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Privatization of Tunisia’s Bankrupt Public-Sector Companies: A Necessary Evil

The Tunisian government finds itself compelled to start implementing its privatization plans and permanently eradicate the daunting influence of the labor unions. 

Momentum is building round the government’s intention to privatize public-sector companies that are on the verge of bankruptcy or simply limit its ownership to a small share and relieve itself of their burden. The debate is heating up while the UGTT, the biggest labor union in the country, still refuses to support the government’s privatization plans, stating unconvincing reasons related to the country’s economic structure and to the fear of having main services fall in the hands of the private sector.

One can understand the apprehension of the UGTT. Ruled by a decades-old conservative doctrine, this organization cannot adjust to the country’s critical economic situation. Its leaders cannot see the size of devastation crippling the public-sector companies that drain the very limited government resources.

In fact, the government still holds control over most of the economy with its ownership of 216 companies spread over 21 sectors, mostly in the energy, industry, health and services sectors. Consequently, it is overwhelmed by major problems and cannot secure proper funding to manage these companies.

The debate about privatization has been on the rise since the government of Prime Minister Youssef Chahed took office. The critical situation of government companies has drained the state budget. These companies, which used to make huge gains and fund the state budget, have been recording unprecedented losses. Despite all the alarming indicators, labor union leaders still insist to remain an obstacle for any attempt at selling shares in these state companies. Meanwhile, the government seems incapable of implementing the economic reform agenda for which it came to power and let go of its custody of these bankrupt companies.

On the other hand, privatization is not a completely new concept for Tunisia. At the beginning of the millennium, the government sold shares in certain companies, allowing it to levy taxes without having to spend. These companies made considerable gains in the last 7 years despite the severe economic situation. Their stock-market value has been on the rise. For instance, 35% of shares in Tunisie Telecom were sold to the UAE Etisalat Company in 2006. These shares were sold last November to the UAE Abraj Investment Group. In 2005, the Banque Du Sud was sold to Wafa Bank of Morocco. Data issued by Tunisia’s entrepreneurship development company CONECT estimate that government companies inflicted losses of $2.85 Billion on public funds in the period 2014-2016. The government still injected $4.72 Billion to assist these companies but their chronic structural deficiency persists.

Companies operating in chemicals, steel, phosphate and petroleum have drained 89% of the state budget allocated for companies in difficulty. Their employee numbers doubled over the last six years, with the ultimate consequence of an unprecedented growth in their salary budget from less than $1Billion in 2010 to $1,63 Billion in 2016. The government is still required to inject $2.6 Billion annually to get these companies to become profitable again, something it cannot do if the current growth indicators do not rise.

In light of these colossal losses, the government seems left with no other option but to speed up the privatization plans for these companies and curb the influence of the labor unions on the Tunisian economy.

TunisianMonitorOnline – Fathi Mohamed (Translated from Al Arab, May 5, 2018, article written by Riadh Bouazza)

 

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