According to the two experts, these technologies will have the potential to “guarantee better integration of those who remain on the fringes of the economic cycle.”
stands. According to the National Statistics Institute (INS), the unemployment rate in Tunisia was 15.3% in the second quarter of 2019. Of the 628,000 unemployed, nearly 43% were graduates, and the unemployment rate for women (22.8%) was higher than for men (12.3%). Meanwhile, the informal economy accounts for nearly 30 per cent of activity.
Smuggling, undeclared jobs and tax evasion are manifestations of evil that make the formal economy increasingly vulnerable. Tunisia is not competitive. According to the World Economic Forum 2019-2020 rankings, it ranks 87th out of 141 countries. Contrasted with this are macroeconomic imbalances, particularly in debt dynamics, socioeconomic issues, a sense of marginalization still fueled by economic inclusion deficits, high unemployment among young people and regional disparities.
But the main reason for this stagnation is the weight of the rentier economy, which is based on the exploitation of privileges, privileges, or business opportunities free from any competition. These monopoly positions hinder any competition. As a result of corruption, this system leads to inefficiencies and distortions. According to the Global Corruption Barometer conducted by Transparency International, 67% of Tunisians believe corruption has increased in the past 12 months, and 64% of them believe that the government has done little to combat the scourge. As a result, Tunisian youth are in deep despair. A veritable “brain drain” ensued, with hundreds of graduates, senior managers and skilled workers leaving the country to try their luck elsewhere.
Banking, rent oligarchs
Contrary to popular belief, the rentier economy is not just about the oil sector. For example, car dealerships are controlled by a handful of households with exclusive marketing rights for the biggest car brands.
The banking industry boils down to a rentier oligopoly made up of a large number of banks (26, compared to 27 brick-and-mortar banks in France), and looks very competitive. However, bank charges are very high and have little to do with the level of service provided to customers. If the main organizer of this cartel, as the industry’s largest shareholder, is indeed the state, then shareholder family groups are very present in several of these banks. They use it as a reserve of private liquidity, solvency and profitability.
The banks they own give them loans without being too careful about guarantees. They can then diversify by investing in new industries where employees have to endure low wages. Due to lack of competition, innovation is not their priority, resulting in lack of added value and low retention of high-quality workforce. Their internationalization is limited by the lack of specialization.
However, the state borrows from commercial banks, which refinance themselves through the Central Bank of Tunis (BCT), leading to the legitimacy of this corruption. So, what if you don’t get your hands on a revolutionary technology like the blockchain attached to the cryptocurrency phenomenon? Wouldn’t Tunisia benefit from welcoming and helping entrepreneurs in this technology, if only to fight the country’s “monopoly” situation? Why can’t young people create convertible currencies to solve their challenges on an international scale?
Paradigm shift
Let’s start by noting that Tunisian institutions have become the driving force behind the use of this new technology, blockchain. Since 2017, BCT has been looking for innovative “de-cash” solutions to curb a cash-based transaction culture that is hurting banks and fueling illicit transactions. In May 2018, the first African Blockchain Summit and the largest African Blockchain Hackathon were held in Tunisia. Co-organized by BCT, the event brought together the presidents of 54 African central banks to reflect on the opportunities this new technology presents. In fact, costs are reduced, lead times are shortened, and financial transactions are simplified.
Finally, Tunis Post is developing a virtual wallet project for sending and receiving funds, paying bills, and more. The service is based on DLT (Distributed Ledger Technology), a blockchain for institutional use with a centralized governance model.
Also, the business model paradigm shift that blockchain offers through its decentralization principles is interesting for overcoming the rent regime. Following the ERC20 standard published on the Ethereum blockchain, young startups have the opportunity to create cryptocurrencies for their innovative projects thanks to a few lines of code. The value of this currency depends on the usefulness of its application. In other words, if they succeed in creating value around one member of the community, the entire community benefits.
This is the magic of blockchain! No commissions are charged for transactions established between community members like Airbnb and Uber. The more useful the services provided by the startups, the more people will buy the cryptocurrency. It will add value and then project leaders make their initial capital grow in cryptocurrency. This also works in the other direction.
Support financial inclusion
Please note that in Tunisia, bank interest rates do not exceed 40%, as the prerequisites for opening a bank account are high, according to the World Bank. Today, blockchain allows the creation of a digital wallet from your phone with a few clicks and guarantees an almost instant exchange of value with very low fees (~0.02%). Simply reducing the cost of financial transactions can support economic growth and financial inclusion.
Also, Maghreb currencies are not convertible. Therefore, allowing young startups to create their own cryptocurrencies on the blockchain will open the door to the internationalization of their activities. It will also solve the problem of acquiring foreign currency, as cryptocurrencies are convertible by default, although blockchain financial instruments have considerable advantages.
Couldn’t this technology allow the Maghreb to catch up in financial transactions and, most importantly, guarantee better integration into a population that has always been on the fringes of the economic cycle? Why not imagine economic integration between the countries of the Maghreb? The World Bank describes the region as the least integrated economy in the world, and trade between these countries is done in euros or dollars. Each year, the shortfall of its GDP is 2%.
However, while Tunisia has yet to declare its legality, Morocco and neighboring Algeria have officially banned cryptocurrencies. Why not take inspiration from neighbouring countries, such as Malta, who are taking advantage of this opportunity? In 2018, the small country enacted the famous VFA (Virtual Financial Assets Act) to encourage the implementation of projects based on blockchain and cryptocurrencies. With its favorable legal framework for foreign investors attracted by this new technology, it has established itself as a “blockchain island.” In return, economic growth took off. One of the prime examples of the success of this strategy is Binance. Established for one year on the island, it is the world’s leading cryptocurrency trading platform, attracting 3,
Carriers of Informal Economic Integration
Other countries, such as Switzerland, Estonia or Singapore, have made this choice, using their small size to attract huge capital and the growth potential that comes with it. Meanwhile, France has also taken a big step forward with the Pacte law, which legalizes ICOs (initial coin offerings), a form of cryptocurrency-based participatory fundraising.
So, after the success of the Entrepreneurship Act, wouldn’t it be wise for Tunisia to legislate in this area and join the select club of “blockchain-friendly” countries? Wouldn’t this create an opportunity to attract FDI and unleash the enormous potential of its frustrated young people? Isn’t this a vehicle for integrating the informal economy? Isn’t the transparency provided by blockchain a means of limiting corruption?
We have seen it: the challenge facing Tunisia is to move from a rental economy, over-management, customerism and corruption to a modern and competitive economy. Therefore, prioritizing technological innovation to combat monopoly situations that stifle individual initiative is a problem. Thanks to the blockchain protocol, its future users will have the possibility to create and activate their own value transfer network for transaction and exchange services without platform intermediaries. This is also the wish of all Maghreb countries suffering from financial instability and recession.
