What Do Entrepreneurs in Tunisia Need Most? Legal Reform

by Alia Mahmoud, February 15, 2012

“Entrepreneurs are people that bring things together. Nothing in entrepreneurship is done alone,” said Hernando De Soto on the last day of the U.S. Maghreb Entrepreneurship Conference that took place in Marrakech from January 17th-18th 2012. This sentiment resonated throughout the conference as participants—from entrepreneurs, to investors, ministers, academics and civil society—worked hard to ensure that this was not another conference boasting a lot of talk with no action behind it. Some of the highlights included former Secretary of State Madeleine K. Albright, U.S. Assistant Secretary of State Jose W. Fernandez, government representatives of the Maghreb countries, and well-known economist Hernando De Soto.

De Soto’s intervention was riveting in its simplicity as he boiled down two days of workshops and plenary sessions to the fundamentals: “Entrepreneurship is possible because [entrepreneurs] work in a market and a market is about linkages.” Linkages, he continued to explain are “concrete things set in law” and therefore “the DNA of entrepreneurship is law.” Law is what allows the pieces to connect and create new value, and well, do business!

Essentially we cannot promote entrepreneurs without tackling the legal framework that gives an entrepreneur the rights to their land, house and capital. According to De Soto, “Without paper you’re dead… capitalism works on paper. It’s the second level of reality.” This reality is the context that entrepreneurs operate in, and without the proper legal titles entrepreneurship will never translate into job creation.

The theme of the conference, organized by PNB-NAPEO, a joint initiative of the Aspen Institute and the U.S. State Department, was “promoting entrepreneurship and job creation in the Maghreb,” yet it stressed this point- that entrepreneurship does not create jobs in a vacuum without the proper ecosystem. In the Maghreb region, regulatory frameworks exist for entrepreneurs that seem to have plenty of support. So why is it not working? To attack unemployment, especially among youth, it will be critical to dissect these frameworks and diagnose where they are falling short and why.

One step in right direction is realizing, as De Soto put it, “that behind the fight for dignity and democracy [that sparked the Arab Spring] there is essentially and entrepreneurial revolution.” According to studies done by De Soto’s organization, the Institute for Liberty and Democracy, there are over 180 million entrepreneurs in the Arab World that are undocumented. What’s even more remarkable, they discovered, is that all of the martyrs of the revolution who self-immolated themselves – specifically 35 people in the 53 days following Mohammed Bouazizi in Tunisia- did not share a religion or ideology but rather non-secured property rights. Each of them met despair in the face of having what little property and business they had taken away.

No legal identity equals no capital, no credit and therefore no ability to grow a business and create jobs. The governments of the Maghreb must wake up to this untapped source of employment and start implementing reforms welcome this population into the formal sector.

These reforms will only be possible with strong leadership.

I was pleased to see signs of this leadership coming from Mr. Hedi Ben Abbes, the new Tunisian Secretary of Foreign Affairs for the Americas and Asia. His speech gave me hope that in this transitional period, Tunisia might be ready to heed De Soto’s advice.  In order to tackle unemployment, regional disparities and inequality he explained, “the role of the state in the economy needs to be redefined.”

He insisted on the need for the government to partner with the private sector and civil society for job creation. “We must promote a private sector that unites profit and purpose. Democracy can only thrive with economic and social development.” This may sound unremarkable to some, but for the entrepreneurs in the room I believe it meant a lot.

A few of those entrepreneurs gave testimonials on the struggles they faced in creating their businesses, including three winners of the Start-up Incubation Prize during the PNB-NAPEO business plan competition that took place on the U.S. Delegation trip in November 2011. This summer, these winners will head to Detroit, Michigan to receive a three-month membership in TechTown's Thrive program. Yet in Tunisia, the impediments they face include a lack of support, lack of entrepreneurial spirit, difficulty recruiting staff, a lack of skills in the market, and an overall lack of risk taking on all sides (investor, entrepreneurs and staff).

To attack some of these problems, a slew of new initiatives were announced during the conference. Some of them were the result of networking that happened on the spot, a testament to the ability of entrepreneurs to connect the dots. Check out the impressive list here.

After a dizzying two days, I left with the impression that there is a renewed cooperation between the Maghreb countries, now it just depends on what we do with it. As De Soto said, “The market has come to the Middle East.” Now it is up to the governments, private sector and civil society of each country to work together and tap this market in the right way to promote entrepreneurship and create jobs. 

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Alia is a recent Masters graduate from the Center for Global Affairs at New York University. She is a half Tunisian, half American from New York City who is passionate about entrepreneurship and the role of the private sector in economic development, job creation and poverty alleviation. She is currently living in Tunis to help launch a new non-profit called the Maghreb Enterprise Development Initiative (MEDI), in conjunction with the Mediterranean School of Business. She is excited to help nurture a new entrepreneurial spirit in Tunisia!!

 
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