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Rebuilding the Potential of Tunisian Firms

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The World Bank Group today released its annual Tunisia Economic Monitor, which provides timely, comprehensive assessments of current economic trends in Tunisia and analysis of the country’s broader development challenges. 

Tunisia is expecting a sharper decline in growth than most of its regional peers, having entered the COVID-19 crisis during a period of slow growth and rising debt levels. After an expected 9.2 percent contraction in 2020, growth is expected to temporarily accelerate to 5.8 percent in 2021 as the pandemic’s effects begin to abate. However, pre-existing structural weaknesses are expected to drag the Tunisian economy into a more subdued growth trajectory of around 2 percent by 2022. With slower growth, some of the past gains in job creation and poverty reduction will be lost: unemployment is expected to edge up, and the share of the population vulnerable to falling into poverty will increase. 

The report notes that the fiscal outlook points to a tight budgetary setting and limited room for fiscal stimulus as the impact of the pandemic spills into 2021. In particular, fiscal risks from a still growing wage bill, subsidies, pensions, and underperforming state-owned enterprises may compromise recovery efforts if they are not managed proactively.  

In this difficult context, restoring the credibility of the macroeconomic framework is a critical next step for Tunisia to successfully navigate its way through this crisis and lay the foundation for a more durable recovery in growth” said Shireen Mahdi, World Bank Senior Country Economist for Tunisia. 

The report recommends restructuring public finances by containing the size of the wage bill, shifting social assistance from subsidies to more targeted transfers, and addressing fiscal risks from state-owned enterprises to free up resources for public investment and the recovery. 

Rebuilding the potential of Tunisia’s firms.

The special focus in this edition of the Tunisia Economic Monitor draws on the recently published enterprise survey for Tunisia to discuss the latest evidence on firm performance and present priorities for a growing and more productive private sector.

The analysis finds that Tunisian firms have lost much of the spring in their step. Looking back over the seven year period between 2013 and 2020, the data shows a number of areas where the environment has improved and where Tunisia performs better than regional peers. But more generally, the evidence shows a weakened private sector landscape. Firms are investing less, they are less innovative, less export oriented, and, therefore, less productive. Although some sectors have been adding jobs to the economy, these jobs are not being created in areas with the highest levels of unemployment. 

With limited fiscal space and a fragile external position, finding ways to finance essential investment is critical, including by using PPP and already committed external funds. This should be combined with the implementation of reforms to boost the private sector, such as the radical simplification of authorizations and improved access to finance. All these are critical elements of the recovery effort” said Tony Verheijen, World Bank Tunisia Country Manager

The report concludes by discussing some of the most urgent structural measures needed to help bring the private sector back on track. These include increasing the ability of new firms to enter the market and to offer new products or services, tackling structural bottlenecks that complicate firms’ access to finance, dealing with the significant deterioration in customs performance, and building a clear vision for innovation policy to nurture sectors where innovation and comparative advantage are beginning to emerge.

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Finance

Boosting Equitable Development as Kenya Strives to Become an Upper Middle-Income Country

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The World Bank Group (WBG) Board of Executive Directors today voiced its support for the WBG’s latest six-year strategy to support Kenya in its ongoing efforts towards green, resilient, and inclusive development.

The Kenya Country Partnership Framework (CPF) is a joint strategy between the World Bank, the International Finance Cooperation (IFC), and the Multilateral Investment Guarantee Agency (MIGA) and the government to promote shared prosperity and reduce poverty for the people of Kenya. Informed by extensive stakeholder consultations, the CPF seeks to drive faster and more equitable labor productivity and income growth, greater equity in development outcomes across the country, and help sustain Kenya’s natural capital for greater climate resilience.

The people of Kenya are in a position to reap even greater dividends from the country’s robust economic growth in terms of more durable poverty reduction,” said Keith Hansen, World Bank Country Director for Kenya. “Tackling the drivers of inequality now will help to ensure that Kenya can achieve and maintain more equitable development in the long run.”

Over the past decade, Kenya’s economy has outperformed its Low- and Middle-Income Country (LMIC) peers with the growing number of better-educated and healthier Kenyans in the labor force contributing more than any other factor to rising gross domestic product (GDP). More recently, however, the pace of poverty reduction, and then the COVID-19 pandemic, revealed how vulnerable many households are when faced with shocks. Though Kenya’s economy is rebounding from the pandemic and projected to grow by an average 5.4% during 2022-24, the ongoing drought and global inflation are causing poverty to rise. The CPF finds that Kenya is still well positioned to secure more inclusive growth and the WBG is ready to provide support that targets lagging areas and communities with better services and infrastructure that build household and community resilience. In doing so, it aims to help Kenya avoid the inequality and productivity traps experienced by other Middle-Income Countries (MICs).

“Kenya’s private sector is poised to drive faster job creation and to seize new opportunities from global and regional integration,” noted Jumoke Jagun-Dokunmu, IFC Regional Director for Kenya.This will require a more level playing field for competition and innovation for large and small firms and between public and private enterprises.”

The CPF also aims to help raise the productivity of small firms, small producers, and women entrepreneurs, improve the investment climate across the country, and stimulate more private participation in public service delivery. To support Kenya’s response to climate change, the CPF has programmed investments to reduce water insecurity, and to mobilize more climate finance for both public and private investments.  

MIGA aims to unlock more private sector investment in climate responsive projects in Kenya through innovative financial solutions,” said Merli Baroudi, MIGA Director for Economics and Sustainability. “Kenya’s impressive progress in mobilizing private capital for renewable energy augurs well for other sectors.

The CPF draws on Kenya’s Vision 2030, the new government’s development agenda, a Systematic Country Diagnostic, a Country Private Sector Diagnostic, a Completion and Learning Review of the previous Country Partnership Strategy, and over 34 stakeholder consultations, including with Kenya’s diaspora. The World Bank Group is Kenya’s largest development financier. IFC’s portfolio of private sector investments in Kenya is its fourth largest and fastest growing in Sub-Saharan Africa and MIGA’s financial operations in Kenya are its third largest program in Africa.

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Tehran hosts Iran-Belarus business forum

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Iran’s capital Tehran hosted an Iran-Belarus business forum at Saadabad Palace Complex on Tuesday evening, the portal of Iran Chamber of Commerce, Industries, Mines and Agriculture (ICCIMA) reported.

The forum was attended by senior officials from the two sides including First Vice President of the Islamic Republic of Iran Mohammad Mokhber and Prime Minister of the Republic of Belarus Roman Golovchenko.

Organized by ICCIMA jointly with the Belarusian Chamber of Commerce and Industry (BelCCI), the business forum was also attended by Iranian Minister of Industry, Mining and Trade Reza Fatemi-Amin, Chairman of the BelCCI Mikhael Miatlikov, and ICCIMA Head Gholam-Hossein Shafeie, as well as heads and representatives of more than 120 Belarusian and Iranian companies.

Forming working groups to remove trade barriers

Speaking at the forum, ICCIMA Head Gholam-Hossein Shafeie called for the formation of joint special working groups in order to identify existing challenges and problems in the way of the trade between the two countries and also to assess the feasibility of joint commercial projects.

According to Shafeie, empowering the two countries’ small and medium-sized enterprises (SMEs), strengthening banking and insurance cooperation, defining new joint projects, developing and facilitating the issuance of visas for businessmen and tourists, creating the necessary infrastructure for developing economic relations, especially in the commercial, industrial and technical sectors are among the measures that the governments of the two countries can take for boosting mutual trade.

The official also underlined the establishment of a joint trade committee between the chambers of Iran and Belarus as an effective measure for developing trade ties.

Iran to open $100m credit line for Belarusian traders

Further in the forum, Iranian Industry, Mining, and Trade Minister Reza Fatemi-Amin described Belarus as an important country from an industrial point of view and considered the economies of Iran and Belarus to be complementary to each other.

Pointing out that several business delegations have been exchanged between the two countries over the last four months, Fatemi-Amin said: “Fortunately, good agreements have been made so far to improve the financial channels between Iran and Belarus, and we are witnessing improvement in the logistics sector as well.”

At the end of his speech, Fatemi-Amin announced the opening of a $100-million credit line for Belarusian traders who are interested in buying Iranian products.

Iran, Belarus should provide trade, investment infrastructure

Elsewhere in the event, Prime Minister of Belarus Roman Golovchenko said there are numerous fields for cooperation between Iran and Belarus, and considered it necessary to reach an agreement to strengthen cooperation between the two countries.

Golovchenko further emphasized that the governments of the two countries should provide an appropriate environment for businessmen to operate.

Tehran Times

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Europe in panic: Six weeks left before the US rolls out ‘industrial subsidies’

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With only six weeks to avoid a transatlantic trade showdown over green industries, the Germans are frustrated that Washington isn’t offering a peace deal and are increasingly considering a taboo-breaking response: European subsidies. Germany mulls breaking subsidy taboo to avoid trade war with Biden, – writes POLITOCO-PRO.

Europe’s fears hinge on America’s $369 billion package of subsidies and tax breaks to bolster U.S. green businesses, which comes into force on January 1.

The bugbear for the Europeans is that Washington’s scheme will encourage companies to shift investments from Europe and incentivize customers to “Buy American” when it comes to purchasing an electric vehicle — something that infuriates the big EU carmaking nations like France and Germany.

The timing of this protectionist measure could hardly be worse as Germany is in open panic that several of its top companies — partly spurred by energy cost spikes after Russia’s invasion of Ukraine — are shuttering domestic operations to invest elsewhere.

The last thing Berlin needs is even more encouragement for businesses to quit Europe, and the EU wants the U.S. to cut a deal in which its companies can enjoy the American perks.

A truce seems unlikely, however. If this spat now spirals out of control, it will lead to a trade war, something that terrifies the beleaguered Europeans.

While the first step would be a largely symbolic protest at the World Trade Organization (WTO), the clash could easily slide precipitously back toward the tit-for-tat tariff battles of the era of former U.S. President Donald Trump.

International Affairs

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