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Tunisia ranks 98 in economic freedom index

Tunisia’s economic freedom score is 58, making its economy the 98th freest among 179 countries in the 2009 Index. Its overall score is around the world average, according to the Wall Street Journal (WSJ) and Heritage Foundation (HF) 2009 index of Economic freedom.

“Tunisia has pursued economic reforms aimed at maintaining a prudent macroeconomic framework, liberalizing domestic prices and controls, and reducing the public sector’s role in economic activity”

Tunisia scores well in business freedom and government size. Regulation has become more efficient and streamlined. Property rights are largely respected even though the executive branch is the supreme arbiter, according to the index.

However, Tunisia scores low in trade freedom and investment freedom due to” excessively high tariffs, import restrictions, and licensing requirements limit trade freedom”.

“Tunisia’s weighted average tariff rate was 18.5 percent in 2006. Import restrictions, some prohibitively high tariffs, import taxes and fees, some import licensing requirements, export promotion programs, and inconsistent customs administration add to the cost of trade”

The index adds that “protectionist investment policies and cumbersome bureaucracy stifle foreign investment.
Tunisia restricts foreign investment in some sectors to minimize the impact on domestic competitors. Foreign investment is screened. In general, domestic trading can be carried out only by a company in which the majority of the share capital is held by Tunisians and management is Tunisian. This assertion needs to be proved and requires a large awareness of domestic trade mechanisms!

The index hails presidential reforms

Inflation remains moderate, but the state can set prices in some circumstances. The government can subsidize goods and manage prices through regulations.

The same index highlights meanwhile President Zine al-Abidine Ben Ali’s action who has undertaken gradual free-market economic reforms, including privatization of state-owned firms, simplification of the tax code, and more prudent fiscal restraint, since the early 1990s. The economy includes significant agricultural, mining, energy, tourism, and manufacturing sectors. Tunisia’s 1998 association agreement with the European Union, which has helped to create jobs and modernize the economy, was the first such agreement between the EU and a Maghreb country. The economy has also benefited from expanded trade and tourism.

The overall freedom to conduct a business is relatively well protected under Tunisia’s regulatory environment. Starting a business takes 11 days, compared to the world average of 38 days. Obtaining a business license takes much less than the world average of 225 days, but costs are fairly high.

Bankruptcy proceedings are easy and straightforward.
The index points out that top income tax rate is 35 percent, and the top corporate tax rate is 30 percent. Other taxes include a value-added tax (VAT) and a vehicle tax. In the most recent year, overall tax revenue as a percentage of GDP was 14.9 percent. These rates are labelled as high by the index.
Government expenditure, including consumption and transfer payments, is moderate, adds the index which highlighted the effort made in opening up economy. Nine enterprises were privatized in 2007.

Financial supervision and regulation have been brought up to international standards.

Five banks control 70 percent of deposits. The government sold its stake in two banks in 2002 and 2005 but remains the controlling shareholder in at least four other banks that control 50 percent of assets. Tunisia’s stock exchange has become more active in recent years with increased foreign participation
It remains to say that even if such report is still considered as the bible of international investors, it includes approximate assessments which hardly reflect the economic reality and does not give the true measure of reforms undertaken every day in Tunisia. It is worth noting in this regard, the latest reform of the Commercial Companies Code, which introduces greater transparency as well as the law on economic initiative that made  Tunisia gain important points in the Doing Business Reports. One might finally note that this type of reports is marred by some inconsistencies in judgments and assessments. Yet they require careful reading and answers that put things back in their place.


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