Tunisia's new Startup Act – a way out of the economic doldrums?

When it comes to the digital economy, Tunisia, the small North African country undergoing a protracted democratic transition, rarely comes to mind as a front-runner. However, this year Tunisia passed a new law governing the digital start-up economy. While hardly being a game- changer, the Startup Act might cement Tunisia's status at the top of African countries in terms of the IT and digital economy.

Tunisia, seen by some observers as the longest-lasting success story of the Arab Spring, is facing several economic problems. Following the uncertainty of the revolution, a string of terrorist attacks sent the country's economy, which depends on tourism, into a long-term recession. For at least four years now, official unemployment has plateaued at 15 per cent, while youth unemployment stands at a staggering 36 per cent, with even higher rates in some marginalized areas of the country, among university graduates, and among women.

The Tunisian government has initiated an array of projects to reform the economy and create employment, several in collaboration with international organizations. Most projects focus on the country’s budget and state finance, while others aim to strengthen promising sectors of the economy. One of the latter is the new Startup Act, a plan to facilitate the creation of new enterprises, especially in the digital economy. The law is part of a larger strategy with which Tunisia aims to enhance the overall digital infrastructure of the country and close the gap separating it from its European neighbours.

"The main indicator of the Act’s success will be whether it helps bring Tunisians into secure employment, and helps develop marginalized regions."

The Startup Act was passed on 2 April 2018, after a remarkable synthesis process: The law was drafted in a participatory manner, joining together a taskforce of different ministries with stakeholders from business and associations. In terms of its content, the law gives easier access to finance for founders, offers a right of return during the first year of leaving one's fixed employment and, quite important for the tightly controlled Tunisian economy, allows founders to open bank accounts in a foreign currency. The difficult convertibility of the Tunisian Dinar hampers the internationalization of businesses, affecting more than just the start-up sector.

"The new focus on the digital economy includes efforts to make the economy more equitable and open the market for young entrepreneurs, at least nominally."

The main indicator of the Act's success will be whether it helps bring Tunisians into secure employment, and helps develop marginalized regions. The expectations are certainly high. Until now, the bulk of Tunisia's private economy has stayed in the hands of a small, politically well-connected elite, with little interest in changing the status quo. The new focus on the digital economy includes efforts to make the economy more equitable and open the market for young entrepreneurs, at least nominally. Unfortunately, there remains a real risk that the new law creates new tax exemptions for investors and opportunities to harvest international development aid, of which Tunisia receives a large amount.

Most analysts also point to the fact that there is no shortage of good laws in Tunisia; the problems always start with their implementation by an inefficient and oversized administration. Without serious investments in education and the necessary infrastructure—unlikely under current austerity measures—Tunisia's digital economy will most likely remain far from the envisioned powerhouse.

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Thomas Claes is based in Tunisia from where he heads the regional project in the Middle East and North Africa region on economic policies for social justice. For more information on the regional work by FES in the Middle East and North Africa, visit the official website and contact the office staff.