Pushed into a Dead End

TUNIS/BERLIN | | tunesien

TUNIS/BERLIN (Own report) - Protests continue against the new Finance Act, which is leading to drastic price hikes in Tunisia, a site of German low wage production. The IMF had imposed the Act on the country to combat the consequences of the structural crisis, in which Germany had played a role in creating. German enterprises and the German government have contributed to Tunisia’s focusing its production on but a few export sectors - particularly the textile and cable production - which cannot offer any real possibilities for the country's development. Because of its heavy dependence on foreign enterprises, Tunis was forced to grant investors tax benefits, which helped drive that country into a dept trap. Last year, Tunisia had to pay nearly a fifth of its budget to foreign creditors, according to a study by the German Left Party-affiliated Rosa Luxemburg Foundation. Within the framework of the G20-"Compact with Africa," Berlin is shaping Tunisia to fit the interests of German investors.

Protests

Protests are continuing against the new Finance Act in Tunisia, which, under pressure of the International Monetary Fund (IMF), went into effect at the beginning of the year. The law is supposed to help raise government revenues to enable the country to reduce its debt, which recently had significantly grown. Tunisia’s economy has slumped in recent years particularly due to a reduction in foreign investments and a decline in tourism, resulting from several jihadi terror attacks. By cutting subventions and increasing the sales taxes, the Finance Act is shifting the burden onto the population, which is now forced to pay more for gasoline, food and medicine.[1] Last week, protests turned violent, when police and military cracked down on demonstrators. Over 800 people were arrested, a demonstrator was killed. The protests against the Finance Act were still ongoing yesterday.

Link in the European Value Chains

However, the real causes of Tunisia's current crisis lie not only in its recent economic slump, but have deeper structural roots. The causes were described in a recent analysis published by Germany's Left Party-affiliated Rosa Luxemburg Foundation. As the analysis confirmed, over the past decades, the country's economy - "as a result of a strategy to integrate the economy into the global value chains," - has become very "unbalanced, with concentration on only a few export sectors," such as "textiles," or "mechanical and electrical appliances," which are clearly "predominated by European companies."[2] German companies are playing a prominent role. Around 250 companies from Germany have invested a total of €350 million in Tunisia. The Nuremberg-based Leoni cable producer claims to be the country's largest employer. Alongside other cable producers (Dräxlmaier, Kromberg & Schubert), the textile companies (Van Laack, Riekler), the Steiff stuffed toy animal producer and various electronics companies (Marquardt, Mentor, Wisi) are present in Tunisia. As the Rosa Luxemburg Foundation noted, it was through foreign investments that "an economic structure developed, focused on the specialization in sectors with low capital growth." At the same time, foreign investors are aiming at "the maximization of profits by way of cost reduction." Profits were regularly - and presumably, not always legally - transferred from Tunisia to the foreign investors' main headquarters. The investors make no contribution to Tunisia's further economic development.

Tax Dumping and Debt Trap

The analysis points out that Tunisia is also under pressure of site competition to try to attract foreign investors to the country or keep them there through "a low taxation policy (tax dumping)."[3] The state-owned Germany Trade and Invest (gtai) business investment agency noted that "investors could profit from Tunisia's low tax rates." "Investments for training young people" and "increasing added value" or "export capacity" are often "heavily subsidized."[4] This, according to the Luxemburg Foundation's analysis, has led to a drop in state revenues and "a deterioration of the socio-economic living standards of the population."[5] There is also the "debt trap." Site competition and the lack of an opportunity for independent development in global added value chains, has structurally driven Tunis into debt, which has now taken on a life of its own, according to the analysis. For example, Tunisia spent "US $1.7 billion - of a total credit of US $2.9 billion" - it had received from the IMF in 2016, to service "an earlier IMF standby credit." In 2017, Tunisia was forced to pay "a fifth of its national budget ... to foreign creditors." Therefore, a prosperous development is practically out of the question.

Investment Incentives

For decades, companies from the Federal Republic of Germany have been using Tunisia as a low wage production site - Leoni, for example, since around 1977 - and therefore have primarily contributed to placing Tunisia into its current predicament. The German government has always supported these business activities in that country. For example, one year after President Ben Ali was overthrown in early 2011, Germany signed a so-called Transformation Partnership with Tunisia, insuring numerous lucrative advantages to German companies. (german-foreign-policy.com reported.[6]) Its most recent initiative is a direct sequel to that "partnership" agreement. Last year, Berlin and Tunis announced they would continue to promote parameters for foreign investments in Tunisia within the framework of the G-20 "Compact with Africa."[7] Since some time, German business circles have criticized "the frequent delay in the application of laws for the enhancement of the business location" in Tunis.[8] For the time being, the focus of the "Compact" is on reforms in the finance and banking sectors.[9]

Weapons for Tunisia

While the population continues its protests, Tunis can rely on German weaponry for their suppression. For example, last year, the German government issued permits raising the amount of weaponry exported to Tunisia to more than €58 million. Twelve automatic rifles from the southern German Heckler & Koch gunsmiths were delivered. The Germans are also implementing numerous training programs for Tunisian police officers, who are to particularly serve to intensify the fortification of the border, as well as other purposes. The German government has announced its intention to train Tunisia's police, also in the future.[10]

 

[1] Sandra Louven: Der Preis der Freiheit. handelsblatt.com 12.01.2018.

[2], [3] Maha ben Gadha, Peter Schäfer: Auslandsverschuldung lähmt Tunesien. Migration, Entwicklungshilfe und der Handlungsdruck der Bundesregierung. Berlin, März 2017.

[4] Fausi Najjar: Deutsche Investoren im Maghreb zum Teil unterrepräsentiert. gtai.de 12.01.2018.

[5] Maha ben Gadha, Peter Schäfer: Auslandsverschuldung lähmt Tunesien. Migration, Entwicklungshilfe und der Handlungsdruck der Bundesregierung. Berlin, März 2017.

[6] See also Securing Profits and For the Benefit of the Tunisian People (II).

[7] See also Einflusskampf um Afrika.

[8] Fausi Najjar: Deutsche Investoren im Maghreb zum Teil unterrepräsentiert. gtai.de 12.01.2018.

[9] Antwort der Bundesregierung auf die Kleine Anfrage der Abgeordneten Niema Movassat, Annette Groth, Heike Hänsel, Andrej Hunko und der Fraktion Die Linke. Deutscher Bundestag, Drucksache 18/13697, 23.10.2017.

[10] Antwort der Bundesregierung auf die Kleine Anfrage der Abgeordneten Sevim Dağdelen, Christine Buchholz, Heike Hänsel, weiterer Abgeordneter und der Fraktion Die Linke. Deutscher Bundestag, Drucksache 19/333, 28.12.2017.