Tunisia PM seeks Western funds "before it's too late"

TUNIS Tue Nov 20, 2012 8:30pm EST

1 of 3. Tunisia's Prime Minister Hamadi Jebali smiles during an interview at the Reuters Middle East Investment Summit in Tunis November 20, 2012.

Credit: Reuters/Zoubeir Souissi

TUNIS (Reuters) - Tunisia's transition to democracy has run into political and economic obstacles and the West must provide more financial backing "before it's too late", Prime Minister Hamadi Jebali said on Tuesday.

"There is acceptable political support from the West for the Arab Spring and Tunisia but, unfortunately, financial support has not quite lived up to the political pledge," Jebali said in an interview at the Reuters Middle East Investment Summit.

"My message to the West ... is that the most important investment for you is the investment in democracy, before it's too late ... This is not a gift but a common interest."

Jebali, a 63-year-old Islamist politician, engineer and journalist, was appointed prime minister last December after the moderate Islamist Ennahda party won the country's first free elections following the overthrow of authoritarian president Zine al-Abidine Ben Ali in a popular uprising.

As the first state to undergo an Arab Spring revolution - a Tunisian vegetable seller's suicide in December 2010 was the initial trigger for revolts around the region - Tunisia has regained some stability before many of the other countries.

Political turmoil and a wave of labor unrest caused the economy to shrink last year, but growth has begun to recover and inflows of foreign investment have rebounded close to their pre-revolution level, according to government data.

Jebali said the developing democracy still faced serious threats, however, making Western financial support important to give the government more room to man oeuvre.

One big source of concern is parliament's slowness in drafting a new constitution for the country, because elections must be held by next June at the latest to ensure a smooth political transition, he said.

"The country cannot afford more time ... If it remains this slow the constitution will not be ready two years from now, and this is unacceptable," Jebali said.

While foreign investors had expressed interest in Tunisia, he said the business community was demanding a clearer vision of the North African country's political future.

Western governments and wealthy Arab states have contributed aid this year - the United States guaranteed a $485 million bond issue by Tunisia in July - but it is unclear whether Tunis has lined up enough financing for next year's planned spending.

Finance Minister Slim Besbes said in another interview at the Reuters Summit that the government would need about 7 billion dinars ($4.4 billion) in loans and aid next year.

ISLAMIST UNREST

Jebali also said hardline Islamists, some known as Salafists, were damaging the economy with protests that sometimes became violent. Islamists stormed the U.S. embassy in Tunis in September to protest at a film made in California that was deemed offensive to their religion. At least four people were killed during the incident.

"We will face religious fanaticism through law and be strict with all violators without exception. But we will address the root causes, such as cultural and social reasons, through the fight against poverty and by creating jobs," he said.

Jebali said Tunisia had attracted expressions of interest from investors in countries including Qatar, Turkey and China. Projects in which they may participate include a solar power generation complex in Kebili, which would export electricity to Europe, and a phosphate project in Sra Wertan, he said.

But for the time being, the government will continue spending heavily to address the economic grievances which sparked the revolution. Officials estimate the state budget deficit will be 6.6 percent of gross domestic product this year, falling only moderately to 5.9 percent next year.

Jebali said the need to stimulate the growth of private sector companies, to create jobs and cut an unemployment rate officially estimated at 17 percent, meant the state could not reduce spending in the near term.

"Reducing expenditure can only come after at least two years, after the return of the private sector's initiative."

Jebali said that to strengthen policy-making, he planned a cabinet reshuffle after the budget debate. "It will certainly include the Ministry of Finance, and most of the ministries will be involved in the change."

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(Writing by Andrew Torchia; Editing by Mark Heinrich)

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