Several attempts have been made to understand the recurrent problem of unemployment in Tunisia mainly from the supply side of the labor market. This week we take a closer look at the demand side of this market and more specifically at some of the characteristics of the entrepreneurial activities in Tunisia. Our interest in understanding the geographical distribution and organizational features of local business steams from two reasons;(a) In a small and open economy like Tunisia with no abundant natural resources to rely upon, domestic firms play a catalyst role in the economic development of the country, in the modernization of neighboring geographic area and the absorption of growing and young educated labor force; (b) Local policy-makers receive very often
harsh criticism for their incapacity to better comprehend the entrepreneurial behavior of local business and inability to design effective development programs that are centered around fostering the private initiatives. Today, reliable and frequently released reports and data on local peculiarities of domestic firms are highly scarce and very often limited to some basic information that restrict the capacity of the researcher to grasp all dimensions of this issues. This week, we investigate two aspects of the private sector; that is the geographical distribution of firms and their sizes in terms of total employees. Chart 1 maps the average annual growth of local business activities in the country over the last 14 years. Not surprising to find that the costal zones in addition to the capital city exhibit the highest growth rate relative for instance to the northern and mid-western regions. Similar finding is also noticed in the south where local business continues to grow at a very low rate. The size of local firms can also shed some lights on the regional disparities of the local business highlighted above. Chart 2 plots the distribution of local firms based on total number of employees. Once again we notice that most mid and large size firms are located in the north eastern region of the country. The inland region (where the unemployment rate reaches its highest level in the country) exhibits the lowest percentage of large firms. Small and micro business (with 1 to 3 employees at most) overwhelmingly dominate the private initiative in those regions.
While this first look into the business characteristics in Tunisia should not be of any surprise to the reader, it should however constitute another wake-up call for both business and policy makers to coordinate their efforts in order to encourage the formation of labor intensive industries with high added values potential. Private sector reforms cannot be implemented overnight. The multi-year reform process should start from school where the academic training will have to be reconsidered in order to foster the entrepreneurial and business-oriented qualification of the labor force. It is imperative that universities and local business work hand in hand to achieve this goal. Additionally, the reform of the legislative framework (tax, administrative cost, public subsidies, financial liberalization, corruption detection mechanisms) to foster competition and provide equal opportunities for everyone; the formation of new specialized niche markets that draw on both human capital and natural resources of the region; the improvement of local infrastructure particularly in the inland region (e.g., railroad, highway, fast and reliable communication tools) are some of the suggestions to better tackle this critical issue of business distribution across the country.
Note prepared by TUNESS Research Team
Data Source: INS