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Tunisian Corruption

At independence in 1956, an efficient, uncorrupted civil service and a well-trained cadre of technicians inherited from the protectorate period stood ready to administer the new state and its modernization plans. The issue of Tunisification (replacement of foreigners by Tunisians in the civil service and the education system) and arabization (replacement of foreign languages by Arabic as the official tongue) lacked the emotional and dysfunctional impact that had accompanied similar actions in newly independent neighboring states.

Half a century later, things had changed. According to Transparency International's 2007 index, the perception is that corruption in Tunisia is getting worse. Tunisia's ranking on the index dropped from 43 in 2005 to 61 in 2007 (out of 179 countries) with a score of 4.2 (with 1 the most corrupt and 10 the least corrupt). Corruption is not as pervasive as that found in neighboring countries. At the regional level, Tunisia is ranked 8th among MENA countries, before its direct competitor, Morocco (10), and its neighbors Algeria (11) and Libya (15). According to the TI Corruption Index scale, a score of ten indicates extremely little corruption and a score of zero means very serious corruption. Although corruption is hard to verify and even more difficult to quantify, all agreed that the situation was headed in the wrong direction.

Tunisia's penal code devotes 11 articles to defining and classifying corruption and to assigning corresponding penalties (including fines and imprisonment). Several other legal texts also address broader concepts of corruption including violations of the commercial or labor codes, which range from speculative financial practices to giving or accepting bribes. Detailed information on the application of these laws or their effectiveness in combating corruption is not publicly available.

Whether it's cash, services, land, property, or even your yacht, President Ben Ali's family was rumored to covet it and reportedly got what it wanted. Beyond the stories of the First Family's shady dealings, Tunisians report encountering low-level corruption as well in interactions with the police, customs, and a variety of government ministries. The economic impact is clear, with Tunisian investors -- fearing the long-arm of "the Family" -- forgoing new investments, keeping domestic investment rates low and unemployment high. These persistent rumors of corruption, coupled with rising inflation and continued unemployment, helped to fuel frustration with the Government of Tunisia and have contributed to protests.

Tunisia's financial sector remains plagued by serious allegations of corruption and financial mismanagement. Tunisian business people joke that the most important relationship you can have is with your banker, reflecting the importance of personal connections rather than a solid business plan in securing financing. The legacy of relationship-based banking is a sector-wide rate of non-performing loans that is 19 percent, which remained high in 2008 but was lower than a high of 25 percent in 2001. Many of these loans are held by wealthy Tunisian business people who use their close ties to the regime to avoid repayment.

While the stories of high-level, Family corruption are among the most flagrant and oft-repeated, Tunisians report encountering low-level corruption more frequently in their daily lives. Speeding tickets can be ignored, passports can be expedited, and customs can be bypassed -- all for the right price. Donations to the Government of Tunisia's 26-26 Fund for development or to the Bessma Society for the Handicapped -- Leila Ben Ali's favored charity -- are also believed to grease the wheels.

Nepotism is also believed to play a significant role in awarding scholarships and offering jobs. Knowing the right people at the Ministry of Higher Education can determine admission to the best schools or can mean a scholarship for study abroad. If you do not know someone, money can also do the trick. There are many stories of Tunisians paying clerks at the Ministry of Higher Education to get their children into better schools than were merited by their test scores. Government jobs -- a prize in Tunisia -- are also believed to be doled out on the basis of connections.

The numerous stories of familial corruption are certainly galling to many Tunisians, but beyond the rumors of money-grabbing is a frustration that the well-connected can live outside the law. One Tunisian lamented that Tunisia was no longer a police state, it had become a state run by the mafia. "Even the police report to the Family!" he exclaimed. With those at the top believed to be the worst offenders, and likely to remain in power, there are no checks in the system.

The Government of Tunisia's strong censorship of the press ensures that stories of familial corruption are not published. The Family's corruption remains a red line that the press cross at their own peril. Although the February 2008 imprisonment of comedian Hedi Oula Baballah was ostensibly drug-related, human rights groups speculate his arrest was punishment for a 30 minute stand-up routine spoofing the President and his in-laws. International NGOs have made the case that the harsh prison conditions faced by journalist Slim Boukdhir, who was arrested for failing to present his ID card and insulting a police officer, were directly related to his articles criticizing government corruption. Corruption remains a topic relegated to hushed voices with quick glances over the shoulder.

Several Tunisian economists argue that it does not matter whether corruption is actually increasing because "perception is reality." The perception of increasing corruption and the persistent rumors of shady backroom dealings has a negative impact on the economy regardless of the veracity. Many are afraid to invest for fear that the family will suddenly want a cut. "What's the point? The best case scenario is that my investment succeeds and someone important tries to take a cut." Persistently low domestic investment rates bear this out. Foreign bank accounts, while illegal, are reportedly commonplace. A recent Ministry of Finance amnesty to encourage Tunisians to repatriate their funds was an abject failure. Many economists and business people note that strong investment in real estate and land reflects the lack of confidence in the economy and an effort to keep their money safe.

Thus far, foreign investors have been undeterred, and largely unaffected. Foreign investment continues to flow in at a healthy rate, even excluding the privatizations and huge Gulf projects which have yet to get underway. Foreign investors more rarely report encountering the type of extortion faced by Tunisians, perhaps reflecting that foreign investors have recourse to their own embassies and governments. At one time Belhassen Trabelsi attempted to strong arm a German company producing in the offshore sector, but after the German Embassy intervened Trabelsi was explicitly cautioned to avoid offshore companies.

Despite pronouncements about increasing domestic investment, the Government of Tunisia focuses heavily on increasing FDI flows to the country, particularly in the offshore sector. Nevertheless, there are still several examples of foreign companies or investors being pressured into joining with the "right" partner. The prime example remains McDonald's failed entry into Tunisia. When McDonald's chose to limit Tunisia to one franchisee not of the Government of Tunisia's choosing, the whole deal was scuttled by the GOT's refusal to grant the necessary authorization and McDonald's unwillingness to play the game by granting a license to a franchisee with Family connections.

Corruption is a problem that is at once both political and economic. The lack of transparency and accountability that characterize Tunisia's political system similarly plague the economy, damaging the investment climate and fueling a culture of corruption. For all the talk of a Tunisian economic miracle and all the positive statistics, the fact that Tunisia's own investors are steering clear speaks volumes. Corruption is the elephant in the room; it is the problem everyone knows about, but no one can publicly acknowledge.



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