The phenomenon of informal networks has become a feature of the Tunisian economy since the end of the 1980s, fueled by the political, security and social fostering during the era of the late President Zine El Abidine Ben Ali. During the last decade, Tunisia witnessed successive political and governmental changes, none of which was able to combat smuggling economies, which expanded massively, specifically within the escalating security and geopolitical risks in neighboring countries. With the measures taken by the Tunisian President, Kais Saied on July 25, 2021, to suspend the work of the Parliament and dismiss Prime Minister Al-Mashishi, the smuggling networks and associated actors have been looking for opportunities that would enable them to preserve their gains accrued over decades.
Expansion
The work of the shadow economy is centered around the smuggling of goods, commodities and individuals. Its activity may extend to production processes that are neither officially registered nor subject to taxation. In Tunisia, it is mainly focused on informal trade. International institutions define ‘informal trade’ as “the flow of goods that have not been reported or that have been misreported by the country's customs authorities”.
Although it is difficult to obtain accurate and updated statistics on the size of informal trade in Tunisia, some academic studies indicate that it constituted about 10% of the total Tunisian imports from 2011 to 2015. What is remarkable is that it represents more than half of the bilateral trade between Tunisia and Libya, and nearly 25% of the fuel consumed in Tunisia is smuggled from Algeria.
As is internationally common, the scope of the ‘shadow economy’ is expanding in the border districts in Tunisia, where the land border ports witness the passage of 15% to 20% of informal trade. The rest passes through the Tunisian main sea ports, according to Tunisian government estimates in 2015.
This ‘parallel economy’ expands to include many actors. A survey conducted in 2017 estimated that the illicit fuel market constitutes 30% of fuel sales in Tunisia, with about 20,000 actors involved, including cross-border smugglers, local carriers, owners and operators of illegal storage points, sellers and buyers.
Various Considerations
There are various economic, political, and security factors that drive the formation and expansion of informal trade and smuggling across the Tunisian borders over the past years, most notably the following:
1- The marginalization of border cities:
Border cities represent an ideal medium for the emergence of informal trade in Tunisia, as the residents often suffer from poverty, living problems and weak opportunities for development. This leads many residents of these cities to rely on a mixture of formal and informal trade to meet their cosumption needs. The absence of development opportunities, the difficulty of conducting business and the inefficient financing institutions there lead individuals to work in transporting and trading unofficial goods, and to get involved in smuggling networks.
Specialized studies have concluded that border cities in Tunisia suffer from ‘complex marginalization’, involving three dimensions. The first dimension is the regional distancing between the cities of the center and the border cities. The second is the economic and development distancing that hinders the ability to produce and create jobs. The third is the human distancing, where people are separated from the national wealth, from equitable distribution and from belonging.
2- Differences in prices of basic commodities compared to neighboring countries:
The prices of several basic commodities traded in the Tunisian official markets are high, when compared to neighboring countries such as Libya and Algeria, whether local or imported commodities. This rise is due to two factors; first, neighboring countries provide higher subsidies to basic commodities such as fuel. The second factor is the difference in the level of levying, where Tunisia comes as one of the highest African countries in this respect. For example, the price of fuel in Algeria is about one-tenth of that in Tunisia.
It is well known that smuggling leads to avoiding the cost of customs duties and tax collection, particularly the value-added tax (VAT). This benefits the consumer, who obtains goods at prices lower than the official market, hence the increase in the demand for smuggled goods. Additionally, and from a macro perspective, smuggling goods allows for lower prices than the official market, which helps keep a limited inflation rate. This has benefited successive Tunisian governments.
Nevertheless, with the tax imposed on cigarettes in Tunisia constituting 66.39% of its market prices, estimates reflect that cigarette smuggling has caused annual tax losses of over $177 M.
3- The escalation of the power of interest groups and their clashes with local communities: Smugglers in Tunisia joined strong business networks, which included the local residents and groups involved in smuggling activities in Libya and Algeria, which are known as "smuggling tycoons", whose activities are concentrated in the border cities. With the escalation of chaos in Libya and the successive governments and political changes within Tunisia, this contributed to the smuggling networks in Tunisia taking a more organized form to become of a higher organizational, financial and administrative capacity. Thus, they are able to deal flexibly and efficiently with all political, security and economic developments on the borders.
Multiple Actors
Various groups of actors, both local and regional, are involved in the activities of the Tunisian informal economy, which may be illustrated as follows:
1- Local residents:
The local population of the Tunisian border cities considers smuggled goods as one of their distinguishing features. Thus, informal trade and smuggling find societal acceptance amidst local residents of the Tunisian border cities and have contributed to their development, given the lack of an official developmental alternative. The work of some of them has evolved over the years from mere street vendors to professional smugglers that have strong relations with officials in Tunisia and neighboring countries.
2- The ruling groups in Tunisia:
Despite the successive political transformations in Tunisia throughout the last decade, some actors that support smuggling activities have always mastered networking and communicating with officials involved in corruption cases. Previously, some groups made up of businessmen and economic elites who were close to the Ben Ali regime benefited from obtaining political support, which served to flourish border smuggling activities, specifically through the Ras Ajdir border crossing with Libya.
After the outbreak of the Tunisian revolution, followed by the Ennahda party obtaining a parliamentary majority and the formation of the government, it was accused of having political interests with armed groups in Libya associated with smuggling networks, and thus the political incubator of smuggling continues within Tunisia.
3- Armed groups in Libya:
Armed and illegal groups in Libya took advantage of the unstable security and geopolitical situation in Libya to trade in smuggling goods, commodities and people across the borders with Tunisia. They found tempting opportunities in the informal market in Tunisia to make profits and enhance their financial capabilities. According to the Barcelona Center for International Affairs (CIDOB), about 3 million Tunisians depend on Libya either from the remittances of Tunisian workers or from black market activities in the border zone. Generally, the World Bank estimates that the Libyan crisis eroded Tunisia's economic growth by 24% over the period 2011-2015, which is equal to roughly 2% of the annual GDP.
Possible Growth
Despite the concerted efforts of the government with the Tunisian army to address the unofficial border activities, the occasional instability of the political situation in the country has impeded the government’s response to the threat of smuggling, causing a failure to accomplish the plans developed either by the government or through multilateral initiatives by the international community. An example is the disruption of the project of the ‘Free Trade Zone between Tunisia and Libya’, which was to be established at the Al-Dhiba border crossing.
The current political crisis in Tunisia and the government vacuum it has created are likely to empower groups involved in smuggling to have opportunities for expanding their activities, and even prepare for the next stage by discussing means of coordination with spheres of influence. This will eventually enhance the continued activity of informal trade in Tunisia in the short and medium terms.
