The Manufacturing Sector Pre-Revolution
Manufacturing in Pre-Revolutionary Tunisia
November 16, 2015
Primary Contributor: Troy Hilson
Team Leader: Sabrine Elejel
Key Words: Tunisia, manufacturing, structural adjustment, foreign investment
Manufacturing currently and historically, has made up approximately one sixth of Tunisia’s GDP. It had seen consistent yearly growth until the 2011 Arab Spring. Traditionally, manufacturing in Tunisia has been dominated by auto manufacturing, textiles, and electrical machinery manufacturing. Despite past successes, Tunisian manufacturing has struggled in the post-revolutionary world.
One of the Tunisian government’s main focuses following its independence in the mid- 20th century was on establishing a manufacturing base. However, there were a number of difficulties associated with manufacturing in Tunisia. First, Tunisia had a small population, making the establishment of a domestic market difficult. Second, the government initially had heavy involvement in the manufacturing industry, keeping most industries public, discouraging competition, and thereby making foreign investment unattractive if not impossible. Finally, Tunisia employed protectionist measures and took an anti-trade stance, making exporting difficult for manufacturers. All of these factors combined to create a very difficult environment for manufacturers to succeed. Despite this, growth in the industry was small but stable from the 1950s to the late 1970s.
After 1987, Tunisia began a structural adjustment program in an effort to bolster its economy and the manufacturing sector. The program prompted the privatization of the manufacturing sector, in an attempt to spur competition, thereby making foreign investment more enticing. The structural adjustment program also sought to liberalize trade, cumulating in Tunisia joining the GATT in 1990. To further attract foreign capital to Tunisia’s market, the government introduced a uniform code of investment in 1993. All of these reforms helped to stimulate growth in the manufacturing sector and Tunisian economy as a whole, leading to a cumulative increase in GDP by 50% for the 1990s. By 2008, there were nearly 1400 joint venture capital firms operating in Tunisia. Specifically to manufacturing, foreign investment began to flow into the country due to the prospect of cheap labour, and easy access to European markets. Tunisia’s manufacturing sector then, became one based around exporting goods to Europe. It was at this time that the textile industry became a disproportionately large section of the manufacturing economy.
An understanding of the history of Tunisian manufacturing is important to understand the expected trajectory of the manufacturing sector following the 2011 revolution. Prior to the revolution, Tunisia had demonstrated a clear willingness to invite foreign investment into the manufacturing sector, as well as facilitate increased private competition. The post-revolutionary government has demonstrated an even stronger commitment to the liberalization of the Tunisian economy. As such, it can be expected that the trends towards privatization that began following the structural readjustment program initiated in the late 1980s will continue on despite the dismantling of the government that enacted the program. This means that foreign investment will continue to be encouraged in Tunisian manufacturing, along with the continued fostering of private competition in the manufacturing sector.
