have provided some useful lessons that have been taken into account in the preparation of the Employment DPL series (DPL I and DPL II). Namely:
Increase the alignment between the Bank’s program and the country’s priorities. This DPL series directly addresses Tunisia’s highest priority - employment, by focusing on improving the employability of labor and the functioning of the labor market.
Maintain a flexible approach to support the government in a changing environment. The programmatic nature of two sequential DPLs, followed by a three-year EC grant, introduces flexibility by aiming for a realistic assessment of reform opportunities and progress.
Focus on a few key actions. Even though the ECAL program was successful, a more streamlined approach focusing on fewer actions facilitates coordination within the Government is needed, as is a focus of authorities’ attention on fewer issues. Similarly, the previous CAS contained a results matrix with many, detailed and thus inflexible goals and indicators. The Employment DPL series introduces flexibility by focusing on key issues with a detailed description of expected results and indicators where possible.
Sustainable reform takes time and the Bank needs to follow the pace of the Government for reforms. Appropriate pacing of reform is also important to maintain stability and social peace. This Employment DPL series gradually builds momentum for reform: the CAS completion record concluded that the previous Programmatic Economic and Sector Work (PESW) helped build inter-ministerial consensus within the Government on a set of major issues pertaining to employment. Further, a five-year joint donor program allows supporting sensitive reforms with a long-term perspective and with the explicit inclusion of consultations with social partners.
Accompany reform program with technical assistance. The more complex measures in the policy matrix, like the reorganization of ALMPs and work processes at ANETI, the ALMP pilots, the migration regulation and the preparation of labor code reforms, are all accompanied by commensurate technical assistance, financed by the EU, the UNDP, Japan Social Development Fund (JSDF) and the Bank.
Need to strengthen M&E systems and focus on practical results framework. The proposed DPL series focuses explicitly on the monitoring and evaluation of employment policies to assist the Government in making informed choices regarding these policies.
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Challenges in harmonizing and developing knowledgeable and skilled human resources and institutional capacity. The CAS completion report identified gaps in human resources and institutional capacity as factor contributing to slow disbursements and delays in implementation. The proposed DPL series contributes directly to the institutional capacity- building of ANETI as well as of those public institutions producing employment data; and indirectly, through technical assistance, to the capacity-building of the key program counterparts.
E. ANALYTICAL UNDERPINNINGS 87. The operation builds directly on the World Bank’s analytic and advisory work. Prior to the request for this DPL series, the Bank, in close cooperation with the Government, conducted a multi-year programmatic ESW on employment, which produced a series of analytical outputs, as detailed in Table 5. The recommendations of this study were condensed in the two MILES policy notes in 2007 and 2008.35
88. The MILES policy notes and their follow-up technical work prompted the Government to request the DPL series. The MILES notes provided findings on employment and its barriers that motivated the actions in this DPL. The key findings are presented in condensed form in the Country Context section of this PD.
89. As part of the preparation for the proposed first DPL the Bank team produced and collected technical notes on:
The improvement of the ALMP portfolio and of work processes in ANETI (December 2008).
The Labor Code and unemployment assistance (FY09)36, following a stakeholder workshop with members of concerned ministries and agencies and social partners (unions, employers) (Sousse, January 2009).
The Bank also commissioned an in-depth process evaluation of service delivery at ANETI (completed December 2009).
In addition, a report (Euromed)37 on the institutional and legal framework for statistics and data collection in Tunisia fed into the preparation.
35 MILES I: Skills Development, Social Insurance and the Labor Market (Policy Note, FY2007) and MILES II: Labor Demand, Skills Supply and Employment (Policy Note, FY2009/10) 36 Vodopivec M, Grun R and Gonda B: “Strengthening the Unemployment Benefit System in Tunisia”, Strategy Note, June 2009 37Republique de Tunisie, Rapport sur la situation statistique nationale, Version 2.0, September 2008
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Table 5: Analytical Underpinnings of the DPL
Policy Area Note or Report Institution Status
Macroeconomic Framework
(i) 2008 and 2009 Article IV
(ii) CGE Simulation Model (Technical Note, Institut d’Economie Quantitative, FY08)
(iii) MILES I: Skills Development, Social Insurance and the Labor Market (Policy Note, FY07)
(iv) MILES II: Labor Demand, Skills Supply and Employment (Policy Note, FY09/10)
(v) Tunisia Development Policy Review (2009/10)
(vi) Tunisia Global Integration Report (2007)
IMF
IEQ
World Bank
World Bank
World Bank
World Bank
Completed
Completed
Completed
Completed
Completed
Completed
Labor Market
(i) Strategy for Employment (Gray Cover, FY04/5)
(ii) Tracer Study of the beneficiaries of the micro-credit/ start-up program of ANETI and BTS (Survey and Report, FY07)
(iii) Tracer Survey of the university graduate cohort of 2004 and their labor market performance (Two surveys, and two reports, FY08 and FY10)
(iv) Tracer Survey and Technical Note of Vocational Training graduates and their labor market performance
(v) MILES I: Skills Development, Social Insurance and the Labor Market (Policy Note, FY07)
(vi) MILES II: Labor Demand, Skills Supply and Employment (Policy Note, FY09/10)
(vii) A new menu of ALMP for Tunisia (December 2008)
World Bank
WB/ONEQ
WB/ONEQ
WB/MEF
World Bank
World Bank
World Bank
Completed
Completed
Completed
Completed
Completed
Completed
Completed
Social Protection
(i) MILES I: Skills Development, Social Insurance and the Labor Market (Policy Note, FY07)
(ii) Strengthening the Unemployment Benefit System (Technical Note, FY2009)
(iii) Social Safety Net Assessment (FY11)
World Bank
World Bank
World Bank
Completed
Completed
Planned
Improving Service Delivery
(i) Process Evaluation and Reform Strategy for the Agence Nationale d’Emploi et du Travail Indépendant
ISO Completed
Statistics/ Monitoring and Evaluation
(i) Rapport sur la situation statistique nationale EuroMed Completed
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V. THE PROPOSED TUNISIA EMPLOYMENT DPL SERIES
A. OPERATION DESCRIPTION
90. The overall objective of the proposed DPL series would be to improve the effectiveness and efficiency of job entry in Tunisia. Concretely, the DPL aims to:
Axis 1: Facilitate employment through Active Labor Market policies;
Axis 2: Enhance domestic and international mobility of the labor force; and
Axis 3: Strengthen the monitoring, evaluation and dissemination of employment data and mainstream evidence-based policy-making
B. LOAN AMOUNT AND SEQUENCING 91. The loan as well as the cooperation with other donors follows a programmatic approach. The Government is requesting a loan amount of US$50 million from the World Bank for this first DPL for 2010. A second DPL is expected to follow in 2011 (probably late in the year, so pertaining to FY12). The EC plans to support the program from 2012 to 2014 through a €60 million grant. The two institutions will use the same five -year matrix as the basis for disbursement (see Annex 2).
C. POLICY AREAS 92. The policy matrix (see Annex 2) describes the logic of the program by showing for each of the three main objectives of the loan, the specific measures to be implemented during the course of the program. The matrix shows two types of measures: (i) prior actions that are considered critical to achieve the program’s objectives; and (ii) accompanying measures that are intended to support each reform and set the stage for follow-up measures in subsequent operations. Given that this is the first of two programmatic one-tranche DPLs, which in turn mark the two first years of a five-year reform program, the matrix states the measures to be implemented by the Government under the first DPL, potential measures to be implemented in the second DPL, and those outcomes to be achieved by the end of the five-year program. The following section discusses the measures to be implemented under the first DPL only.
93. The first DPL includes eight prior actions for the first DPL and seven proposed triggers for the second DPL. They were chosen with three “best practice” principles in mind: (i) ownership: they are either reflected in the Government’s strategic documents such as prior actions 1 to 4, and/or implementation is already completed by the end of pre-appraisal, such as prior actions 1 to 6; (ii) importance: they are critical to the ultimate realization of the objectives of the program and (iii) predictability: their effective implementation can be adequately monitored. The actions selected strike a balance between the importance of ownership, the appropriate pacing of reform in light of the required stakeholder consensus, the ambition of the reform program as well as realism and expected effectiveness of implementation given the timeframe of this first DPL. This proposed first DPL would set the initial stages for deeper
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reforms, and gradually broaden the scope of action into areas that need prior social partner consultation. This has been the hallmark of successful reforms in Tunisia in the past, and is a reliable way to guarantee their sustainability.
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Box 2: Prior Actions for DPL I and Triggers for DPL II
Prior actions for DPL I:
The Government of Tunisia has agreed upon and implemented the following prior actions before the presentation of the first DPL to the Bank’s Executive Board (see “policy areas” section for more details):
Prior Action 1. The Ministry of Higher Education, and Scientific Research (MHESR) and the Ministry of Vocational Training and Employment (MVTE) have issued Circular (Circulaire) No. 1 dated August 10, 2009 launching a pilot program to provide support for students seeking to establish their own companies upon graduation through the preparation of business plans (Business Plan Theses or BPTs), and MHESR has published in the National Gazette Order (Arrêté) dated June 30, 2009, to allowing such BPT as undergraduate theses.
Prior Action 2. MVTE has published in the National Gazette Decree No. 349 dated February 9, 2009, providing for a complete re-structuring of the ALMP Menu towards better efficiency.
Prior Action 3. MVTE has published in the National Gazette Decree No. 87 dated January 20 2010, under which the National Agency for Employment and Independent Work (ANETI) is required to offer individual-centered job seeking assistance (modern case management) for the long-term unemployed.
Prior Action 4. MVTE has published in the National Gazette, Decree No. 87 dated January 20, 2010, which, inter alia, encourages increasing involvement of the private sector and non-governmental organizations in the delivery of employment services.
Prior Action 5. The International Employment Division responsible for international labor intermediation has been established at ANETI, has initiated engagement with international employer associations and facilitates language and technical training for prospective migrants in cooperation with the International Organization for Migration (IOM).
Prior Action 6. MVTE has published in the National Gazette Decree No. 2009-2139 dated July 8, 2009 to establish the National Qualification Framework (NQF), including a commission responsible for its implementation, and MVTE has issued an Order (Arrêté) setting forth the composition and operating mechanism of the implementing commission.
Prior Action 7. The Ministry of International Cooperation and Development (MDIC) has issued in 2010 an Order (Arrêté), referred to in the 1999 Statistical Law, which stipulates the official procedure for public agencies to transmit data files to INS for statistical purposes.
Prior Action 8. The National Statistical Institute (INS) has harmonized its nomenclature of products with the nomenclatures of the United Nations and the European Union, for statistical purposes.
Triggers for DPL II
Trigger 1. The Ministries in charge have developed and published in the National Gazette new quality standards for the local provision of social childcare with Decree No. … dated ..
Trigger 2. ANETI has launched operative mobile units to reach the population in at least three remote rural areas of the West and South.
Trigger 3. Following the results of the consultation, a document has been submitted to the relevant Ministers, with reform options to encourage the creation of private enterprises specialized in job placement.
Trigger 4. The Inter-departmental commission consults with the stakeholders the options to reform (i) employment regulation and (ii) social protection mechanisms for laid off workers, and submits a corresponding document to the relevant Ministers
Trigger 5. Decree for regulating the activities of private international employment agencies submitted for presidential approval.
Trigger 6. The MDIC delegates authorization of requests for individual data (microdata) to the Director General of the INS. And the INS publishes on their website a report which includes the number and subject of the data requests received, and the share of requests carried-out.
Trigger 7. The National Observatory for Employment and Qualifications (Observatoire National de l’Emploi et des Qualifications, ONEQ), with the participation of the National Social Security Fund (CNSS), INS and ANETI, has established an action plan for the introduction of the CIN (Carte d’Identité Nationale) as a unique identifier for all official databases.
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Axis 1: Facilitate employment through Active Labor Market Policies
94. Policy actions within this area fall into two categories:
1. Tap new sources of job creation
2. Facilitate employment through well targeted and efficient ALMPs
95. The prior actions for this policy area are:
Prior Action 1. The Ministry of Higher Education, and Scientific Research (MHESR) and the Ministry of Vocational Training and Employment (MVTE) have issued Circular (Circulaire) No. 1 dated August 10, 2009 launching a pilot program to provide support for students seeking to establish their own companies upon graduation through the preparation of business plans (Business Plan Theses or BPTs), and MHESR has published in the National Gazette Order (Arrêté) dated June 30, 2009, to allowing such BPT as undergraduate theses.
Prior Action 2. The MVTE has published in the National Gazette Decree No. 349 dated February 9, 2009, providing for a complete re-structuring of the ALMP Menu towards better efficiency.
Prior Action 3. The MVTE has published in the National Gazette Decree No. 87 dated January 20 2010, under which ANETI is required to offer individual-centered job seeking assistance (modern case management) for the long-term unemployed.
Prior Action 4. The MVTE has published in the National Gazette Decree No. 87 dated January 20, 2010, which, inter alia, encourages increasing involvement of the private sector and non-governmental organizations in the delivery of employment services.
96. Prior Action 1 supports the Government’s objective of generating new jobs through self-employment, while specifically addressing the needs of the growing pool of graduate first time job-seekers. These unemployed first time job-seekers are in many cases graduates in law, economics and business – disciplines that are usually conducive to entrepreneurship. This prior action is supported by the Presidential Program (2009-2014), which calls for: (i) “the development of new employment opportunities (especially) in the area of social outreach services, in both known and new professions”; (ii) “a new legal basis for individual start-ups”; and (iii) several measures to facilitate start-up financing and incubation, such as higher credit ceilings for the public development banks.
97. Prior Action 2 addresses the issue of inefficiency in the ALMP portfolio. Previously, the sheer number of ALMP programs (more than 20) made them difficult to monitor and control financially. There was also evidence that some ALMPs suffered from substitution effects and deadweight loss, due to unconditional access by both job-seekers and employers. The new menu includes therefore ‘filters’, i.e. conditionalities of access, for both beneficiaries and employers.
98. Prior Action 3 addresses the effectiveness of ANETI’s intermediation, by introducing a more targeted client orientation. Assisting the long term unemployed, often the hardest to place, will include case management, providing the option to sub-contract this activity to the private or third sectors. This action is also in line with the Presidential Program, which commits the Government to: (iv) “stewarding the upgrading of the employment offices in order to dynamize
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their role in the matching of labor supply and demand”38, as well as in line with international best practice.
99. Prior Action 4 primarily addresses ANETI’s capacity constraints by allowing the agency to sub-contract specific services to the private and third sectors. This is an important first step towards the liberalization of private provision of employment intermediation. Tap New Sources of Job Creation 100. The pilot ALMP with BPT and company start-up (incubation) (Prior Action 1) began in the 2009-2010 academic year. Over 250 “licence appliquée" programs from every university country-wide participated, with a total number of about 20,000 eligible students. Out of these, 1,702 have applied, some of them teaming up in groups of two, so that the total number of proposed projects is 1,506. One-half of these have been randomly selected to participate in the pilot program. These participants will write their final year thesis on a business idea with a detailed business plan (BPT). They will receive tutoring in the form of start-up training and supervision from their university professors and private sector experienced coaches. During this process, students will develop a business plan (BP) which they will submit to a jury for evaluation (by June 2010). At the same time, the BPT will fulfill the academic thesis requirement for undergraduates. This possibility has already been certified by an arrêté approved by the MHESR (30 June 2009).
101. Once all BPs are submitted, the top 50 winners will receive a prize package which includes a monetary reward of TND 15,000, 7,000 or 2,000 (equivalent to $ 10,200, 4,760, or 1,360).39 For prize winners, the money will count as own funds and will be directly transferred to a venture capital fund supporting the enterprise, according to a procedure laid out in the operations manual of the pilot program. All participants will further benefit from coaching for the start-up of the enterprise (registering, setting up etc), available through the pépinière (university incubator) system and through ANETI. They will also have access to financing from the public micro- and meso-credit banks BTS (Banque Tunisienne de Solidarité) and BFPME (Banque pour le Financement de la Petite et Moyenne Entreprise), who participated in designing the program. All applicants initially completed a detailed application which will serve as the baseline survey. A follow-up survey two years later of these individuals (one year after start-up of the firms resulting from the theses) as well as the randomized implementation of the program, will allow for a rigorous evaluation of the program’s impact.
102. The main challenge of this pilot is institutional coordination. A cross-ministerial management unit supervises implementation of an intervention which covers elements delivered by three different ministries and their agencies: ANETI delivers the customized entrepreneurship course; the API, through the pépinière, offers business coaching while the theses are written, and university professors provide primary supervision for the thesis exercise. For ease and quality of implementation, local management units have been established, headed by a university representative, and including representatives of API and ANETI. A central steering committee, comprised of General Directors from the three ministries, follows up on the
38 Programme Presidentiel 2009-2014, “L’emploi, une priorite absolue”, 20 subpoints on employment, 2009 39 A sponsorship round to finance the prize money is being conducted among private enterprises and has already yielded TDN 80,000, which has been deposited in an earmarked special account at ANETI.
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work of the management unit. It is expected that recent university graduates will encounter more employment opportunities through participation in the BPT program. A survival rate of 65 percent40 of the founded companies for at least one year is expected. In case of good performance, the pilot program will be scaled up. This pilot ALMP would be fully implemented and the prize money for competition winners disbursed by the beginning of DPL II.
103. In addition to the above described prior action 1, which is a condition for disbursement, the Government has chosen to pursue an accompanying measure, which will provide additional support to the objective of Tapping New Sources of Job Creation. The MVTE, together with other concerned Ministries, is preparing a pilot ALMP for Community Childcare. Under this pilot, early childhood development (ECD) services in poor urban communities would contribute to: (i) reducing unemployment by creating employment opportunities for poor unemployed women with relevant skills; (ii) alleviating poverty by allowing participating mothers to engage in productive activities; and (iii) increasing poor children's human capital – integrated socio-cognitive development and better school preparedness – through the provision of quality affordable community ECD services for poor children ages 6 and younger. The pilot scheme would include 350 satellite centers (providing home-based and community-based care) reaching approximately 3,500 to 4,200 children in five poor urban areas of Tunisia. Poor unemployed women with relevant skills would be trained to provide childcare in their own childcare enterprises, and a conditional cash transfer (CCT) would help beneficiary families to cover the childcare costs.
104. For DPL I, the MVTE has written the terms of reference (TOR) and has contracted a consultant, with the support of UNDP, to design the pilot with the CCT scheme.
105. By the start of DPL II, the Ministries in charge of preschool activities will have used experiences from the pilot to draft and publish in the National Gazette a Decree setting forth new quality standards for the local provision of social childcare. This is a proposed trigger for the second DPL. Facilitate employment through well-targeted and efficient Active Labor Market Policies (ALMPs) 106. A fundamental re-structuring of Tunisia’s ALMP menu (Prior Action 2) has been required by Decree (arrêté) 349 of February 2009. This Decree resulted in the bundling of over 20 programs into six generic ALMP. The first two are targeted to university graduates, (i) a subsidized internship (stage d’initiation a la vie professionnelle, SIVP) which can be applied for after six months own job search, and (ii) a vocational conversion training for graduate first time job seekers that have not been able to find work during three years (contrat d’insertion des diplômés d’enseignement supérieur, CIDES). CIDES is usually a dual apprenticeship tailored to the demands of a specific employer that guarantees hiring the candidate afterwards. (iii) The equivalent ALMP for non-graduates is the CAIP (contrat d’adaptation et insertion professionnelle). (iv) The contrat de reinsertion dans la vie active (CRVA) is targeted to previously employed jobseekers and offers them a training package tailored to the demands of a specific new employer, who in turn guarantees hiring the trainee. Further, the Decree continues a
40 A study of micro-enterprises financed by Banque Tunisienne (BTS) in 2006 found a survival rate of 62 percent on average and a higher one for university graduates.
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previously successful ALMP, (v) a comprehensive package of training, coaching and incubation support for start-ups41, and (vi) introduces a new ALMP that will be designed and implemented by the Governorates, at the de-central regional level.
107. Almost all ALMPs (except the start-up program and the regional ALMPs) are now targeted to specific job-seeker groups and include access conditions: (i) and (ii) are conditional on an individual’s own job-seeking efforts, and (i), (ii), (iii), and (iv) are conditional on the employer hiring a share (under ALMP type (i) described above) or all (all other ALMP types) candidates that participate in the tailored program.
108. Evidence regarding the effectiveness of such programs is notable. For example, the UK’s New Deal, a portfolio of ALMPs targeted to specific job-seeker groups, has had a significant impact on insertion rates, particularly among young job-seekers.42 Further, evidence from randomized controlled trials (RCTs) suggests that well-defined and appropriate access conditionalities for ALMPs can be more important for achieving successful employment insertion than the actual content of the ALMPs themselves.43 Finally, tailoring an ALMP to the needs and criteria of an employer (as CIDES, CAIP and CRVA do) can make a substantial difference in terms of employment success.44
109. The most important challenges in the implementation of the new Decree are the stricter access conditions, which are new in the Tunisian context. Higher-education graduates, who are quick to register with and rely on ANETI, need to learn that their personal job search, prior to participating in such programs, is their responsibility. Further, employers may be hesitant to guarantee hiring even after a training program tailored to their needs, as not many of them are used to co-managing training programs with the public employment agency. They, too, will have to learn to be more vocal and pro-active in the shaping of training programs, so that the programs truly prepare individuals for a specific job. The expected outcome of this specific reform is the establishment of more efficient public labor market intermediation efforts.
110. The expected results of this reform are: (i) better transparency and manageability of the ALMP menu, and, therefore, (ii) greater efficiency in use of resources. ANETI’s own performance contract with the MVTE also foresees increased (iii) employer take-up of ALMPs and program participant employment. We would assume that (i) above would allow ANETI to be more successful in placing job-seekers. As the overall placement rate is dependent on the business cycle, we chose the percentage of submitted job offers that ANETI manages to fill in a year. Unfortunately (ii) above is hard to measure. While ANETI will certainly save money if job-seekers place greater emphasis on their own prior job search, the unit cost per beneficiary will not decrease. Rather, the easier to place will probably not even enter ANETI’s files. Similarly, while the stricter employer conditionality will reduce deadweight losses, and thereby the numbers of individual take-up, those who do participate in these programs will have done so due to a real need and the tailored training expense will be higher rather than lower in those
41 Although in Tunisia the unemployed are strongly encouraged to use start-up support, and the ALMP is used on a larger scale than in most European countries, the survival rate of the founded firms is quite decent at 62 percent. 42 De Giorgi (2005): “Long-term effects of a mandatory multi-stage program: the New Deal for Young People in the UK, IFS Working Paper W05/08 43 Graversen, B. and J. van Ours (2006), “How to Help Unemployed Find Jobs Quickly: Experimental Evidence from a Mandatory Activation Program”, IZA DP no. 2504 44 See Attanasio, Kugler and Meghir (2008): Training Disadvantaged Youth in Latin America: Evidence from a Randomized Trial, NBER Working Paper No. W13931
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cases. We, therefore, suggest measuring results through ANETI’s own performance contract, and report the employer take-up rates for the ALMP with the strongest employer conditionality, CIDES and CAIP.
111. The MVTE is envisaging a longer-term reorientation of ANETI’s work processes towards modern case management45 and priority-oriented customer profiling, and the first step towards this has been realized with Decree 87 of January 2010. (Prior Action 3). Article 41 of this decree introduces modern case management for the long-term unemployed, i.e. for those jobseekers on ANETI’s files that are the most difficult to place. This measure responds to the capacity constraints of ANETI described in Section III, which currently favors a quantitative and unpersonalized management of the unemployed. This is likely to have serious consequences for these individuals who have the lowest probability of insertion. Giving priority to the long-term unemployed in ANETI’s activities is, therefore, a first and important step towards profiling job-seekers into groups according to specific risks. The exact definition of ‘long-term unemployed’ is still being finalized by ANETI’s management, but will certainly include, according to ANETI, job-seekers who have been unemployed for at least three years and who belong to the official poverty list (‘familles necessiteuses’). In addition, the Decree allows for this case management to be sub-contracted to the private and third sectors. This will likely relieve ANETI’s capacity constraint both in terms of required staff and in terms of case management expertise.
112. Although case management is widely seen as the ‘gold standard’ of modern employment services, rigorous international evidence on its effectiveness is still scarce. A recent reform that introduced several of the elements of the Tunisian ALMP reform is the so-called ‘Hartz’ reform, which was phased in in Germany and introduced, among other activities, case management. The ‘Hartz’ reform was carefully evaluated ex post, using quasi-experimental econometric and qualitative methods. This evaluation found a positive effect on probability of insertion that was highly dependent on circumstance (e.g., young men residing in areas with few job offers and employment offices with an extremely high workload (Eastern Germany) benefited most).46
113. The implementation challenges for this Decree are likely few. ANETI has some experience with outsourcing and is already providing some training programs through private or third sector trainers. Appropriately formulating and supervising the content of sub-contracted case management, might be a challenge particularly given no prior in-house experience with this. However, ANETI is also currently benefitting from a twinning-arrangement with a European employment agency, mediated by the EU which explicitly includes support in the supervision of case management. The expected outcome is that public employment services are better targeted and that the share of the long-term unemployed decreases from 16 percent to an inferior percentage.
114. By the start of DPL II, ANETI will have implemented the first phase of reorganization, including the restructuring of regional and local offices in line with efforts to reorganize work processes of the agency. (Benchmark action.)
45 “Case management” in the area of employment services means, at the minimum, (i) opening and following up an individual file for each jobseeker, (ii) developing an individual strengths and needs assessment and (iii) an individual development plan. It also means following up the plan with the jobseeker. The case manager also refers the jobseeker to further or outside sources of further interventions, for example to improve his/her health or education. 46 Mosley, Hugh (2006): Neuausrichtung der Vermittlungsprozesse, WZB and Infas, Berlin and Bonn 2006
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115. Responding to the concern with regards to ANETI’s low coverage of the general workforce (covering only 21 percent of all jobseekers in 2007 according to the latest data available to the team), a suggested trigger for DPL II will be the following: by mid-2011, ANETI will have effectively implemented their current plan to launch mobile units in under-served regions in the South and South-West (interior). These units (specifically buses) will be equipped similarly to an employment office and will have access to Intranet. The buses would be active in rural and poor regions, and cater primarily to individuals with less than a secondary education. The expected outcome of this effort is an increase in the coverage of public employment services. Specifically, it is expected that ANETI will increase its coverage rate in the overall workforce (not just university graduates) from 21 percent (2007) to 35 percent (2012).
116. In response to the evidence on ANETI’s capacity constraints, the MVTE has begun taking steps to increase the involvement of the private and third sector in the delivery of employment services. This is a politically difficult undertaking, because private employment intermediation is currently forbidden by the Labor Code and is opposed by the trade unions who have quality concerns with regards to private intermediation services. Still, several private intermediators already operate in Tunisia, without the supervision of the labor inspection.
117. The Government’s objective is, therefore, to gradually increase the role for private and third sector provision until the full liberalization of private intermediation, subject to a legal framework that regulates the standards for the sector, takes hold. A first major step is the publication of Decree 87 of January 2010 under DPL I (Prior Action 4), which allows and encourages ANETI to involve the private sector and NGOs in training and coaching under the start-up program, and in providing case management to the long-term unemployed. Training and coaching under the start-up program can also be accessed by the job-seeker on his/her own through a newly introduced training voucher. The changes introduced by this Decree are reflective of a paradigm shift in Tunisian public employment services.
118. The ‘Hartz’ reform program described above provides a carefully evaluated example of changes similar to those described above. The ‘contracting of third parties’ was newly permitted under the ‘Hartz’ reform for several employment service tasks, such as profiling, application management and case management. While the evaluation did not find a higher success rate of private providers over public services on average, a positive effect of subcontracting was found among those agencies that suffered capacity constraints. Therefore, as in the earlier example, sub-contracting some services to the private sector was particularly successful for men in Eastern Germany (a region with generally fewer available jobs and more job-seekers than the national average.) Training vouchers as a means of subcontracting were evaluated separately and showed a strong positive effect (+8 percent) on beneficiaries’ overall probability of insertion. The effects were particularly significant for older job-seekers (ages 55 and older). 47
119. The challenges in implementing this new approach are expected to be moderate. As mentioned above, ANETI has previous experience with outsourcing. Still, international evidence with regards to the introduction of sub-contracting indicates that there is a learning curve in the contracting agency in terms of matching job-seekers to appropriate providers, and in terms of monitoring and supervising of providers. As mentioned, the twinning-arrangement with a
47 Mosley, Hugh (2006): Neuausrichtung der Vermittlungsprozesse, WZB and Infas, Berlin and Bonn 2006
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European employment agency should help ANETI also weather this challenge. The expected outcome is a more efficient provision of employment services through increased private sector involvement. It is expected that the share of ANETI’s budget for ALMP channelled through private provider or NGOs increases from its current 5 percent to at least 10 percent by 2012.
120. The Government would pursue this development under DPL II, and prepare a comprehensive legal framework, based on a background study of the sector and the actors currently operating in this sector. The study and draft legal documents would be the subject of consultation with key stakeholders. Following the results of the consultation, a document has been submitted to the relevant Ministers with reform options to encourage the creation of private enterprises specialized in job placement. This is a trigger for the second DPL. Axis 2: Enhance domestic and international mobility of the labor force 121. Policy actions within this area fall under two categories:
1. Improving labor market dynamics to allow for re-structuring of the production structure
2. Moving towards managed migration to benefit from increased international mobility of the workforce
122. Critical Benchmark Actions for this policy area include:
The MVTE has sent an invitation letter on May 18, 2010 that specifies the composition of the inter-departmental commission (“IDC”) with the objective to elaborate reform options for: (i) employment regulation in the Labor Code to achieve greater mobility of the workforce; and (ii) the protection for laid off workers to improve its coverage and performance.
The IDC has met on May 29, 2010 and approved the TOR for a study to: (i) assess the coverage and performance of the current protection for laid off workers and (ii) formulate options for policy reform.
123. Prior actions for this policy area include:
Prior Action 5. The International Employment Division responsible for international labor intermediation has been established at ANETI, has initiated engagement with international employer associations and facilitates language and technical training for prospective migrants in cooperation with the International Organization for Migration (IOM).
Prior Action 6. The MVTE has published in the National Gazette, Decree No. 2009-2139 dated July 8, 2009 to establish the National Qualification Framework (NQF), including a commission responsible for its implementation, and MVTE has issued an Order (Arrêté) setting forth the composition and operating mechanism of the implementing commission.
124. The two Benchmark Actions constitute the first step towards adapting the legal framework currently governing the labor market from its focus on the protection of jobs to the protection of incomes. It is expected that the following will be achieved at the end of the five-year program: (i) a modified Labor Code that enables firms to react to economic realities by adjusting their factor inputs, including labor, and thereby lowering the transaction costs for open-
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ended employment; and (ii) a modern and efficient safety net for workers who currently have no job , that can respond to the needs of the entire workforce in terms of coverage and eligibility, as well as to the Government’s fiscal requirements. This vision is anchored in the Presidential Program for Employment (2009-2014), which commits to: (i) “the improvement of the labor market legislation, with a view to adapting to the new economic situation and to new forms of work”, and to (ii) ensuring “no family without work or source of income until 2014.” The path of reform enabled by this essential Benchmark Action forms the very core of the five-year cooperation between the Government and the program’s two donors, the Bank and EC.
125. Prior Action 5 addresses the vacuum in international labor intermediation that is currently being filled by illegal intermediators. The establishment of the International Employment Division within ANETI moves international labor intermediation activities towards a legalized and regulated scope of action.
126. Prior Action 6 addresses the lack of a coherent and competency-based qualification framework (i.e., the NQF) widely accepted by employers having the potential to signal the level and quality of individuals’ qualifications to employers abroad.
Improving labor market dynamics to allow for Restructuring of the production structure
127. The Inter-Departmental Commission (IDC) on Facilitating Labor Mobility would mainly focus on any modifications to the Labor Code and on strengthening of the safety net for redundant workers. In order to ensure informed decision-making, an important first step would be to evaluate the performance of the present unemployment assistance scheme and to formulate proposals for possible reforms. These proposals would be submitted to a multi-partite commission (comprised of members of various ministries: MVET, MSASTA, Finance (MOF), MDIC, Industry but also eventually social partners). The IDC would aim to increase the flexibility available for firms in adapting to structural changes; and responding to economic shocks, while providing better protection for workers within a dynamic and evolving labor market. Commission members may undertake a study tour in countries that have implemented similar reforms. As mentioned in Sections II and III, the existing unemployment assistance program is very limited. At the end of the five-year program, the Commission will have worked out options for a way forward and will have brokered an agreement on the best way to protect and reconcile the interests of employers and employees.
128. A major challenge facing this IDC in addressing these issues is extremely sensitive nature of the issues which are central to the social contract between the Government and the Tunisian population. Additionally, it will require a high-level of inter-institutional coordination between agencies involved in employment issues, most notably Ministries of Employment and of Social Affairs; and will rely on credibility of the proposed reforms to achieve change. Labor legislation is a sensitive area for reform in any country, and particularly, in the context of high structural unemployment rates and an economic crisis which has resulted in increases in unemployment. In addition, while the MVTE is responsible for employment services, employment policy and M&E, MSASTA is responsible for the Labor code, Labor inspection services and for salary negotiations with the unions. Partnership with the private sector is limited. Given the lack of evidence on the effectiveness of available programs, the social dialogue sometimes focuses on maintaining the status quo and protecting existing jobs rather than creating new jobs and providing workers with the capabilities to obtain them.
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129. The Benchmark Actions we propose break out of this mold, and thereby also facilitate the transition out of the Government’s short term crisis-response measures. It is expected that these efforts will move employment legislation from centering on job protection to focusing on income protection. It is envisaged that restrictions for open-ended redundant workers, which allow employers easier economic adjustment, will be revised and that the share of redundant workers with access to unemployment benefits will increase from 5.4 percent in 2007 to a higher level after the implementation of the reform. As benchmarks, unemployment insurance coverage is 11 percent, 16 percent, and 43 percent in Brazil, China, and U.S., respectively (2009).
130. The trigger actions for DPL II address the substance and implementation of reform options going forward. By the time DPL II begins, the IDC will have consulted with the relevant stakeholders options to reform (i) employment regulation and (ii) social protection mechanisms for laid off workers. The commission will also have submitted a corresponding document to the relevant Ministers.
Move towards managed migration to benefit from increased international mobility of workforce
131. ANETI established an internal division responsible for international labor intermediation (emploi international) in December 2009, trained the Division’s employees, and designated one international representative, in each of the 91 local offices, to be in charge of facilitating international job offers by spring of 2010 (Prior Action 5). The EU-financed AENEAS program is providing technical and financial assistance for this project, aiming to build the institutional capacity of ANETI to provide international labor intermediation for migrants, thereby increasing the share of legal Tunisians abroad while at the same time reducing incentives for illegal migration.
132. The newly established Division within ANETI (emploi international) focuses on three target regions: Europe, North Africa, and the Gulf countries. In Europe, for example, Tunisia has bilateral agreements with France and Italy but the country is unable to fill current visa quotas (only 16 percent of quota to France was filled in 2009). In all target regions and countries, emploi international currently focuses on identifying the needs of the labor market and in establishing contacts with employers and employer associations. Emploi international also collaborates with IOM to provide language and technical training to prospective migrants to Italy. Facilitating migration and equipping migrants with relevant skills and knowledge may lead to brain drain. However, brain drain is not considered a political economy concern in Tunisia, given the current lack of employment opportunities for qualified people in the national labor market and the ongoing transformation into a knowledge-economy, which will ultimately profit from the experiences of Tunisians abroad. The main challenge of emploi international is its financial sustainability after EU-funding stops at the end of 2010. It is expected that this Division’s work will result in more and better matching of migrants into jobs abroad. It is expected that the number of: 1) work visas issued to France will increase from 1,546 (2010) to 3,600 in 2012; and CVs sent to employers and employment agencies abroad increases from currently 1,000 to 2,500; and that the 3) share of international employment contracts facilitated (of the total number of contracts facilitated by ANETI) increases from 0.003 percent (2010) to 1.5 percent (2012).
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133. As a trigger for DPL II, a decree for regulating the activities of private international employment agencies will have been submitted for presidential approval. An expected result from this activity will be a legalized and supervised private international intermediation system in addition to ANETI’s emploi international. All private and public labor intermediators will be required to collect demographic and other basic information on individuals placed abroad in a migration form.
134. As a benchmark, ANETI will also have initiated collaboration with the public institutions of vocational and professional training to put in place a pilot program for pre-departure training including a rigorous impact evaluation component. The institutions include MVTE, CENAFFIF (Centre National de la Formation de Formateurs et de l’Ingenierie de la Formation, an autonomous agency of MVTE in charge of the training of trainers and curricula development for vocational education), and ATFP (Agence Tunisienne de la Formation Professionnelle, an autonomous agency of MVTE that offers pre-service training in public training centers).
135. A main barrier to international migration is the lack of agreement between Tunisian and foreign qualifications and competencies. A national, competence-based, qualifications framework can help increase the employability of Tunisians abroad. In July 2009, the MVTE has issued a decree to announce a competence-based NQF and by mid May 2010, an inter-ministerial commission will be established to coordinate the implementation of the NQF (Prior Action 6). The design of the NQF was led by the Direction Générale de la Normalisation et de l’Évaluation (now part of the MVTE) and CENAFFIF and supplemented by a technical group consisting of representatives of the Prime Minister, the Ministries of Higher Education, Education, and Employment, employer associations, unions, and other associations in the fields of hotel business, agriculture, and tourism. Implementing the NQF will require time and strong coordination among several stakeholders (mainly CENAFIFF, unions and employer associations). The main challenges in implementing the NQF are assuring good governance and quality assurance which are critical for its acceptance among Tunisian and international employers. Similar to the establishment of an internal division responsible for international labor intermediation at ANETI, it is expected that as a result of this action there will be increased and improved matching of migrants to jobs abroad. It is expected that the proportion of training centers (both public and private) providing a degree that is valid and recognized under the NQF increases from 33 percent (2010) to 40 percent (2012).
136. By the start of DPL II, as a benchmark action, CENAFFIF will have worked with the aforementioned stakeholders to translate competences established by the NQF into training programs for two sectors of relevant job markets abroad. In addition, CENAFFIF would review and compare differences and similarities in training programs and organizational structure in the same sectors in other migration destinations in Europe, North America, and Gulf countries.
Axis 3: Strengthen the monitoring, evaluation and dissemination of employment data and mainstream evidence-based policy-making 137. Policy actions within this area fall under three categories:
1. Coordinating data production
2. Harmonizing data nomenclature
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3. Mainstreaming evidence-based policy making
138. The prior actions for this policy area include:
Prior Action 7. The MDIC has issued in 2010 an Order (Arrêté), referred to in the 1999 Statistical Law, which stipulates the official procedure for public agencies to transmit data files to INS for statistical purposes.
Prior Action 8. The National Statistical Institute (INS) has harmonized its nomenclature of products with the nomenclatures of the United Nations and the European Union, for statistical purposes.
139. Prior Action 7 addresses constraints to data sharing from public agencies to the INS. This includes agencies that collect employment-related data in addition to those obtained by the INS, for example during the annual Labor Force Survey. Systematic evidence-based policy making could be improved by assuring a better information flow among public agencies and outside users, as well as a through regular monitoring of employment-related data.
140. Prior Action 8 responds to the need for a nationally and internationally harmonized system of industry activities and codes. Once adopted nationally, employment-related data collected by different agencies will be internally consistent and comparable, regardless of the original source.
Coordinate data production
141. The MDIC has issued an Order (arrêté) which stipulates the official procedure for the transmission of data to the INS from public agencies (Prior Action 7). Currently, the INS receives data from other public agencies through bilateral agreements or informal arrangements. Transmission procedures are not formalized, however, and the degree of coordination varies by agency. The main challenge will be the regular enforcement of the Order from the reporting agencies. The expected outcome of this reform is a regular transmission of data and more efficient data-sharing system among public bodies. Specifically, it is expected that the number of formal conventions for the transfer of data that are signed between the INS and public agencies increases from zero (2009) to seven (2012).
142. In addition to the prior action described above, INS has established a technical committee that is responsible for coordinating the production of employment data, which is seen as a critical condition for achieving the program’s objectives. Efforts to coordinate the production of data on employment are also underway by the CNS. A working group to monitor demographic and social statistics including employment statistics has been formed, which includes representatives of producers and users of statistics. These working groups meet and deal with various issues relating to statistics or employment. A challenge related to these committees within the INS or the CNS is to ensure that they meet on a regular basis and make decisions. The expected result includes better coordination of the production of employment statistics and greater coherence of these statistics.
143. By the time DPL II begins, the technical committee meets on a regular quarterly basis and publishes an annual schedule for data production and publication, which will be available on the INS website. The ministries and public agencies routinely transmit data to INS as per the
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official procedure established under Prior Action 7. In addition, ministries and public agencies will have access to data from the INS on demand, as per the official procedure.
Harmonize data nomenclature
144. The INS has produced two reports on new official nomenclature for Tunisia: i) Nomenclature Project of Tunisian Activities, 2009; and ii) Project for the Tunisian Classification of Products, 2009. The aim is that the classifications of activities and products used in the statistical information system on employment be unified at the national level and harmonized with the relevant international classifications. These classifications have been revised as official standards by the Tunisian National Institute of Standardization and Industrial Property (INNORPI). The classification of Tunisian products 2009 (CTP.2009) has been adopted as standard No NT 120.02 (2009) of 28 February 2010. This nomenclature is consistent with the common international standards, i.e. the CPC version 2 of the UN and the EU CPA. 2008. The classification of activities (NAT.2009) is adopted as standard No NT 120.01 (2009) of 28 February 2010, subject to amendment or cancellation of the Order of 1996. This nomenclature is consistent with ISIC Rev.4 UN and the EU NACE Rev.2. A challenge remains in the application of the new nomenclature, which is currently on a voluntary basis. The expected outcome of this reform is the availability of a nationally and internationally harmonized nomenclature. To achieve a high utilization of the harmonized nomenclatures, the INS and ONEQ will each adopt a specific work program to apply the new nomenclature. 145. By DPL II, a similar revision to the national nomenclature of occupations (from 1997) will be in effect. The nomenclature will be revised in order to harmonize it with the standards of the International Labour Organization (ILO), through a corresponding modification of Decree number 97-2452 of December 15, 1997. Mainstream evidence-based policy making 146. Under DPL I, the Government has chosen a series of benchmark measures to support evidence-based decisions with regards to employment policy: (i) the MVTE has published Decree (No 349, February 2009) with the objective of systematically reinforcing the M&E of ALMPs. ANETI manages the ALMPs under performance contracts with MVTE, which contain target indicators for each ALMP. (ii) As a concrete example, ONEQ has published a monitoring report on Instrument 32 of the Funds 21/21. (iii) ONEQ has also developed objectives for an Information System which closely follows graduates of Vocational Training, Higher Education, and the ALMPs as they enter the labor market. It is expected that these efforts would promote and facilitate access of relevant employment data to policy decision-makers.
147. As a trigger for DPL II, the ONEQ, together with CNSS, INS and ANETI will publish an action plan to introduce the use of a unique identifier in all national databases.
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Box 3: Good Practice Principles for Conditionality Ownership - Reinforce ownership The Government of Tunisia’s program supported by the first Employment DPL is well-covered both by the XIth National Development Plan (NDP) and the National Consultation on Employment (NCE). The NDP’s strategic objectives are to: (a) accelerate the pace of growth in order to reduce unemployment, boost incomes, and consolidate Tunisia’s progress in the reduction of poverty; (b) preserve macroeconomic stability; (c) uphold social achievements and human development; and (d) preserve natural resources. The measures supported by this DPL focus on the achievement of (a) and (c). All detailed measures proposed in the policy matrix (annex 2) reflect recommendations given by the NCE. Further, they are those measures that the Government believes are necessary and politically feasible. Harmonization - Agree up front with the government and other financial partners on a coordinated and accountability framework The program is jointly supported by the World Bank and the European Commission (EC) and these development partners have collaborated effectively throughout identification and pre-appraisal and have coordinated the content of the program. Both donors and the Government have carefully discussed and agreed on the proposed policy matrix. Customization - Customize the accountability framework and modalities of Bank support to country circumstances The policy matrix reflects the Government’s priorities and lessons learnt by the three institutions in supporting similar programs of the Government. The Bank has been flexible with regards to the Government’s preference in terms of both the tranching and preparation schedule. Importance - Choose only actions that are critical for achieving results as conditions for disbursement In harmony with the findings of OPCS’s Development Policy Lending Retrospective 2009, this Development Policy Loan (DPL) focuses on a single sector only. The Government has asked the Bank to maintain the focus of this DPL on three labor market areas: ALMPs, internal and external workforce mobility, and monitoring & evaluation (M&E) of employment policies. Each are crucial to the Government’s job creation, productivity and results-based policy agenda. This focus, reflected in the relatively small number of Ministries involved allows the Bank’s efforts to be more targeted. It also allows counterparts to coordinate efficiently in order to achieve results. Transparency and Predictability - Conduct transparent progress reviews conducive to predictable and performance-based financial support The selected prior actions can be effectively monitored, providing predictable and performance-based financial support. Tunisia has always strived to implement all the measures of its program matrices in the past, as well as its prior actions. Recourse to waivers has been exceptional in the past.
VI. OPERATION IMPLEMENTATION
A. POVERTY AND SOCIAL IMPACTS
148. Unemployment is the most pressing social issue in Tunisia at the moment and the President’s Program gives employment a very high priority. At the same time, however, since employment is at the core of the social contract in Tunisia, it is also a sensitive issue. For any reforms to the Labor Code or unemployment assistance efforts to succeed, the Government needs to enlist the support of different stakeholders, including influential unions. Rigorous analysis of existing employment data provides a factual basis for a productive dialogue among a broad set of stakeholders. Baseline information on job-seekers is available in the documents
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listed in Table 5. In addition, the country team is undertaking simulations with regard to the impact of proposed measures to address the current crisis. Further, consultations with UTICA, the employers’ association, and UGTT, the workers’ union, have helped deepen the understanding of the political economy of potential reforms and highlighted the need for effective communication of the proposed measures.
149. The proposed Employment DPL should contribute to the effectiveness and efficiency of job entry. The key findings of previous World Bank work highlight the persistence and high level of unemployment and the segmentation of Tunisian labor markets. These findings were described in the Country Context section of this PD.
150. The proposed reforms are expected to facilitate job creation and productivity growth, while helping to improve the prospects for vulnerable groups in accessing formal sector jobs. By proposing to shift protection from jobs protection to protection of workers’ income, they would re-balance existing structural inequity with likely changes to social welfare and overall positive distributional consequences. This far-reaching impact underscores the importance of the policy reform supported by this DPL.
151. The Bank’s analytical work from aggregate data (see Section IV), shows that the current unemployment system has negative distributional effects. Only permanent workers laid off for economic reasons are entitled to unemployment assistance (that is only 5.4 percent of all people laid off). Formal layoff procedures that entitle people to this assistance are difficult and therefore often avoided by employers. Currently access to detailed statistical data from the LFS or the Consumption Survey is restricted (see also Section III – Monitoring & Evaluation of Employment Policies). We are at this stage unable to demonstrate how unemployment correlates with poverty patterns either through household surveys or other specific poverty mapping. However, based on international evidence, there is consensus on the positive aggregate effects of increased labor mobility and on the positive distributional impact of an effective net of income protection for workers.
152. A set of national social protection programs and centers are in active for vulnerable groups (persons with disabilities, vulnerable children and adolescent, homeless etc. The definition of vulnerability is twice the minimum salary (SMIG)). Efforts are also underway to extend national micro-credit programs (such as The 2626 Fund) in all areas of the country to support income-generation projects, especially in popular urban neighborhoods. The overall impact of such social protection programs on poverty and employment patterns for vulnerable groups is currently not known. A comprehensive social safety net assessment is foreseen as an analytical underpinning of DPL II in 2011 in order to identify opportunities for better effectiveness and integrated impact of social protection programs.
153. What follows discusses the main foreseen social and poverty impacts of each individual measure supported by DPL I.
154. The reform should facilitate employment through ALMPs (Objective 1). As previously mentioned, this DPL lays the groundwork for phasing out the Government’s short-term actions by modernizing the portfolio and administration of ALMP. Those individuals laid off during the economic crisis will be able to access better employment services, at the central and the local level, through new job opportunities and expansion of self employment via ALMPs. Young job-seekers have explicitly been targeted in programs by the MVTE to provide them with relevant
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professional training and adequate job opportunities. International evidence has shown that graduate entrepreneurial activities can be promoted and undertaken early – even when future entrepreneurs are still students.
155. The proposed action to tap new sources of job creation through the support of BPT as well as the call for proposals to design a pilot ALMP with CCT to support community childcare in poor neighborhoods, provided by unemployed female graduates of ECD-related fields, are well-targeted towards characteristic pockets of unemployment and provide opportunities for direct positive impacts of this reform. These measures, however, should be regarded as first steps that will be further developed in preparation of DPL II based on the results of the pilot activities
156. Furthermore, the first step in reforming ANETI’s work procedures includes the introduction of personalized case management for the long term unemployed. The 'long-term unemployed' are defined as (i) individuals who are out of work for three or more years; (ii) members of 'familles necessiteuses' (low-income households, see Box 2); and (iii) university graduates (which are indeed harder to place on the labor market than people with vocational education). This measure can be expected to have a direct positive effect on the labor market insertion and the income of this particular vulnerable group.
157. The proposed action to reduce the unconditional access to all ALMPs and to add new and stricter conditions for eligibility for many ALMPs poses a distinct social and poverty risk in the short-term and in a crisis situation. The assumption is that this measure will provide incentives for the unemployed to increase the intensity of their individual job-search. This action however risks increasing the barriers for young job-seekers in the short term, and as such may have a limited negative social impact. In the longer term, however, the measure, as demonstrated in other countries, is likely to change behavior and strengthen the young job-seekers’ ability to access the labor market on their own. Although the Bank has good reason to expect a similar positive outcome to those experienced in other countries48, it is uncertain what the outcome of these measures would be in the Tunisian context.
158. The proposed objective of enhancing domestic and international mobility of the labor force (Objective 2) (in this regard, adapting the Labor Code to increase workforce mobility) is the measure that is assumed to have the strongest positive distributional effect in the long run. However, at the same time it also carries a short-term negative social risk. Tunisia’s strict employment protection legislation de facto reduces the access to jobs among newcomers to the labor market (including youth and women) as they cannot compete with well-established groups such as prime-age males who are already in well-protected jobs (see Country Context). This barrier to formal job entry can also prevent them from being covered by formal social insurance.
159. Moreover, in the presence of higher severance costs for laying off workers with permanent contracts (likely older and more experienced) laying off may disproportionately affect young workers, who are more likely to have a temporary contract. Established workers hired under permanent contracts are those for whom the bulk of employment protection legislation
48 Graversen, B. and J. van Ours (2006) “How to Help Unemployed Find Jobs Quickly: Experimental Evidence from a Mandatory Activation Program”, IZA DP no. 2504
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applies. They are likely to suffer from radical reforms that soften the legislation as this might increase the chance they will lose their jobs.
160. The case study of Colombia in the early 1990s is often used to illustrate the experience of introducing reforms that soften barriers against layoffs while simultaneously expanding performance and coverage of the social safety net for laid-off workers. The analytical review of this reform process indicates that greater flexibility may on one hand explain part of the surge in unemployment during periods of economic recession (Kugler 2000). At the same time, the evidence shows that the duration of unemployment decreased as a result of more relaxed legislation and that exit rates from unemployment into formal employment rose more than exit rates into informal employment (Kugler 2004).
161. As part of the reform efforts to improve labor market dynamics to allow for restructuring of the production structure towards higher value-added sectors, proposals to strengthen the social safety net for workers outside of firms (laid off workers and needy groups) will be considered. This will be a first step towards modernizing and expanding Tunisia’s safety net for the unemployed, so that basic revenue can be protected during unemployment spells.
162. Specific government programs, targeting the poor and needy, such as the PFN have contributed to reducing the levels of extreme and moderate poverty but are not adapted to address emerging vulnerabilities around employments shocks. These programs will be appraised in the Social Safety Net Assessment undertaken by the Bank to be finalized in FY11.
163. The policy proposal to move towards managed migration to benefit from the international mobility of the workforce is expected to have positive socio-economic impacts. Legalizing and regulating public and private labor intermediation will ensure a more efficient placement of Tunisians abroad, thereby increasing the positive externalities of international migration for Tunisia through remittances and other channels.49 Efficient intermediation in combination with a transparent and recognized NQFs helps to counteract “brain waste”.50 Over the long term, however, the cost of skilled migration might potentially outweigh the benefits, if the depletion of skills is a binding constraint to economic development. This is not an immediate concern for Tunisia, given an increasingly educated workforce and an insufficient demand for academically qualified labor. Yet, it is important to begin laying the groundwork for data collection (such as household or migration surveys) to allow for proper monitoring of the determinants and consequences of migration.
164. The policy reforms supported by this DPL series to foster Monitoring, Evaluation and Dissemination of Employment Data (Objective 3) – namely enhancing and coordinating data production, improving access and management of national data with a view to mainstream evidence-based policy-making – is not expected to have any adverse socio-economic effects. However, if in the future, Tunisia has regional employment data and employment projections for each governorate and has made all administrative and survey employment data available on a central server, this would be extremely helpful in improving poverty mapping and targeting of social programs.
49 Research indicates that skilled migration may have additional positive externalities, such as an increased return to human capital investments due to an increase in the emigration rate; knowledge and innovation transfer from the Diaspora; cross-border business networks; and transfer of norms and values. World Bank (2010): “Labor Migration from North Africa: Development Impact, Challenges, and Policy Options. “ 50 Brain waste occurs when the skills and capabilities of migrants are underutilized in the labor market of the receiving country.
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165. A merger of data from all relevant social security systems with employment data and poverty mapping would also likely allow for improvements in M&E capacity. Improved monitoring and impact evaluations will be critical in documenting the impact of reforms on vulnerable and targeted groups and in order to perform more detailed poverty and social impact assessments in Tunisia.
166. The key question is whether the proposed policy reform measures are adequate to avoid further marginalization of vulnerable groups, such as youth and women, and if the Government will be able to follow through with reforms in the face of political inertia or opposition. Policy reform with regards to employment is likely sensitive in the Tunisian context as it is a core issue of the social contract between the government and the Tunisian population. Fundamental changes will imply a gradual reformulation of that contract as well as social change. However, a balance has to be struck as security for some will likely result in reduced employment opportunities for others.
167. Further social analysis would be useful not only to clearly identify those who gained and who lost as a result of the reforms, but also to gauge ownership and to assess the likelihood that stakeholders’ would assist or obstruct the project’s development objective. The analysis would also position DPL II to improve the poverty orientation of the reform by including both qualitative and quantitative assessments of reform programs, i.e. by improving household survey data as suggested.
B. ENVIRONMENTAL ASPECTS
168. This operation is a DPL in support of a program of reforms for which the environmental requirements of OP/P8.60 apply. Overall, policies supported by the proposed loan are not likely to have any significant adverse impact on the country’s environment, including forests and other natural resources. Safeguard policies (such as OP 4.01 Environmental Impact Assessment) do not apply to this operation.
169. The reforms supported by this DPL are expected to facilitate employment through ALMP, to s enhance domestic and international labor mobility and strengthen the monitoring, evaluation and dissemination of employment data and mainstream evidence-based policy-making. Most of these reforms will not have any impact on the environment. There are, however, a few reforms which could have a negative environmental impact and are detailed below:
170. The pilot ALMP with BPT. The funds will count as own funds and will be directly transferred to a venture capital fund supporting the enterprise, according to a procedure laid out in the operations manual of the pilot program. All participants will further benefit from coaching for the incubation of the enterprise (registering, setting up, etc.), available through the pépinière (university incubator) system and through ANETI. They will also have access to financing from the public micro- and meso-credit banks, BTS and BFPME. 50 enterprises founded by students participating to the Business Plan Competition will receive grants ranging from 2,000 to 15,000 TND. Some of these newly created micro-enterprises could have negative environmental impacts. An analysis of a draft pipeline of projects ideas showed that most of the projects consist of micro-enterprises providing services. Therefore, given the fact that the micro-enterprises will have limited financial and human resources, it is very likely that environmental
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impacts resulting from their activities will be both limited and reversible. It must also be noted that these companies will be subject to the existing Tunisian environmental legislation.
171. Pilot ALMP for Community Childcare: The pilot scheme would include 350 satellite centers (home and community-based) reaching approximately 3,500 to 4,200 children in five poor urban areas of Tunisia (average of 10 to 12 children per center). It must be noted that this pilot program would not entail any new construction and that the services provided will meet the quality standards set by the Ministry of Women, Family, Childhood and Senior Citizens (MWFCS).
C. IMPLEMENTATION, MONITORING AND EVALUATION
172. Implementation and coordination responsibilities: The responsibility for implementing the program in Government rests with the MDIC which will coordinate all relevant activities with other Ministries. The Government will take the lead in monitoring progress in implementation.
173. Supervision by the Bank. Regular supervision will allow the Bank to continue providing policy advice and technical assistance to the institutions involved in the implementation of the program of reform. The Bank will continue to maintain dialogue with the relevant Government ministries and will conduct regular reviews in close collaboration with other partners. This will take the form of joint missions with the EC and shared analytical work and technical assistance.
174. M&E: The M&E of the program and its expected results will be fully embedded in the M&E framework of the NDP. The Bank and other development partners will continue to provide support to the Government to strengthen M&E, improve data quality and management and enhance capacity for using development outcomes to inform policy making. The Bank’s program of investment lending incorporates aspects of M&E in each of the sectoral operations and administers trust funds in support of M&E; this work will naturally feed into the overall efforts of the Employment DPL.
D. FIDUCIARY ASPECTS
175. No major fiduciary issues are expected in the proposed DPL. The Government’s public administration operates in a structured and reliable manner, with adequate controls, as well as uniform public accounting rules and procedures.
176. Financial Management Diagnostics and Risk Rating. Given the Bank’s experience in Tunisia and the primary conclusions from the Public Expenditure and Financial Accountability (PEFA) work currently in progress, it has become clear that the country’s public finance system is governed by a highly developed legal and regulatory framework that offers significant global guarantees in terms of viability and transparency. This system relies not only upon the principle of the strict separation of the functions of authorizing officers and finance officers but also mandates key internal control rules as well as internal and external auditing rules. The Tunisian system also relies upon high quality administrative structures and strong human and material resources. Overall, the Tunisian public expenditure system presents a very low budgetary and financing risk. Additionally, yearly Country Policy and Institutional Assessments (CPIA) based on Bank expert knowledge continue to maintain there is a low fiduciary risk. The low risk rating
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is due in large part to the steady and continued efforts and reforms supported by the Government to modernize and improve the efficiency of the public sector including public financial management activity during the last several years. These reforms are still ongoing.
177. The reporting and accounting are reliable, even though there is a room for improvement and modernization; the computerization of the budget and accounting is rather simple, but well spread among the public operators and its architecture allows a timely reporting. The cash and debt managements are made in a professional way, due notably to a strong technical assistance of the Bank. The whole area of control and audit is comprehensive and reliable, but still lacking sufficient public disclosure, notably for the annual report of the General Auditor (“Cour des Comptes”) which is only partially disclosed.
178. The ongoing PEFA exercise recommended improvements including: (a) reducing the delays to produce the year-end government financial statements; (b) further simplifying the a priori internal controls while continuing to strengthen the ex-post controls and internal audit; (c) further accelerating the implementation of the functional classification of expenditure that will contribute to an accounting system reform; and (d) undertaking multi-annual budget and performance-based budgeting. Public financial management reforms conducive to further efficiency remain central to the government agenda, therefore, PEFA recommendations would be used by Government to assess areas where performance will need to be improved.
179. Flow of funds (including foreign currency exchange) is subject to standard public financial processes. Tunisia has had no safeguards assessment undertaken by the IMF. However, during many years of working with the Tunisian government, the Bank has had no major fiduciary issues in relation to the funds flow. The Government budget is comprehensive, unified and subject to centralized treasury account. Cash flow and debt are professionally managed under generally satisfactory conditions. Moreover, the Central Bank of Tunisia (BCT) has been audited for the past several years and no weaknesses have been reported by any previous independent audit. The auditor’s opinions were issued with no qualifications.51
180. Loan proceeds are deposited in a government designated account at the BCT and transferred to the Treasury current account for government budget. The MOF will then provide a confirmation of this transfer to the World Bank, indicating that the total amount of the loan was received.
E. DISBURSEMENT AND AUDITING
181. The proposed loan will follow the Bank’s disbursement procedures for Development Policy Loans (DPLs) and will be disbursed through a single tranche. Once the loan has been approved by the Board of Executive Directors and becomes effective, the proceeds of the loan will be deposited by the International Bank of Reconstruction and Development (IBRD) in a dedicated account of the Borrower at the Central Bank of Tunisia, upon submission of a withdrawal application. The Borrower should ensure that upon the deposit of loan proceeds into
51The Central Bank publishes in the Annual Report the "Financial Statement and co-auditors report" The 2008 report is already publicly available and the team will request the 2009 report as a way to get a better knowledge of the Central Bank environment".
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said account, an equivalent amount is credited to the treasury current account at the Central Bank of Tunisia. .
182. The Borrower will report to the Bank on the amounts deposited in the foreign currency account and credited to the budget management system. If the proceeds of the loan are used for ineligible purposes as defined in the Development Loan Agreement, IBRD will require the Borrower to promptly upon notice refund an amount equal to the amount of said payment to IBRD. Amounts refunded to the Bank upon such request shall be cancelled. The administration of the accounts relevant to this loan will be the responsibility of the Central Bank of Tunisia.
183. Although an audit of the use of the funds may not be required, IBRD reserves the right to require audits of the deposit account at any time.
F. RISKS AND RISK MITIGATION 184. There are four moderate to high risks covering the political, macro, institutional and technical spheres and mitigation measures have been set up to address each.
185. On the political side, it will be important to promote greater efficiency and equity and to build the reform process on broad national consensus. The actions supported by this proposed DPL will serve as first steps to gradually build momentum for reform. In addition, the Bank has pro-actively supported the Government’s communication about employment policies to stakeholders and the social partners have been included in the dialogue on options for reform in the areas of employment from the very beginning.
186. In terms of macro-economic risks, Tunisia is still experiencing the aftermath of the economic crisis and the level of and changes in employment opportunities will largely depend on the business cycle. DPL I has been carefully designed to include measures that can mitigate the crisis’ impact on employment in the short and long term (e.g., the sequencing of reform measures is mindful of the impact of the crisis).
187. Ensuring adequate institutional and technical capacity to support reform implementation as well as ensuring cooperation between different ministries (such as MVTE and MSASTA) is a key challenge. Moreover, ministerial personnel changes at high technical and political levels can happen without prior notice and affect the ownership of the DPL series. The Government is aware of this issue and this has been dealt with to some extent by augmenting the teams for international cooperation and for statistics and by forming inter-ministerial commissions with representatives from Ministries as well as other concerned parties. Similarly, several actions require cross-institutional cooperation.
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Table 6: Risks and risk mitigation
Risks Mitigating Factors Risk after mitigation
Political Government unwilling to undertake reforms that may be perceived as threats to social cohesion and peace. 1. Miscommunication, or incomplete
communication about policies affecting the young graduate unemployed have in the past (very rarely) resulted in localized outbreaks of unrest, and their subsequent control by the authorities.
The actions supported by this proposed DPL will be specific and serve as first steps to gradually build momentum for reform. 1. The social partners, UTICA for employers and
UGTT for employees, have been integrated in the dialogue on options for reform for the objectives (i) and (ii) from the very beginning. The DPL team has met them, and representatives are expected to join study tours to the Philippines and to Poland. At a later stage they will join the commission elaborating reform options.
2. The Bank has proactively supported the Government’s communication about employment policies to stakeholders, especially graduates, and ensured equity and transparency.
3. The reform actions pertaining to this risk can be considered high risk/ high return.
High
Macro 1. Tunisia is still experiencing the aftermath of
the crisis. The level of and changes in employment opportunities will depend on the business cycle. For example, it is likely that unemployment will still rise in the short term, especially in the manufacturing and service sectors. There is no real counterfactual to evaluate the macro-impact of the proposed policies; the aggregate employment rate will be an indicator subject to many influences outside this DPL.
1. The program of this DPL has been carefully set
up to include measures that can mitigate the crisis’ impact on employment in the short and long term.
2. The sequencing of the reform measures is mindful of the impact of the crisis, and the time-to-effect of the measures.
3. Targets will be formulated carefully, in order to take care of the vulnerable macro environment.
Moderate
Institutional
1. Currently lengthy official procurement procedures can delay the impact of public expenditure.
2. Although the DPL is focused on one sector only, several actions require cross-institutional cooperation, in some cases for the first time. This may delay implementation.
3. Ministerial personnel changes at high technical and political levels can happen without prior notice and affect the ownership of the DPL series.
1. Very few actions include public expenditure.
The two Active Labor Market Policy (ALMP) pilots rest on existing structures as far as possible. The experience with the business plan thesis ALMP has shown that procurement decisions in ANETI (the Public Employment Agency) can be taken and executed speedily. ANETI will be the leading agency for both measures requiring direct public expenditure.
2. This risk is mitigated through two measures: (i) the MDIC acts as coordinating and convening Ministry for the DPL; and (ii) the cross-institutional cooperation arrangements needed do not differ significantly from one measure to the other; economies of scale can be expected.
Medium -
High
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Technical 1. The implementation capacity of line
ministries is limited. The cooperation on a significant lending operation is a first time for both the MVTE and MSASTA.
1. The MVTE has augmented its teams for (i)
international cooperation and (ii) the ONEQ (statistics) by 7 persons in total, at the explicit request of the EC prior to the 5-year employment program.
2. Measures touching on the remit of MSASTA all require very close social partner consultation, and thereby automatically involve also the MVTE and the MDIC as convening Ministry, among others.
High
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ANNEX 1: LETTER OF DEVELOPMENT POLICY
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59
60
61
62
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REPUBLIC OF TUNISIA MINISTRY OF DEVELOPMENT AND INTERNATIONAL COOPERATION THE MINISTER 10-234 May 24, 2010 Mr. Robert B. Zoellick President of the World Bank Group World Bank, Washington, D.C. Letter of development policy Mr. President, Tunisia has achieved considerable success in the liberalization and modernization of the economy, the development of human resources, the consolidation of social well-being and progress towards the establishment of the foundations of sustainable development. This performance was made possible by perseverance in the introduction of reforms in the economic and social areas, guaranteeing the continuity and effectiveness of development work and helping to improve the country’s ability to meet challenges and resist external shocks. These sustained reform efforts enabled Tunisia to achieve average GDP growth of 5.2 per cent a year at constant prices over the last ten years. It also promoted diversification of the productive base, with an increase in the share of the service sector, which exceeded 58 per cent of GDP in 2009, compared with 47 per cent in 1996, and the emergence of new growth sectors characterized by their high knowledge content. In addition, the rate of job creation showed a marked increase over this period, reducing the unemployment rate by more than two points. The improvement in income and the decline in unemployment helped to reduce poverty and to expand the middle class, which now accounts for 81 per cent of the population. In 2008 and 2009, the international economic situation was marked by the fall-out from the financial and economic crisis. In this context, and despite the difficulties encountered by certain export sectors, the Tunisian economy developed in relatively favorable conditions. As soon as the first signs of this crisis became apparent, the Tunisian Government was careful to take the necessary precautions to limit its effects and contain its fall-out. For this purpose, an action plan was launched early in 2009 to preserve the momentum of the economy and encourage its opening to the outside world. This plan includes temporary measures to support firms affected by the decline in external demand (assistance with staff
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training, payment facilities for customers with cash flow problems, action to promote their exports). It also includes a program to support the integration of the Tunisian economy in the global economy and to improve its competitiveness, with a view to reducing transaction costs, simplifying and optimizing foreign trade procedures, improving access to financing and the business climate and consolidating the economic and financial bases of the economy. This program has been designed and implemented with the support and financial assistance of the World Bank, the African Development Bank and the European Union. Thanks to the measures adopted, the momentum of growth and investment was preserved and the financial equilibrium was protected: GDP growth was 3.1 per cent in 2009, the current balance-of-payments deficit is only 2.5 per cent of GDP and the budget deficit is only 3 per cent. At the same time, foreign exchange reserves grew and represented 180 days of imports at the end of 2009, and indebtedness declined from 38.8 per cent of GDP in 2008 to 38.7 per cent in 2009. However, the labor market was under pressure mainly due to a mismatch between labor supply and demand, despite the measures taken to mitigate the effects of the global economic crisis. A total of 50,000 jobs were created and the unemployment rate increased by only 0.8 percentage points thanks to the measures adopted in 2009. The unemployment rate for university graduates continued to increase, reaching 22 per cent in 2009. Because of this situation, the acceleration of job creation and the reduction of unemployment became a fundamental axis of the 2009-2014 Presidential Program and a priority for the Government. In this situation, the Tunisian Government committed itself to meeting the employment challenge, particularly by accelerating the structural transformation of the economy in order to increase productivity and create enough skilled jobs. In this context, the Government opted for an integrated employment strategy reflecting the interdependencies and complementarities between factors linked to: (i) labor demand; (ii) labor supply; and (iii) a labor market with a legal framework reflecting the new economic context and taking into consideration new types of employment. The employment strategy will also require better monitoring of the situation and evaluation of key policies and trends in the labor market as well of employment policies and programs, and better dissemination of information to the actors concerned. Consequently, the employment program has three axes:
i. Facilitate employment through active labor market policies; ii. Strengthen the functions essential for domestic and international mobility of the labor
force; iii. Strengthen the monitoring, evaluation and dissemination of employment data.
1) Facilitate employment through active labor market policies
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The goal of active labor market policies (ALMPs) is to facilitate successful insertion in the labor market on a cost-effective basis. The measures envisaged to reinforce ALMPs as regards assistance to job seekers are:
Adoption of innovative ALMPs to allow the creation of new jobs for university graduates who choose to prepare a business plan instead of fulfilling the requirement of an internship upon graduation and who plan to start up businesses after obtaining their degree. Assistance to these young people in the form of support structures and funding should result in successful insertion in the world of work.
Launching of a pilot project to promote community services in poor districts so as to
improve access by low-income groups to services such as pre-schools, remedial classes or assisted living, through a system of conditional cash transfers. The goal is to reduce school failure rates in these districts, to enhance creditworthiness and thus promote the creation of independent activities by young graduates and to reduce unemployment among women with the right qualifications.
Fundamental restructuring of the portfolio of ALMPs, bundling the 20+ programs into
six generic ALMPs, and introducing… both for beneficiaries and employers. Reforms to encourage the creation of businesses specializing in job placement. Reorganization of the work processes of the National Agency for Employment and
Independent Work (Agence Nationale pour l’Emploi et le Travail Indépendant – ANETI) with a focus on the long-term unemployed and the hard-to-place job seekers. This means offering individual-centered job seeking assistance (modern case management, remark of the translator) to this group, which may be subcontracted to the private sector and NGOs.
2) Strengthen the functions essential for domestic and international mobility of the labor force The goal is to develop policies to facilitate mobility of the workforce, including legislation allowing businesses to adapt their production factor input in case of shocks, social coverage guaranteeing an income for laid off workers and facilitation of legal migration for the benefit of the national economy. The measures advocated to make the labor market more dynamic and to increase the mobility of the working population include adapting the legal framework for employment to the requirements of the economic context and the new types of employment and protecting the income of workers laid off for economic reasons. They could also include a new regulatory framework for private employment intermediation at the international level and a competency-based national qualification framework allowing transparent recognition of qualifications and skills. This could improve the employability of individuals and expand opportunities for placement of Tunisians in suitable jobs abroad. More specifically, the reform measures that we envisage are:
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Creation of an interdepartmental commission to evaluate existing legislation and mechanisms and propose reforms to strengthen the ways for businesses to adapt to structural changes and economic shocks and improve social coverage for laid off workers.
Institutional capacity-building to enable ANETI to provide international work force
intermediation for emigrants, thus increasing the number of Tunisians with legal status abroad and at the same time reducing illegal immigration.
Coordination of the implementation of the competency-based national qualification
framework to improve the match between supply and demand on the international labor market.
3) Improve monitoring, evaluation and dissemination of employment data and mainstream evidence-based management The goal is to improve and develop employment statistics and to disseminate them with maximum transparency, following quality criteria reflecting best international practice in this regard. In order to achieve this goal, a system of employment statistics will be established, involving the public statistical agencies concerned, in order to ensure close coordination between such agencies. The agencies involved in this system will be upgraded to improve their capacity to produce and disseminate the necessary data on employment and the labor market. The architecture and the basic statistical instruments of this system (concepts, nomenclatures, …) will be developed and upgraded in compliance with the relevant international standards. In addition, the dissemination of employment statistics will be improved so as to facilitate access to such data by the various categories of users and to improve the sharing of the data, with the goal of allowing decision-makers and various stakeholders to monitor employment and employment data on a regular basis. Procedures will be introduced to transmit the administrative databases containing employment data to the National Statistical Institute, in order to enrich the sourcing of employment statistics. Procedures for access to individual-level survey data gathered by the National Statistical Institute will be formalized, so as to facilitate access by public and private users, while respecting data confidentiality in accordance with the statistical principles generally accepted internationally. Action already adopted or under way to improve the availability of employment statistics: revision of employment concepts and statistical nomenclatures to bring them into line with international standards, introduction of quarterly household labor force surveys, updating of the directory of businesses and of employment modules in business surveys, greater use of employment-related administrative sources. In order to pursue this action and attain the goals of this program (loan), the following reform measures and actions are proposed:
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Promulgation by the Ministry of Development and International Cooperation of an order establishing the official procedure for transmission of data to the National Statistical Institute by administrations and public agencies, for statistical purposes.
Standardization of the nomenclature of economic activities used in nation-wide
employment surveys and their harmonization with the United Nations and European Union nomenclatures.
Creation by the National Statistical Institute of a technical committee to coordinate the
compilation and dissemination of employment statistics among the public agencies concerned. The committee is drawing up a program of activities to contribute to the creation of a consistent system of employment statistics.
Adoption and mainstreaming of evidence-based management to systematically improve
the monitoring and evaluation of ALMPs. In conclusion, the Tunisian Government believes that the program of reforms described in this letter will enable Tunisia to enhance the effectiveness and efficiency of job entry in Tunisia. Implementation of this program would be greatly facilitated if the request for rapid disbursement of US$50 million were to be granted by the World Bank.
(Signed) Mohamed Nouri Jouini
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ANNEX 2: EMPLOYMENT POLICY MATRIX
Prior actions under DPL I and possible triggers under DPL II are highlighted in bold
Objectives Policy Actions Expected Outcomes / Indicators
Prior Actions DPL I Possible actions DPL II 5 Year Vision Objective 1: Facilitate employment through Active Labor Market Policies
Tap new sources of job creation
(1) The Ministry of Higher Education, and Scientific Research (MHESR) and the Ministry of Vocational Training and Employment (MVTE) have issued Circular (Circulaire) No. 1 dated August 10, 2009 launching a pilot program to provide support for students seeking to establish their own companies upon graduation through the preparation of business plans (Business Plan Theses or BPTs), and MHESR has published in the National Gazette Order (Arrêté) dated June 30, 2009, allowing such BPT as undergraduate theses.
The MHESR and the MVTE have implemented all the components of the pilot ALMP as detailed in the Operational Manual of the BPT.
If performance is satisfactory, the business plan competition will be available nationwide to all licence appliquée students.
Increased employment opportunities for recent university graduates. More than 65 percent of university graduate student beneficiaries of the BPT program are employed for at least a year. April 2012
MVTE has written the TOR and published the call for proposals for the design of a pilot ALMP including a conditional cash transfer (CCT) component to support community childcare in 5 poor neighborhoods, provided by re-trained unemployed.
(1) The Ministries in charge have developed and published in the National Gazette new quality standards for the local provision of social childcare with Decree No. XX-XXXX dated XX.
GT has evaluated the pilot in a rigorous way and if satisfactory extended to other community activities in other areas. Tunisia has put in place legal standards for social childcare services.
Sustainable labor market insertion of at least 50 percent of program participants (childcarers). April 2012.
Facilitate employment through well
(2) MVTE has published in the National Gazette Decree No. 349 dated February 9, 2009, providing for a complete re-
A high performing portfolio of ALMP with conditions for
More effective public labor market intermediation.
ANETI’s rate of filling
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Objectives Policy Actions Expected Outcomes / Indicators
Prior Actions DPL I Possible actions DPL II 5 Year Vision targeted and efficient Active Labor Market Policies
structuring of the Active Labor Market Policy Menu towards better efficiency.
eligibility for all ALMP which include a financial benefit component.
firm’s job offers posted in a given year increases from 81 percent (2009) to 85 percent (2012).
CIDES take-up by graduates and employers increases from 2,387 (during all 2009) to at least 5,000 (end 2011).
CAIP take-up by non-graduates and employers increases from 16,206 (during all 2009) to at least 20,000 (end 2011). 52
(3) MVTE has published in the National Gazette Decree No. 87 dated January 20 2010, under which ANETI is required to offer individual-centered job seeking assistance (modern case management) for the long-term unemployed.
The MVTE has implemented first phase of reorganization of ANETI, including the re-structuring of regional and local offices. (2) ANETI has launched operative mobile units to reach the population in at least three remote rural areas of the West and South.
ANETI offers modern case management to all types of jobseekers, including triage and profiling at reception, treatment according to priority in terms of unemployment risk, and personalized follow-up via development plans.
Better targeting and coverage of public employment services. Share of long-term unemployed decreases from 16 percent (2007) to an inferior percentage in 2012. (LFS) Coverage of all jobseekers through ANETI increases from 21 percent (2007) to 35 percent (2012).
52 The take-up of CIDES and CAIP is limited by employer-demand; there is no risk of lack of demand from jobseekers. These performance indicators feature in ANETI’s performance contract with the MVTE.
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Objectives Policy Actions Expected Outcomes / Indicators
Prior Actions DPL I Possible actions DPL II 5 Year Vision (4) MVTE has published in the National Gazette Decree No. 87 dated January 20, 2010, which, inter alia, encourages increasing involvement of the private sector and non-governmental organizations in the delivery of employment services.
The MVTE has conducted a study on the private employment intermediation, including a suggestion for a new legal framework. The study has been consulted in a stakeholder workshop. (3) Following the results of the consultation, a document has been submitted to the relevant Ministers with reform options to encourage the creation of private enterprises specialized in job placement.
GT has regulated the role of the private sector in labor market intermediation, both for the foreign and the domestic market.
More efficient provision of employment services through increased private sector involvement. Share of ANETI’s budget for ALMPs delivered by private or third sector increases from 5 percent (2009) to 10 percent (2012).
Objective 2: Enhance Domestic and International Mobility of the Labor ForceImprove labor market dynamics to allow for re-structuring of the production structure
MVTE has sent an invitation letter on May 18, 2010 that specifies the composition of an inter-departmental commission (“IDC”) with the objective to elaborate reform options for: (i) employment regulation in the labor code to achieve greater mobility of the workforce, and (ii) the protection system for laid off workers to improve its coverage and performance. IDC has met on May 29, 2010 and approved the terms of reference for a study to (i) assess the coverage and performance of the current protection for laid off workers and (ii) formulated options for policy reform.
(4) The Inter-departmental commission consults with the stakeholders the options to reform (i) employment regulation and (ii) social protection mechanisms for laid off workers, and submits a corresponding document to the relevant Ministers.
A sustainable option for the reform of (i) employment regulation in labor code and for (ii) social protection mechanisms for laid off workers will have been consulted with all concerned stakeholders and the GT will have revised the corresponding legislative measures.
Moving from job protection to income protection. Restrictions to contract termination for open-ended redundant workers are revised to allow employers easier economic adjustment. Baseline: Employers need to notify/ ask approval from a third party before terminating one or more redundant workers. Coverage of laid off workers by a safety net
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Objectives Policy Actions Expected Outcomes / Indicators
Prior Actions DPL I Possible actions DPL II 5 Year Vision increases from 5.4 percent (LFS 2007).
Move towards managed migration to benefit from international mobility of workforce
(5) The International Employment Division responsible for international labor intermediation has been established at the National Agency for Employment and Independent Work (ANETI), has initiated engagement with international employer associations and facilitates language and technical training for prospective migrants in cooperation with International Organization for Migration.
(5) Decree for regulating the activities of private international employment agencies submitted for presidential approval.
MVTE, ANETI, ATFP and CENAFFIF have launched a pilot program for pre-departure training including a rigorous impact evaluation component.
GT put in place a mechanism which facilitates mobility from Tunisia including:
(a) Regulation passed on labor market intermediation agencies;
(b) A system to anticipate developments in labor demand in targeted countries;
(c) Improvement of the quality of the information system on migration.
More and better matching of migrants into jobs abroad.
Increase quota share of migrants to France from 16 percent in 2009 to 40 percent in 2012.53
Increase number of applicant CVs sent to employers or employment agencies abroad by 150 percent (from 1000 in 2009 to 2500 in 2012).
Increase share of international employment contracts facilitated from 0.003 percent in 2009 to 1.5 percent in 2012.54
(6) MVTE has published in the National Gazette Decree No. 2139 dated July 8, 2009 to establish the National Qualification Framework (NQF), including a commission responsible for its implementation, and MVTE has issued an Order (Arrêté) setting forth the composition and operating
CENAFFIF works with stakeholders to translate competences established by the NQF into training programs for 2 sectors pertinent for migration and undertakes a detailed comparison of differences and similarities in training programs and organizational structure in the same sectors in
The NQF is (i) compatible with the EQF, and (ii) enables the validation of work experience as a qualification. The NQF will serve as the basis for the Lifelong
Increase in proportion of public and private training centers (formation initiale) that currently provide a degree that is valid and recognized (homologation) with the institutionalization of national training
53 Tunisia and France have an agreement to facilitate work visas for 9000 Tunisians in France per year. Currently, Tunisia only manages to fill 16 percent of this quota. 54 In 2009, only 4 contracts were facilitated to Canada out of a total of 131,403 contracts facilitated.
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Objectives Policy Actions Expected Outcomes / Indicators
Prior Actions DPL I Possible actions DPL II 5 Year Vision mechanism of the implementing commission.
different migration destinations in Europe, North America, and Gulf countries.
learning Strategy. standards from 33 percent in 2009 to 40 percent in 2012.55
Objective 3: Strengthen the Monitoring, Evaluation and Dissemination of Employment Data and Mainstream Evidence-Based Policy-Making
Coordinate data production
(7) The Ministry of Development and International Cooperation (MDIC) has issued in 2010 an Order (Arrêté), referred to in the 1999 Statistical Law, which stipulates the official procedure for public agencies to transmit data files to INS for statistical purposes.
INS has formed a technical committee that is responsible for coordinating production of employment data.
The ministries and public agencies transmit to INS, and have access to data from the INS on demand, as per the official procedure.
The technical committee meets on a quarterly basis and publishes an annual schedule for data production and publication, available on the INS website.
Employment data has been harmonized to international standards and is shared with public agencies.
Effective data sharing among public bodies. The number of conventions to transfer files between the INS and public agencies rises from 0 (2009) to 7 (2012).
Harmonize data nomenclature
(8) The National Statistical Institute (INS) has harmonized its nomenclature of products with the nomenclatures of the United Nations and the European Union, for statistical purposes.
(6) The National Nomenclature of occupations, from 1997, has been revised in order to harmonize it with the standards of the ILO, through a corresponding modification of Decree n° 97-2452 of 15 December 1997.
Achieve utilization of new nomenclatures for data production and data dissemination of all employment data.
Utilization of harmonized nomenclatures INS and ONEQ adopt each a work plan to apply the new nomenclatures of 2009.
Mainstream evidence based
MVTE has published a decree (No 349, February 2009) with the objective of systematically reinforcing Monitoring and
(7) The National Observatory for Employment and Qualifications (ONEQ), with the participation of
Facilitation of relevant employment data to
55 All 212 public training centers and 90 of 700 private training centers currently offer a valid and recognized degree.
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Objectives Policy Actions Expected Outcomes / Indicators
Prior Actions DPL I Possible actions DPL II 5 Year Vision policy-making Evaluation of ALMPs. ANETI manages
the ALMPs as per the contract objectives of MVTE, which contains performance indicators for each ALMP.
ONEQ has published a monitoring report on Instrument 32 of the Funds 21/21.
ONEQ has developed objectives for an Information System which closely follows graduates of Vocational Training, Higher Education, and the ALMPs.
the National Social Security Fund (CNSS), INS and ANETI, has established an action plan for the introduction of the CIN as a unique identifier for all official databases.
ONEQ has established a MIS system which closely follows graduates of Vocational Training and Higher Education.
decision makers.
ANETI has computerized the files (E-Dossier) of employment seekers.
The CIN is included in all databases related to employment as a unique identifier.
ANNEX 3: FUND RELATIONS NOTE
May 5, 2010
Tunisia— Assessment Letter for the World Bank Background Tunisia’s sound economic policies and structural reforms, underpinned by increasing trade openness, led to higher growth in recent years and allowed it to strengthen its footing to face the current global crisis. Tunisia enhanced its resilience with a reduction in public and external indebtedness and a significantly improved reserves position. Nonetheless, while relatively insulated from international financial contagion, Tunisia continues to be exposed to the uncertainties related to economic recovery in its partner countries, particularly in Europe. The medium-term outlook is favorable, based on the projected global economic recovery. Tunisia is weathering the impact of the global crisis relatively well. Real GDP growth slowed down from 4.6 percent in 2008 to 3.0 percent in 2009, reflecting mainly a fall in exports of manufactured goods to EU countries. This drop was partially offset by buoyant growth in the mining and energy sectors and in some services. Domestic demand was sustained by investment and strong consumption fueled by salary increases. Inflation declined from an average of 5 percent in 2008 to 3.7 percent in 2009, but picked up to 5.2 percent (year-on-year) in March 2010. The current account deficit, after widening in 2008, contracted in 2009 owing to lower import prices and resilient tourism and remittances receipts. Despite the decline in foreign investment inflows in 2009, reserves reached US$ 10.6 billion at end-2009 (5.4 months of imports). The authorities promptly deployed measures to contain the impact of the global economic slowdown, including a fiscal stimulus package of about 1.4 percent of GDP in 2009 and a more accommodating monetary policy by the Central Bank of Tunisia (BCT). The fiscal deficit increased to 3.2 percent of GDP in 2009 (from 1.2 percent in 2008), partly as a result of the stimulus package. However, steady economic growth allowed the public debt-to-GDP ratio to decline further from 47.5 percent in 2008 to 47.2 percent in 2009. Revenues dropped slightly in 2009, in line with the relative slowdown of economic activity compared to the previous year. The increase in expenditure was contained by lower subsidies for staple foods and petroleum products, reflecting for the most part lower world prices. Banks were not directly affected by the global financial crisis since they rely only marginally on external financing. The banks’ soundness indicators continued to improve, but the level of non-performing loans (NPLs) remains relatively high (15.5 percent in 2008). Growth in credit to the economy decelerated somewhat from 14.0 percent in 2008 to 10.6 percent in 2009. The good performance of the financial sector, combined with abundant liquidity due to an accommodative monetary policy, contributed to a particularly buoyant stock market.
International Monetary Fund 700 19th Street, NW Washington, D. C. 20431 USA
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IMF Staff Assessment The performance of the Tunisian economy was relatively strong in the context of the global crisis, due to good fundamentals resulting from sound policies implemented over the years. The growth outlook is favorable, but downside risks are still present—pertaining to the speed of the recovery in Europe—and Tunisia faces challenges related to the still high level of unemployment. The authorities’ temporary expansionary fiscal stance was appropriate to mitigate the impact of the global crisis. The 2010 Budget Law extends the fiscal stimulus into 2010, given the still uncertain outlook in partner countries. Over the medium term, the authorities intend to revert to fiscal consolidation in order to maintain the public debt-to-GDP ratio on a downward path. A key pillar of the strategy should be the reduction in subsidies, through the continued effective implementation of the new oil price adjustment mechanism and improved targeting of measures to support the poorer segments of the population. A timely reform of the pension system will be necessary to avoid an unsustainable burden on the budget in the future. The BCT’s monetary policy stance has been appropriate, with a cautious easing in 2009 to accommodate demand support. It should remain closely coordinated with fiscal policy, and the BCT should consider a gradual approach in withdrawing the monetary stimulus, taking into account potential excess liquidity and renewed inflationary pressures, as well as the risks of deteriorating prudential indicators of the banking system. Over the medium term, the authorities are encouraged to continue strengthening the effectiveness of monetary policy and implementing the building blocks for the planned inflation-targeting framework. The exchange rate remains broadly aligned with its fundamentals and the authorities’ policies are consistent with external stability. The authorities are encouraged to continue anchoring the exchange rate policy to their medium-term objective of a freely floating exchange rate. Prudential indicators of the banking sector continued to improve, but the level of NPLs remains high. The authorities have implemented regulations that prevented the emergence of new NPLs, but should make more resolute efforts to reduce the older stock in order to further strengthen the banking system’s resilience, particularly in light of the planned gradual opening of the capital account. It will be important to monitor closely individual banks and to proceed with plans for further enhancing the quality of bank services. The regulatory and supervisory frameworks should continue to adapt to financial sector developments. A more forward looking approach to banking supervision is necessary, including in the context of the future implementation of Basel II. Comprehensive stress testing is needed to assess better the potential vulnerabilities of the banking system and prepare appropriate contingency plans. The Tunisian authorities have followed a pragmatic approach to trade and financial integration. Tunisia participates actively in the regional integration effort, and negotiations with the EU to extend the Association Agreement to services could become a key step forward. Ongoing tax and customs administration reforms would continue to improve the business climate and enhance geographic diversification.
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2005 2006 2007 2008 2009 2010Prel. Est. Proj.
Output and PricesReal GDP (market price) 4.1 5.3 6.3 4.6 3.0 4.0Consumer prices (end of period) 3.7 3.3 5.3 4.1 4.3 4.7Consumer prices (period average) 2.0 4.5 3.1 5.0 3.7 4.2
Investment and SavingGross capital formation 22.3 24.6 25.7 27.5 23.1 25.0
Of which: Nongovernment 1 15.9 18.4 19.8 21.1 15.9 17.5
Gross national savings 21.3 22.6 23.1 23.3 19.8 22.3
Of which: Nongovernment 1 18.0 19.6 20.2 17.9 15.6 18.4
Public Finances 2
Revenue, excluding grants and privatization 23.6 23.4 23.8 26.2 24.6 24.0Expenditure and net lending 26.8 26.5 26.7 27.3 27.9 27.7Budget balance, excluding grants and privatization -3.2 -3.0 -2.9 -1.2 -3.2 -3.6Primary balance, excluding grants and privatization -0.4 -0.3 -0.3 1.1 -1.1 -1.5Total government debt 58.1 53.7 50.0 47.5 47.2 47.2
Monetary Sector (Annual Credit to the economy 6.3 6.6 9.7 14.0 10.6 2.9
Base money 21.9 17.6 15.3 26.7 13.0 4.1Broad money 11.0 11.4 12.5 14.4 13.1 6.7Velocity of broad money 1.6 1.6 1.5 1.5 1.4 1.4One-year treasury bill rate (period average, in percent) 5.2 5.2 5.5 5.4 4.8 …
External Sector Exports of goods (in US$, percentage change) 9.8 9.9 29.6 26.6 -24.8 5.6 Imports of goods (in US$, percentage change) 3.4 12.8 26.9 28.7 -22.5 7.0
Merchandise trade balance -6.7 -8.1 -8.1 -9.8 -8.9 -9.6Current account excluding official transfers -1.0 -2.0 -2.6 -4.2 -3.4 -2.7Current account including official transfers -0.6 -1.5 -2.1 -4.0 -3.0 -2.4
Foreign direct investment 3 1.8 3.2 4.0 5.3 3.9 3.1
Total external debt 4 65.3 58.1 53.9 53.7 52.7 51.8Gross reserves (in billions of U.S. dollars) 5 4.4 6.8 7.9 9.0 10.6 11.4
In months of next year imports of goods and services 4.0 5.4 5.0 4.4 6.7 6.7In percent of short-term external debt(on remaining maturity basis) 98.5 127.3 139.4 158.1 191.2 202.4
Memorandum ItemsNominal GDP (in US$ billions) 29.1 31.1 35.6 40.8 40.1 41.8Unemployment rate (in percent) 14.2 14.3 14.1 14.2 14.7 14.6Net imports of petroleum products (in millions of U.S. dollars) 393.4 632.1 -106.8 676.8 112.6 142.1Terms of trade (deterioration -) -2.3 -3.6 -1.9 0.8 8.0 -0.9Local currency per U.S. dollar (period average) 1.3 1.3 1.3 1.2 1.4 1.4Real effective exchange rate (annual average, percentage change) -4.2 -0.8 -2.8 -0.6 0.0 …
Stock market index 6 1,615.1 2,331 2,614 2,892 4,292 …
Sources: Tunisian authorities; and Fund staff estimates.
1/ Includes public enterprises.
2/ The f iscal year is the calendar year.
3/ Excludes privatization receipts.
4/ Includes bank deposits of non-residents, most of w hom in Tunisia for a long-term horizon, estimated at 7.7 percent of GDP in 2008
5/ Includes privatization receipts, w hich w ere about US$2.2 billions in 2006 and averaged US$0.1 billion in 2005 and 2007-08.
6/ TUNINDEX (1000=4/1/1998).
(Main export: electronic and mechanical goods, textiles, energy, tourism; 2008)
Annual percentage change, unless otherwise indicated
Tunisia: Selected Economic Indicators, 2005–10(Quota: SDR 286.5 million)
(Population: 10.3 million; 2008)(Per capita GDP: $3,632; 2008)(Poverty rate: 3.8 percent; 2005)
(In percent of GDP, unless otherwise indicated)
(Annual percentage change)
(In percent of GDP)
(In percent of GDP)
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ANNEX 4: COUNTRY AT A GLANCE
Tunisia at a glance 3/9/10
M . Eas t Lo werK e y D e v e lo p m e n t In d ic a t o rs & N o rth m iddle
T unis ia A fric a inc o m e( 2 0 0 8 )
P o pulat io n, m id-year (m illio ns ) 10.3 313 3,435Surfac e area (tho us and s q. k m ) 164 8,778 35,510P o pulat io n gro wth (%) 1.0 1.7 1.0Urban po pulat io n (% o f to tal po pulat io n) 66 57 42
GN I (A t las m etho d, US$ billio ns ) 36.0 883 6,543GN I per capita (A t las m etho d, US$ ) 3,480 2,820 1,905GN I per capita (P P P , internat io nal $ ) 7,140 7,402 4,585
GD P gro wth (%) 4.5 5.9 10.2GD P per c apita gro wth (%) 3.5 4.1 9.1
( m o s t re c e n t e s t im a t e , 2 0 0 3 – 2 0 0 8 )
P o v erty headc o unt rat io at $ 1.25 a day (P P P , %) 3 4 ..P o v erty headc o unt rat io at $ 2.00 a day (P P P , %) 13 17 ..Life expec tancy at birth (years ) 74 70 69Infant m o rtality (per 1,000 liv e births ) 18 32 38C hild m alnutrit io n (% o f c hildren under 5) .. .. 25
A dult literac y, m ale (% o f ages 15 and o lder) 86 82 88A dult literac y, fem ale (% o f ages 15 and o lder) 69 65 77Gro ss prim ary enro llm ent , m ale (% o f age gro up) 110 108 112Gro ss prim ary enro llm ent , fem ale (% o f age gro up) 107 103 109
A c ces s to an im pro v ed water s o urc e (% o f po pulat io n) 94 89 88A c ces s to im pro v ed s anitat io n fac ilit ies (% o f po pulat io n) 85 77 55
N e t A id F lo ws 19 8 0 19 9 0 2 0 0 0 2 0 0 8 a
(US$ m illio ns )N et OD A and o f f ic ial aid 240 391 222 310T o p 3 do no rs (in 2007): F ranc e 79 76 93 128 Euro pean C o m m iss io n 1 25 71 117 Germ any 26 -8 2 27
A id (% o f GN I) 2.8 3.3 1.2 0.9A id per c apita (US$ ) 38 48 23 30
L o n g - T e rm E c o n o m ic T re n d s
C o ns um er pric es (annual % c hange) .. 6.5 3.0 5.0GD P im plic it def lato r (annual % c hange) 12.8 4.5 3.2 5.9
Exc hange rate (annual av erage, lo c al per US$ ) 0.4 0.9 1.4 1.2T erm s o f t rade index (2000 = 100) .. 64 100 100
19 8 0 – 9 0 19 9 0 – 2 0 0 0 2 0 0 0 – 0 8
P o pulat io n, m id-year (m illio ns ) 6.4 8.2 9.6 10.3 2.4 1.6 1.0GD P (US$ m illio ns ) 8,743 12,314 19,443 40,309 3.3 4.7 4.9
A gric ulture 14.1 15.7 12.3 9.9 2.8 2.3 2.7Indus try 31.1 29.8 28.6 32.6 3.1 4.6 -2.9 M anufac turing 11.8 16.9 18.2 17.9 3.7 5.5 -23.9Serv ic es 54.8 54.5 59.1 57.5 3.5 5.3 7.7
H o us eho ld f inal c o nsum pt io n expenditure 61.5 63.6 60.7 62.8 2.9 4.3 5.0General go v 't f inal c o nsum pt io n expenditure 14.5 16.4 15.6 14.6 3.8 4.1 4.3Gro ss c apital fo rm at io n 29.4 27.1 27.3 27.0 -1.8 3.6 2.1
Expo rts o f go o ds and s erv ic es 40.2 43.6 44.5 61.0 5.6 5.1 4.3Im po rts o f go o ds and s erv ic es 45.6 50.6 48.2 65.3 1.7 3.8 3.0Gro ss s av ings 25.1 22.2 23.1 21.8
N o te: F igures in italic s are fo r years o ther than tho s e s pec if ied. 2008 data are prelim inary. .. indic ates data are no t av ailable.a. A id data are fo r 2007.
D evelo pm ent Ec o no m ics , D ev elo pm ent D ata Gro up (D EC D G).
(av erage annual gro wth %)
(% o f GD P )
6 4 2 0 2 4 6
0-4
15-19
30-34
45-49
60-64
75-79
percent of total population
Ag e d istr ib u tio n , 2007
M ale Fem ale
0
10
20
30
40
50
60
70
80
90
1990 1995 2000 2007
Tunis ia M iddle E as t & North A fric a
U n d er-5 mo rtal i ty rate (p er 1,000)
0
2
4
6
8
10
95 05
GDP GDP per c api ta
Gro wth o f GD P an d GD P p er cap ita (%)
78
Tunisia
B alance o f P ayments and T rade 2000 2008
(US$ millions)
Total merchandise exports (fob) 5,840 19,217Total merchandise imports (cif) 8,556 24,586Net trade in goods and services -705 -1,124
Current account balance -821 -1,717 as a % of GDP -4.2 -4.2
Workers' remittances and compensation o f employees (receipts) 796 1,870
Reserves, including gold 1,821 8,861
C entral Go vernment F inance
(% of GDP)Current revenue (including grants) 24.1 24.8
Tax revenue 21.6 21.6Current expenditure 19.9 21.4
T echno lo gy and Infrastructure 2000 2008Overall surplus/deficit -3.7 -1.2
Paved roads (% of to tal) 68.4 65.8Highest marginal tax rate (%) Fixed line and mobile phone Individual .. .. subscribers (per 100 people) 11 95
Corporate .. .. High technology exports (% of manufactured exports) 3.4 5.3
External D ebt and R eso urce F lo ws
Enviro nment(US$ millions)Total debt outstanding and disbursed 11,307 20,700 Agricultural land (% of land area) 61 63Total debt service 1,906 2,117 Forest area (% of land area) 6.2 6.8Debt relief (HIPC, M DRI) – – Nationally protected areas (% of land area) .. 1.5
Total debt (% of GDP) 58.2 51.9 Freshwater resources per capita (cu. meters) 429 410Total debt service (% of exports) 20.1 9.3 Freshwater withdrawal (billion cubic meters) 2.6 ..
Foreign direct investment (net inflows) .. .. CO2 emissions per capita (mt) 2.1 2.2Portfo lio equity (net inflows) .. ..
GDP per unit o f energy use (2005 PPP $ per kg of o il equivalent) 6.9 7.8
Energy use per capita (kg of o il equivalent) 794 863
Wo rld B ank Gro up po rt fo lio 2000 2008
(US$ millions)
IBRD Total debt outstanding and disbursed 1,211 1,353 Disbursements 136 70 Principal repayments 150 273 Interest payments 79 74
IDA Total debt outstanding and disbursed 39 22 Disbursements 0 0
P rivate Secto r D evelo pment 2000 2008 Total debt service 2 2
Time required to start a business (days) – 11 IFC (fiscal year)Cost to start a business (% of GNI per capita) – 7.9 Total disbursed and outstanding portfo lio 11 115Time required to register property (days) – 39 o f which IFC own account 11 84
Disbursements for IFC own account 1 18Ranked as a major constraint to business 2000 2008 Portfo lio sales, prepayments and (% of managers surveyed who agreed) repayments for IFC own account 1 1 n.a. .. .. n.a. .. .. M IGA
Gross exposure – –Stock market capitalization (% of GDP) 14.5 15.6 New guarantees – –Bank capital to asset ratio (%) 7.5 7.7
Note: Figures in italics are for years o ther than those specified. 2008 data are preliminary. 5/26/10.. indicates data are not available. – indicates observation is not applicable.
Development Economics, Development Data Group (DECDG).
0 25 50 75 100
Control of corruption
Rule of law
Regulatory quality
Political stability
Voice and accountability
Country's percentile rank (0-100)higher values imply better ratings
2008
2000
Governance indicators, 2000 and 2008
Source: Kaufmann-Kraay-Mastruzzi, World Bank
IBRD, 1,571IDA, 24IMF, 0
Other multi-lateral, 4,636
Bilateral, 3,238
Private, 6,992
Short-term, 3,984
Composition of total external debt, 2007
US$ millions
79
Millennium Development Goals Tunisia
With selected targets to achieve between 1990 and 2015(estimate closest to date shown, +/- 2 years)
Go al 1: halve the rates fo r extreme po verty and malnutrit io n 1990 1995 2000 2007
Poverty headcount ratio at $1.25 a day (PPP, % of population) 5.9 6.5 2.6 .. Poverty headcount ratio at national poverty line (% of population) 7.4 7.6 .. .. Share of income or consumption to the poorest qunitile (%) 5.9 5.6 5.9 .. Prevalence of malnutrition (% of children under 5) 8.5 .. .. ..
Go al 2: ensure that children are able to co mplete primary scho o ling
Primary school enrollment (net, %) 93 .. 94 96 Primary completion rate (% of relevant age group) 80 90 87 120 Secondary school enrollment (gross, %) 44 57 75 85 Youth literacy rate (% of people ages 15-24) 84 90 93 96
Go al 3: e liminate gender disparity in educatio n and empo wer wo men
Ratio of girls to boys in primary and secondary education (%) 86 .. 100 104 Women employed in the nonagricultural sector (% of nonagricultural employment) .. 23 25 25 Proportion o f seats held by women in national parliament (%) 4 7 12 23
Go al 4: reduce under-5 mo rtality by two -thirds
Under-5 mortality rate (per 1,000) 52 40 31 21 Infant mortality rate (per 1,000 live births) 41 32 25 18 M easles immunization (proportion of one-year o lds immunized, %) 93 91 95 98
Go al 5: reduce maternal mo rtality by three-fo urths
M aternal mortality ratio (modeled estimate, per 100,000 live births) .. .. .. 100 Births attended by skilled health staff (% of total) 69 81 90 .. Contraceptive prevalence (% of women ages 15-49) 50 60 66 ..
Go al 6: halt and begin to reverse the spread o f H IV/ A ID S and o ther majo r diseases
Prevalence of HIV (% of population ages 15-49) .. .. 0.1 0.1 Incidence of tuberculosis (per 100,000 people) 31 31 25 26 Tuberculosis cases detected under DOTS (%) .. .. 101 78
Go al 7: halve the pro po rt io n o f peo ple witho ut sustainable access to basic needs
Access to an improved water source (% of population) 82 86 90 94 Access to improved sanitation facilities (% of population) 74 78 81 85 Forest area (% of total land area) 4.1 5.2 6.2 6.8 Nationally protected areas (% of to tal land area) .. .. .. 1.5 CO2 emissions (metric tons per capita) 1.6 1.8 2.1 2.2 GDP per unit of energy use (constant 2005 PPP $ per kg of o il equivalent) 6.4 6.5 6.9 7.8
Go al 8: develo p a glo bal partnership fo r develo pment
Telephone mainlines (per 100 people) 3.7 5.8 10.0 12.5 M obile phone subscribers (per 100 people) 0.0 0.0 1.2 76.7 Internet users (per 100 people) 0.0 0.0 2.7 16.8 Personal computers (per 100 people) 0.3 1.4 2.2 7.5
Note: Figures in italics are for years other than those specified. .. indicates data are not available. 3/9/10
Development Economics, Development Data Group (DECDG).
T unisia
0
25
50
75
100
125
2000 2002 2004 2006 2007
Primary net enrollment ratio
Ratio of girls to boys in primary & secondary education
Education indicators (%)
01020
3040506070
8090
100
2000 2002 2004 2006 2007
Fixed + mobile subscribers
Internet users
ICT indicators (per 100 people)
0
25
50
75
100
1990 1995 2000 2007
Tunisia Middle East & North Africa
Measles immunization (% of 1-year olds)
80
ANNEX 5: COUNTRY MAP IBRD 33500