Situation and cooperation

Bazaar in Tunis

­Tunisia is currently going through a phase of radical political change. The popular uprising and the expulsion of President Ben Ali in January 2011 offered this North African country the opportunity to become a democratic country governed by the rule of law. Important steps in this direction have already been taken. For example, international observers considered both the elections to the constituent assembly held in autumn 2011 and the parliamentary and presidential elections in late 2014 to have been free, fair and transparent – notwithstanding a few organisational shortcomings. Freedom of the press and freedom of opinion, which were severely curtailed during Ben Ali's time in office, are now being upheld, and all political prisoners have been released. Several new political parties and civil society organisations have been set up.

A milestone on the road to democracy was reached in January 2014 with the adoption of a new constitution. The next steps were new presidential and parliamentary elections held in late 2014. The current government, which came to power in February 2015, is made up of members from all of the major political factions. Its most urgent task is to improve the security situation and stimulate the economy, so that new jobs are created and people's earnings improve.

Social situation

Café in Sidi Bou Said, Tunisia

The living conditions of Tunisians, both male and female, have improved in recent years. Virtually the entire population has access to clean drinking water and electricity, and there is now a large, educated middle class. On the United Nations 2015 Human Development Index (HDI), Tunisia is ranked 97th out of 188 states.

These developments notwithstanding, the wealth that the country has achieved so far is unevenly distributed. Inland regions, in particular, are not yet benefitting sufficiently from the country's economic development. The new government has therefore produced an ambitious programme for regional development, which is meant to foster private investment in the regions in particular.

One of the country's biggest problems is the high level of unemployment. According to official figures, unemployment stands at around 15 per cent. Unemployment is considerably higher still among young people, people with university degrees and those living in disadvantaged regions.

Economic situation

Desalination plant on Djerba

Tunisia is on the brink of becoming an industrialised country. Around sixty per cent of the country's gross domestic product are accounted for by the services sector, and some thirty per cent by industry. Whilst the country’s economy grew by 2.3 per cent in 2013 and 2014, growth fell back to a mere 0.8 per cent in 2015. The International Monetary Fund (IMF) is predicting growth rates to increase again in 2016 and 2017.

Tunisia's economy is heavily dependent on the economic climate in Europe: Around two thirds of Tunisia's foreign trade is with the European Union, and the major share of foreign investments comes from there. Furthermore, Tunisia was the first country in the Maghreb region to conclude an Association Agreement with the EU, which it did in 1995.

The revolution had a considerable impact on Tunisia's economy. The country's uncertain political future, as well as the unstable security situation there, made many foreign investors wary of doing business in Tunisia. Tourism slumped, and frequent strikes and blockades crippled many Tunisian-based businesses over many months.

The political changes in Tunisia have opened the door to new economic opportunities. During Ben Ali's regime the most important companies of the country were in the hands of the President's family. This monopoly has now been ended, allowing for free competition.

Thus, the country's government is making an effort to push through real structural reforms, for example in public financial management and the banking sector, in order to make capital available for new businesses. As recently as September 2016, the International Monetary Fund (IMF) rated the reform process in Tunisia as positive.

Development potential

Fisherman on the Mediterranean Sea

Investors are attracted to Tunisia by its proximity to Europe, its high level of industrialisation in comparison with other countries in the region, its competitiveness in terms of prices and its well-developed infrastructure.

There is potential for growth in its services sector, in particular in information technology, logistics and health care services.

However, the sector that will have a major impact on the development of the economy in the future is tourism. Following two terrorist attacks on tourist resorts in March and June 2015, visitor numbers again plummeted. According to Tunisia's tourist board, the number of tourists travelling to Tunisia in October 2016 was somewhat higher than in the same period in 2015. However, the numbers were still far below 2014 levels.

Priority areas of German-Tunisian development cooperation

Germany and Tunisia have engaged in development cooperation since the 1960s. Since the revolution, the Federal Ministry for Economic Cooperation and Development (BMZ) has raised its funding for Tunisia considerably, in order to support the process of peaceful transformation there. Development cooperation activities have been aligned with the goals of Tunisia's government, and existing programmes have been integrated.

Cooperation now focuses on supporting integrated rural development, with the aim of creating income-generating opportunities in disadvantaged areas. To fund these activities, Germany committed funds totalling some 456.8 million euros in 2017, of which 367 million euros are loans at near-market conditions. The BMZ supports the political priorities of the Tunisian government and at the same time consistently calls for the implementation of reform measures. Central to this is the reform partnership in the financial and banking sector concluded with Tunisia in 2017, which is a bilateral contribution to the G20 Compact with Africa Initiative. The partnership aims to improve the framework conditions for private sector investment in Africa. In addition, Tunisia benefits from the BMZ's special initiative "Stability and development in the MENA region".

Development of disadvantaged regions

Wind turbines in El Alia, Tunisia

A basic prerequisite for peaceful political and social change in Tunisia is the noticeable improvement of living conditions in the inland regions that, up to now, have been disadvantaged. Therefore the BMZ is supporting a far-reaching investment programme targeted at rural areas. The aim of the programme is to improve water resources management, increase agricultural output and enhance local infrastructure. The BMZ also supports young entrepreneurs who create jobs and bring innovative ideas to market. 

Finally, Germany is also providing advice to the Tunisian government on decentralisation measures.

Employment promotion

Young women in the city of Tunis

Given Tunisia's very young population, it is particularly important to create adequate employment opportunities – thus giving people a genuine prospect of a better future. Moreover, it is important to bring employment offers into alignment with the demand for labour. Many Tunisian businesses do not practise any proper human resource management, and it is difficult to obtain useful information about the country's labour market.

In direct response to the outbreak of the Arab Spring, the BMZ launched an open regional fund to support training and employment measures as early as 2011, as a way of reducing the high levels of youth unemployment in Tunisia and Egypt. A further area of action is support for small, medium and micro enterprises. Such enterprises can provide more jobs if they have access to credit. However, in Tunisia, the microfinance sector is still underdeveloped. That is why Germany is supporting the setting up of a supervisory authority for microfinance institutions. On top of that, KfW is being charged with providing refinancing funds to Tunisian banks, which these in turn can use to give loans to small, medium and micro enterprises.

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