Parallel Economy
After going into the depth of the Rentier economy, it is utterly important to shed light on an established perpetuated reality affecting the Tunisian and Global Economy.
The term ‘parallel’ falls short to keep up to its tangible meaning or rather importance in most Tunisian regions. The awareness about this topic is growing ever absurd when the considered formal economy itself has become ‘parallel’.
Parallel, grey, shadow, and informal economy are different names for the concept that is by definition ‘tacit incomes and unauthorized transactions not subject to legal procedures.
Considering it, some people might think of mob bosses, drug dealers, or organ traders and even remember Al Capone or Pablo Escobar. But, in reality, this phenomenon is much wider than some might believe. It can be defined as all the economic activities within a country that are not subject to governmental control including the illegal activities and the undocumented income from the production of legal goods and services, operating in the shadow of the formal economy hidden from tax authorities. Usually, conspicuous consumption, real estate, investment in foreign assets, criminal activities, corruption, etc.. are the typical spending pattern in the parallel economy.
It is considered a shortfall for any state, but for a part of the population, it is a means of survival within inflation and the increase of purchasing power.
It is hard, even impossible to accurately quantify the losses. However, all projections agree that the size of the parallel economy in the country is snowballing. In some places, it has even lost its meaning to become another form of the official economy. Though estimations by the likes of the IMF states that parallel economy attracts roughly 41.5% of the task force.
The “Shadow economy “ phenomenon has been historically infiltrated within the kernel of Tunisian society. It has progressively prevailed until reaching fierce competition against a formal economy on the verge of collapse.
Even though it is pushing experts to see a blurred unprosperous future through economic lenses, the motives behind the black market proliferation are crystal clear. In fact, citizens acknowledge that the Tunisian government has been transformed into an utterly untrustworthy entity processing within corrupt institutions. They can not build confidence in leaders’ action plans that more often than not turned into ashes because of the belief that they are the doom of a country sucked into a spiral of debts where people’s purchasing power is declining and the labour market is saturated and where hopes about launching new businesses are shuttered due to lengthy delays and strict procedures imposed by the government. Hence, they figure out that switching to working off the books is the ultimate solution.
The informal economy encompasses a wide range of activities that are not confined to a specific class, region, gender or age bracket. It is a widespread trend that involves those who want to make a living and to survive the inhumane miserable conditions and also, those who find it a gateway to opulence and well-being. It is also manipulated in coastal economically evolved regions as well as under-developed cities.
Surprisingly, according to a study published in 2015 by the International Labor Organization (ILO), about 75 per cent of young people aged between 15 and 29 work within the hidden economy. The Center of Arab Women for Training and Research-CAWTAR also demonstrated, through research made in 2016, that 45 % of Tunisian women joined these practices.
Indubitably, The most frequent and well-known illegitimate form is smuggling either through official or unregulated channels. indeed, we always notice vendors of contraband school furniture, cigarettes, clothes, electronic devices or toys on roadsides brought from Libyan or Algerian borders through Southern deserts of Western mountains, and we had certainly heard about one of our friends, relatives or neighbours shopping during a vacation in Turkey, Gulf or European countries, returning with luxurious products to sell in their local shops or houses concealing them from customs police or paying them bribes.
The presence of smuggled goods in every household becomes inevitable because middle and low social classes cannot afford to purchase from the legal business making it a general propensity to escape from exorbitant prices.
Furthermore, the ‘Tunisian Institute for Strategic Studies’ in November 2017 announced that 77.6 per cent of Tunisian citizens buy contraband goods and that 76 per cent of the goods imported from Libya pass through smuggling channels.
Nevertheless, people should be aware that Media mainly shed lights on smuggling practitioners and condemns them ignoring the other instances that can stem from an underground economy. Wealthy tax evaders are owning large striving corporates, small unregistered enterprises’ managers that start operating without governmental authorization and hiring undocumented workers without any social or sanitary security, there are also people who catch high seasons opportunities to work in touristic places exhibiting souvenirs and traditional antiques or working as tour guides in total secrecy
To further elucidate this phenomenon, one must indubitably showcase its effect on the local economy.
In layman’s terms, Tunisia is in terminal stage cancer of economy, a disease that has festered in its already frail body since the Jasmin innocently intended to guide it to prosperity had turned into poison ivy.
The parallel economy is one villainous micro-organism that crept its way into the country’s environment as a result of a series of unfortunate that will later be discussed.
The manifestations are rather obvious, from illegal microenterprises that spread like wildfire to undocumented transactions and haphazard employment. This grey sector has cost Tunisia heavily. It solely accounts for 54% of the country’s GDP, a quite frightening figure if I were to be asked, but that is only the tip of the iceberg.
As aforementioned, the informal economy attracts 41.5% of the active population, which is close to 1.5 million citizens.
A study by Jeune Afrique goes on to show that these wretched of the earth share a few common features such as a level of education not exceeding primary school (55%) and a business process rather dominated by men.
They represent a class of the population coming from marginalized regions of the state with a rather rough upbringing and a hint of wrath at the inconsiderate state.
They thus flee their native lands with the dream of coming back with the riches of the promised lands. They open small businesses or set up shop haphazardly in the streets.
The Tunisian gipsies then crush any legal competition in one fell swoop. These “business owners” do not pay taxes on revenues costing the country more than TND2.6 billion each year. Furthermore, their goods escape customs and come at a much lower price than the competition as such.
So why doesn’t the government simply intervene and stop this madness? you might ask.
The god-knows-how-many freakshows (or as we prefer to call them, governments) that have elapsed since the revolution have been rather lenient, to be polite. To keep the masses docile while they wreak havoc on the construct of our politics, they offer bread and circuses and avoid any confrontation that will anger the people lest it drives them back to the streets to ask for their true rights.
The fiscal policies that are yearly introduced by our national asylum do nothing but encourage this economic behaviour. By forcing exorbitant taxes on imported goods because of the very low foreign exchange reserve on businesses, they simply drive these previously legal enterprises to resort to illicit trade to compete in the local market.
The parallel economy in our country is not limited by the borders of regions, class, gender, or age bracket. It is a nationwide phenomenon and an established reality. A fallacy is also established and further sustained as an inevitable result of the exhortation of the state, media, and experts to focus on smuggling whenever the notion is mentioned, whereas the latter is only the tip of the iceberg. The phenomenon also does not enjoy a popular national discourse, as many consider it the only way to maintain a decent lifestyle. This consideration is further reinforced by the state’s failure at providing alternatives and indifference to rehabilitate the fiscal system. What contributes to this phenomenon is also the lack of awareness about it, thus, the phenomenon would enjoy many who unknowingly contribute to it. One example of that is tax evaders who complain about smugglers for ‘harming the economy.
Modes of parallel economies vary from different angles and when observing different parameters. But in all case scenarios, the state is deprived of billions of dinars. However, there are no actual signs that the government is willing to take full measures to tackle the issue and recover those lost billions.