GLOBAL ECONOMY & DEVELOPMENT WORKING PAPER 71 | FEBRUARY 2014 Global Economy and Development at BROOKINGS PROMOTING INCLUSIVE GROWTH IN ARAB COUNTRIES RURAL AND REGIONAL DEVELOPMENT AND INEQUALITY IN TUNISIA Mongi Boughzala Mohamed Tlili Hamdi Global Economy and Development at BROOKINGS Mongi Boughzala is a professor of economics at the University of Tunis El Manar. Mohamed Tlili Hamdi is an associate professor of eco- nomics at the University of Sfax in Tunisia. Acknowledgements: We would like to thank all of those in Sidi Bouzid and Le Kef who provided us with precious data and information. We also thank Hafez Ghanem and Michael Rettig for their excellent comments on earlier versions of the paper. We also benefited from discussions with the people we met at the workshops on regional development organized by the GIZ in Sidi Bouzid and le Kef. Abstract: Regional disparities and inequality between the rural and the urban areas in Tunisia have been persistently large and perceived as a big injustice. The main regions that did not receive an equitable share from the country’s eco- nomic growth, as compared to the coastal regions that are highly urbanized, are the predominantly rural western regions. Their youth often have to migrate to the cities to look for work and most of them end up with low-paying and frustrating jobs in the informal sector. The more educated among them face a very uncertain outlook and the highest rate of unemployment. This bias is strongest for female workers and university graduates living in the poor rural regions. The purpose of this paper is to study the underlying causes and factors of these dispari- ties and to discuss policies and measures that may allow these regions to benefit from faster and more inclusive growth. Regional disparities do not mean that Tunisia’s rural regions remain totally backwards or that nothing has been achieved in the poorer regions. Actually, over the previous five decades various governmental programs and projects were implemented in these regions—in particular in the area of education. But the government efforts in the western regions were much less substantive than they were in the rest of the country, and little was done to develop modern non-agricultural economic activities. Moreover, while the democratization of education was not successful in ensuring job growth, it was critical in raising the level of awareness about regional disparities and the urban/rural economic gap. Inadequate government investment is not the only factor responsible for Tunisia’s rural poverty. The scarcity of natural resources (mainly water), the distribution of land and the limited access to financial resources are among the other important structural economic constraints facing agricultural development. Two regions are studied in more detail, namely Sidi Bouzid in the midwest and Le Kef in the northwest. We also give an overview of best international practices and the literature on economic development, with a focus on the case of South Korea and Taiwan in order to draw relevant lessons. We argue that, while it is possible to boost productivity and income for the rural population in Tunisia’s poor regions, improving productivity in agriculture is part of the solution. However, it cannot ensure a decent liveli- hood for all of Tunisia’s rural population, in particular for the impoverished Tunisians that own small farms or are almost landless. Regional development requires major structural reforms and strategies and comprehensive government-initiated programs operated within a holistic framework that combines public and private interven- tions. In the case of some regions with limited resources, such as Sidi Bouzid, this will not be sufficient; inevitably, rural to urban exodus and migration to other regions will continue. Politically, this may be hard to accept and to include in political agendas. CONTENTS Introduction . 1 Regional and Rural Development and Disparities in Tunisia: An Overview . 4 Unequal Progress and Development . 4 Income Inequality and Poverty . 8 Development Challenges and Potential in Two Tunisian Rural Governorates: Le Kef and Sidi Bouzid . 12 Sidi Bouzid . 12 Fairly Effective Rural Development Programs and Forgotten Youth . 12 Natural Resources . 14 Government Services . 18 Le Kef . .. 20 Population and Labor Force Capacities . 21 Rural and Agricultural Development in Le Kef . .. 24 Development Institutions and the ODESYPANO Experience . 28 Lessons from International Experiences . 31 Alternative Policies and Recommendations . 34 References . 35 Endnotes . 36 LIST OF TABLES Table 1: Tunisia’s Labor Force by Level of Education, 1966-2011 (% of total labor force) . 5 Table 2: Tunisia’s Labor Force by Region and Level of Education, 2010 (Number of People) . 5 Table 3: Tunisia’s Labor Force by Region and Level of Education, 2010 (%) . 5 Table 4: Tunisians’ Access to Basic Infrastructure by Year (% total population) . 6 Table 5: Distribution of Industrial Activities by Region (enterprises with more than 10 employees) 6 Table 6: Per Capita Consumption in Tunisia by Region, 2010 (2005 Tunisian dinars) . 8 Table 7: Per Capita Consumption in Tunisia by Region (2005 Tunisian dinars) . 8 Table 8: Per Capita Consumption in Tunisia by Urban and Rural (2005 Tunisian dinars) . 9 Table 9: Poverty Rate in Tunisia: By Location and Year (%). 9 Table 10: Poverty Rate in Tunisia: By Region and Year (%) . 9 Table 11: Unemployment Rate in Tunisia by Region and Education Level, 2010 (%) . 11 Table 12: Irrigated Land in Tunisia, 1995-2012 (hectares) . 14 Table 13: Water Resources in Sidi Bouzid . 15 Table 14: Distribution of Farm Land in Sidi Bouzid, 1994-2004 . .. 17 Table 15: Distribution of Irrigated Land in Sidi Bouzid by Size of the Holdings, 2005 . 17 Table 16: Labor Force by Education Level in Sidi Bouzid, 2010 (%) . 19 Table 17: Farmers by Education Level in Sidi Bouzid, 2005 (%) . 19 Table 18: Farmers by Education Level in Tunisia, 1996 . 19 Table 19: Population Growth of Le Kef, 2007-2012. 21 Table 20: Labor Participation and Unemployment in Le Kef, 2007-2012 . 23 Table 21: Unemployment Rates of Youth and Women in Le Kef, 2010 (%) . 24 Table 22: Land Distribution by Farming Mode in le Kef and Sidi Bouzid, 2005 (holdings) . 26 Table 23: Distribution of Holdings by Size in le Kef, 2005 . 26 Table 24: Agricultural Debt in Le Kef, 2007 (thousands of Tunisian dinars) . 28 Table 25: Water Resources and their Use in Le Kef, 2012 (Mm3) . .. 29 Table 26: Water Erosion in Le Kef, 2003 . 29 LIST OF FIGURES Figure 1: Geographic Concentration of Tunisia’s Employment Opportunities, 2010 . 7 Figure 2: Poverty Rate in Tunisia: By Region and Year (%) . 10 Figure 3: Map of Sidi Bouzid Governorate, Tunisia . 13 Figure 4: Distribution of Irrigated Land and Major Aquifers in Sidi Bouzid . 16 Figure 5: Map of Le Kef Governorate, Tunisia . 20 Figure 6: Population Growth of Le Kef, 2007-2012 . 22 Figure 7: Decreasing Unemployment in Le Kef, 2007-2012 (% total population) .. 23 Figure 8: Distribution of Holdings by Size, 2012 (%) . 27 PROMOTING INCLUSIVE GROWTH IN ARAB COUNTRIES RURAL AND REGIONAL DEVELOPMENT AND INEQUALITY IN TUNISIA Mongi Boughzala and Mohamed Tlili Hamdi INTRODUCTION offers only low-productivity and low-pay employment. As a result, the per capita income in these regions is The January 2011 uprising in Tunisia was about jobs around half that of the wealthiest regions, and the and justice for all regions of the country. Although poverty rate is three times higher. some indicators suggest that overall inequality and poverty have decreased in Tunisia over the last five de- Although Tunisia has made some important progress cades and that the size of the middle class has grown, building women’s rights, gender bias is another seri- by 2011 regional disparities and inequality between the ous concern that is more prevalent in rural areas. rural and the urban areas had become unacceptable. However, there are many promising statistics too. Regional disparities have been persistently large in Girls have equal access to schools at all levels and in Tunisia and perceived as a big injustice. The country’s basically all regions. The absolute number of female rural regions, mostly located in the western part of the students has outgrown that of males. And more than country, did not receive an equitable share of benefits 60 percent of university graduates are females. Yet from the country’s economic growth as compared to the rate of female participation in the labor force re- the coastal regions. Some areas have benefited very mains low. Only 26 percent of Tunisian females partici- little. Youth originating from the poor rural areas of- pated in the country’s labor market in 2011, compared ten have to migrate to the cities to look for work and to 70 percent of males. The female unemployment most of them end up with low-paying and frustrating rate is also much higher—nearly twice the rate for jobs in the informal sector. The more educated among males—and when employed, they often receive lower them feel even more politically and economically ex- pay. This bias is strongest for female workers and uni- cluded, because they face a very uncertain outlook versity graduates living in the poor rural regions in the and the highest rate of unemployment. west of the country. Female participation in agricul- tural employment is relatively high, but such employ- Tunisia’s poorer regions are predominantly rural and ment is most often unpaid family work or seasonal their economies are much less diversified. Agriculture work with the lowest wages in the country. remains the main economic sector in these areas and PROMOTING INCLUSIVE GROWTH IN ARAB COUNTRIES: RURAL AND REGIONAL DEVELOPMENT AND INEQUALITY IN TUNISIA 1 Leading up to the 2011 uprising, these disparities What then is to be done to provide new opportunities strengthened the sentiment of exclusion, injustice for the people of these primarily rural regions? And and discrimination felt among Tunisians from the what are the appropriate policies and measures that predominantly rural regions.