Vested Interests and Economic Rent: Tunisia’s Car Market
Tunisia’s public discourse about economic rent contends that freeing the economy from its clutches requires dismantling the economic domination of families, i.e. ending the family-based economic corporations’ monopolization of profitable sectors.[1] Meanwhile, employers generally argue that liberating the economy from its rentier character first requires erasing the licenses and privileges granted to others and privatizing the public sector.[2] The annals of Tunisia’s economic history may contain pages that confirm both theses, as well as ones revealing that the reform slogan is not as sincere as it seems. The car business may be the best page to read in this regard. Before the 2011 revolution, this sector constituted a means of creating family-based rent, which explains some of the indignation it evokes today. After the revolution, it became the theater of a struggle among influential people waged under the pretense of dismantling rent.
The Pre-Revolution Annals: Dismantling State Rent as a Means of Economically Empowering Notables
In the framework of the “program for structurally reforming the Tunisian economy”, whose stated goal was to liberate the economy from public sector domination, the Tunisian state began in 1987 to put various economically profitable public institutions up for sale to private entities. Meanwhile, it liquidated several others suffering from financial difficulties.
In this context, during the first half-decade of the 21st century, the state disposed of the car dealerships that it owned. Later, it emerged that this process, whose professed goal was to end state intervention in the competitive sectors, was partially used to enable the president’s family to dominate this lucrative market. It thereby created an alternative rent supported by the authority and serving only those privileged to it.
The Authority and Rent Creation
Studies undertaken by the National Commission tofor the Investigateion of Corruption and Embezzlement following the revolution revealed that President Zine El Abidine Ben Ali had used his authority to enable his family members to acquire the public car dealerships put up for privatization.[3]
Initially, during the drafting of the sale terms and documents, the assets of these companies were undervalued so that they could be sold at cheap prices that privileged the buyer at the state’s expense. Then, the banks were secretly instructed to withdraw financing approval that they had provided to anyone wishing to compete. Meanwhile, these people were warned that their insistence on making offers defied the president’s will and could create problems for them, the least being a thorough fiscal audit. Finally, public financial institutions were instructed to issue loans to finance offers issued by companies owned by the family and its in-laws without requiring collateral or self-financing.
Thanks to these practices, the president’s daughters and sons-in-law acquired STAFIM, the sole marketer of Peugeot; Ennakl, the sole dealership for Volkswagen; and Le Moteur, which markets Mercedes. Given their assets and the importance of the brands they market domestically, these businesses are leaders in the field.
It also emerged that within the framework of the same structural economic reform policy, the authority had intentionally neglected to protect one of its commercial assets, namely Autotractor, the only Ford dealer in Tunisia.[4] It authorized the president’s son-in-law and a partner to represent the same brand and liquidated its own business, whose spare parts and equipment were then sold to the new dealer at token prices.[5]
Hence, a supposed means of ending state rent clearly contributed to the establishment of a family-based rent. After helping to create this rent, the authority used its influence to foster it and increase profits.
After Empowerment: Despotically Fostering the New Rent
The car dealership market is subject to a quota system whereby each brand is allocated an annual limit on imports. However, the authority turned this regulatory mechanism into a means of increasing the domination of its cronies’ rent at the expense of other actors in the business. For example, in 2001, Autotractor – a public institution – was only allowed to import 118 cars. Hence, its market share was approximately 1%. When Alpha Ford was authorized to represent the same brand just two years later, it was licensed to import 1,562 cars, i.e. around 6% of the market. This pattern continued such that in 2010, the number reached almost6 4,000, i.e. 9% of all cars imported by authorized dealers. The same phenomenon occurred just as clearly with Ennakl. In 2004, its market share was approximately 3,000 cars. After its acquisition by Princess Holding, owned by the president’s daughter and her husband, the number of cars it was allowed to import climbed to 11,0000 in 2010. Consequently, its transactions increased over the same period from TND99 million to TND350 million. Because of the quick and easy profit, the new owners sought to expand their investments by applying for authorization for new brands that they alone would have the right to supply. Hence, applications submitted by companies not connected to the family were rejected while companies connected to it were being granted facilities to launch new brands. The best example may be the authorization of Kia and Hyundai,[6] which caused rent accrued by newly -created concessions to hold nearly 55% of the market by the end of 2010.
The above shows that the slogan of ending state intervention in the economy and preventing its monopolization of competitive activities can be exploited to create true monopolies, whereby a group of people linked by non-competitive relationships dominate the market. It is also clear that in such cases, the authority becomes a servant of the interests of those groups as they exploit its regulatory powers. Perhaps this situation, which Tunisia cognized on the dawn of its revolution, is among the reasons for public discourse’s hostility to the so-called rent of the families controlling the economy and the justifications for attempts to – or calls for – dismantling this economy. However, this discourse appears, in some of its details, to be an instrument for creating another rent on the margin of the existing economic structure, one that thrives on populist slogans.
The Post-Revolution Annals: Reform Slogans in the Service of Rent
The confiscation decree issued a few days after the success of the revolution[7] ended the Ben Ali family’s hegemony over car dealerships.[8] The subsequent sale of confiscated assets enabled the major local economic groups, which are mostly family-based,[9] to replace them. Then, the companies’ new owners were able to grow thanks to their authorization to bring new brands, most of which were Chinese, into the Tunisian market. The number of concessions increased from 30 in 2010 to 55 in 2020, and the new brands and European brands have shared the market quota.
During the same period, the new government began looking to develop avenues for importing used cars. These revolutionary reforms and legislative policies resulted in a redistribution of the car market in a manner that caused a conflict between two rents, one represented by people authorized to market new cars and the second represented by those who utilized the law to expand the used car import market. The latter phenomenon is essential to any attempt to understand the crisis of the rent discourse today.
Early Beginnings: Creating the “Permanent Return” Rent
In the framework of fiscal policies aimed at encouraging Tunisians living abroad to return and invest, the post-independence state had granted them a package of privileges when they registered their permanent return. These privileges included the right to import a car fully exempt from customs fees on the condition that they did not later transfer it to others in the local market, as well as the right to import a car partially exempt from customs fees that could be transferred later.
Subsequently, because many people who had migrated to neighboring countries lacked the resources to benefit personally from this privilege and most who had migrated to Europe were settled and had no desire to return, the phenomenon of trading the second category of this privilege developed even though the law prohibited it. The privilege came to be sold at recognized prices to people seeking to buy cars from abroad.
Before the revolution, and despite a multitude of indications that the president’s family had a hand in the manipulation of customs restrictions, which governed the movement of the parallel car market, the state’s public policy turned toward curtailing this market and attempting to impose on it controls that accorded with its policy of refreshing the car fleet. These measures were the following:
- The requirement that imported cars were first registered outside Tunisia no more than three years earlier.
- The creation of the “popular car” [voitures populaires] system, which allowed middle-income earners to buy a new four-fiscal horsepower car with a customs exemption better than that granted to permanent returnees.
The ruling authority considered these policies a success as they increased private car ownership among Tunisians, which reached 9.1% in 2011 (higher than the corresponding rates in Morocco and Algeria). They also improved and helped to refresh the car fleet. However, opponents saw them as means adopted to increase the profitability of car dealerships and thereby boost the ruling family’s rent, as well as an impingement on migrants’ right to import the cars they desired. Some also faulted these policies for preventing Tunisians from buying cars with European specs that may be better quality than the new ones and are certainly cheaper. This negative perspective on the policies may help to explain why the first budget law adopted by the National Constituent Assembly targeted them.
On the pretext of protecting migrants’ right to import cars that suit their means, a clause was added to the Supplementary Finance Law of 2012 raising the first-registration time limit for cars imported in the permanent return framework from three to five years and lowering their customs fee to 25%. These measures significantly changed Tunisia’s car market.[10] The market share of cars imported in the permanent return framework increased from 19% in 2010 to 34% – i.e. 19,783 cars – by the end of 2014. Luxury cars, i.e. cars whose power exceeds nine- fiscal horsepower, occupied around 39% of the market in 2012 but 57% in 2014.
These facts indicate that in practice, and under the guise of a service for migrants, the authority served the interests of the parallel economy (which does not pay taxes or employ a stable workforce and depends on the illegal transfer of hard currency outside Tunisia) at the expense of the regulated sector, which provides over 10,000 jobs and state revenue estimated at TND 100 million [approx. USD35 million at present].[11] Awareness of this deviation may have contributed to subsequent steps that once again conflicted with each other in a manner suggesting that a struggle of interests was playing a hidden role.
A Struggle of Interests: What Lies Behind Sweet Talk
Through the Tunisian Confederation of Industry, Trade, and Handicrafts (UTICA), the car dealerships pressured the Tunisian government to curb the danger that the market surrounding the permanent return privilege posed to their interests. Consequently, the 2016 Financial Law restricted the right of permanent returnees to sell their cars, only allowing such sales once a year had passed since their import. The law also granted dealers a new rent: whereas the privilege to import a car without paying customs fees was originally limited to one person per returning family, the law allowed that person’s spouse to import a second car on the condition that it be procured from a licensed dealer. It also required that the cost of the car be paid in foreign currency and that it fall under the full exemption framework, thereby preventing it from being sold later.
Subsequently, the market share of cars imported in the permanent return framework declined to 20% by 2020. However, the war between the two rents did not end there. Bills proposed and debates that occurred over them before the president suspended Parliament confirm that the efforts to defend the permanent return privilege in support of migrants’ rights scarcely explore its economic impact.
All those who have engaged in the struggle over car market privileges may have their justifications for their positions. However, their shared claim to be confronting rent underscores the crisis of this concept and shows that some of its battles have ulterior motives.
This article is an edited translation from Arabic.
