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SUBJECT / : / REPORT AND RECOMMENDATIONS OF THE PRESIDENT, IDB ON THE STRENGTHENING THE EMPLOYABILITY OF YOUTH DURING TUNISIA’S TRANSITIONG TO A GREEN ECONOMY.

Country: Republic of Tunisia

Sector: Education

Department: Human Development Department (HDE)

Date (Hijri): Rajab 1434H

Date (Georgian):May 2013

TABLE OF CONTENTS

NO. / TABLE OF CONTENTS / Page No.
IDB PROJECT INFORMATION SHEET / iii
LIST OF ACRONYMS/ABBREVIATIONS / iv
EXECUTIVE SUMMARY / v
I / BACKGROUND / 1
III / THE SECTOR / 2
IV / RATIONALE, OBJECTIVES AND KEY RESULTS / 4
V / THE PROJECT / 3
VI / PROJECT COST ESTIMATE & FINANCING PLAN / 8
VII / IMPLEMENTATION ARRANGEMENTS / 8
VIII / RISKS AND SUSTAINABILITY / 10
IX / PROJECT JUSTIFICATION / 11
X / RECOMMENDATIONS / 12

List of Annexes

  1. Results Based Logical Framework
  2. Socio-Economic and Financial Indicators of Tunisia
  3. IDB Financing for Tunisia
  4. Map of Tunisia and Project Location
  5. Project Risks and Mitigation Measures
LIST OF ACRONYMS AND ABBREVIATIONS

BEDBoard of Executive Directors

BTSTunisian Bank for Solidarity

CHDPRSComprehensive Human Development & Poverty Reduction Strategy

EDUEducation Division

E4eEducation For Employment

GDPGross Domestic Product

GERGross Enrolment Rate

GJPGreen Jobs Programme

GOEDGroup Operations Evaluation Department

GOTGovernment of Tunisia

HDEHuman Development Department

HDI Human Development Index

ICIECIslamic Corporation for the Insurance of Investment and Export Credit

ICDIslamic Corporation for the Development of the Private Sector

IDIslamic Dinar

IDB Islamic Development Bank

IFCInternational Finance Corporation

IRTIIslamic Research & Training Institute

ISIImplementation Support Agency

ITFCIslamic Trade Finance Corporation

MDGs Millennium Development Goals

MENAMiddle East & North Africa

MVTEMinistry of Vocational Training and Employment

NERNet Enrolment Rate

NGOsNon-Governmental Organizations

OCROrdinary Capital Resources

OECDOrganization for Economic Development

OPSDOperations Policy and Service Department

PMUProject Management Unit

TNDTunisian Dinar

UNOPSUnited Nations Office for Project Services:

WB World Bank

CURRENCY EQUIVALENTS

(As of April2013)

Currency Unit: Currency Equivalent

Tunisian Dinar = TND 1 US$ = TND1.59

Islamic Dinar =ID 1US$ = ID 1.52

Project Team Members: /
  1. Br Abdi M Abdullahi, Education Specialist, EDU, HDE, IDB
  2. Br Said Kechida, Senior Advisor, Middle East & North Africa Partnership OECD
  3. Br Abdelkafi Rami, Country Manager, CTY, IDB

Peer Reviewers / (1):
(2): / Br Mohamed Ahmed Zubair, Lead Economist, CTY IDB
Br Ahmed MusbahElsadig, Country Manager, CTY, IDD
Project Team Leader: / Br Abdi M Abdullahi, Education Specialist
Sector Division Manager: / Dr Mohamed AbderrahmaneBeddi
Sector Director: / DrDaoudaMalle.

Date: May 2013

IDB PROJECT INFORMATION SHEET

TUNISIA

STRENGTHENING THE EMPLOYABILITY OF YOUTH DURING TUNISIA’S TRANSITION TO A GREEN ECONOMY.

Beneficiary (Country/Organization): / The Government of Tunisia
Executing/Implementing Agency: / Ministry of Vocational and Training For Employment
Project Title: / Strengthening the Employability of Youth During Tunisia’s Transition to a Green Economy.
Sector/Sub-Sector: / Vocational Education
Total Project Cost: / US$ 6.47 Million
TFs Contribution: / US$ 4.42 million
Co-financiers Contribution / 1.75 million
Government Contribution: / US$ 0.30 million
Proposed IDB Financing:
Modes(s) / Amount (US$, Million) / Repayment Period (Years) / Gestation/Grace Period (Years) / Service Fee/ Mark-up
- / - / - / - / -
- / - / - / - / -
Co-financers & Terms of Co-financing:
Co-financier(s) / Amount (US$, Million) / Maturity (Years) / Grace/Gestation Period (Years) / Service Fee/ Mark-up
Solidarity Bank of Tunisia / 1.75 / - / - / -
Government / 0.300 / - / - / -
Implementation Period (Years) from the First Date of Disbursement / 4 years
Key Milestones:
Approval / 15th May 2013
Signature / 30th June 2013
Effectiveness / 31st August 2013
Planned First Date of Disbursement / 1st September 2013
Planned Last Date of Disbursement / 31st December 2013
Planned Date of Completion / 31st December 2016

EXECUTIVE SUMMARY

Strengthening the Employability of Youth During Tunisia’s Transition to a Green Economy.

1)Rationale for Country and Sector Support:

The project is in line with the objectives of the newly adopted Social Pact and the National Vocational Training Strategy of the Government of Tunisia, which aims at supporting the employment policies and increasing the work return. The proposed project responds to the recommendation of the National Dialogue on Employment on exploring emerging sectors such as green jobs, which represent an untapped source of jobs for youth, by anticipating needs for qualifications and encouraging entrepreneurship.The project is aligned with the IDB 1440H vision, Comprehensive Human Development and Poverty Reduction Strategy (CHDPRS) and the Bank Medium Term Business Strategy of the Bank ( 2013 – 2015).

The project will be financed by the Middle East and North Africa Transition Fund.It is in line with the overall objective of the Transition Fund, in particular, it aims at: (ii) identifying key measures to deliver high-quality vocational education and training (VET) that is well connected and responsive to the needs of the labour market. Such programmes can also provide alternative pathways to boost completion of upper-secondary education; (ii) addressing the main factors hindering basic skills, notably among the most socially disadvantaged Tunisian youth, many of whom live in backward regions; and (iii) supporting the transition towards new sectors and new jobs, particularly Green Jobs.

The proposed project is complementary to broader IDB engagement and financing package in Tunisia. It is also in line with the strategies defined in the e4e Action Plan for Tunisia endorsed by the stakeholders in May 2012 under the joint IDB and International Finance Corporation (IFC) Education for Employment (e4e) initiative”. Furthermore, the proposed project will complement the recently IDB approved Youth Employment Support Program.

2)Project Objectives and Key Results:

The main objective of this project is to support the GOT in its endeavour to design and implement a comprehensive approach for improving the employability of Tunisian young generations. The programmespecifically will support the creation of an enabling environment, conducive to the formation of the right skills mix needed to integrate Tunisian youth into the formal labour market, while at the same time accessing more stable and better quality jobs. At completion, the key expected results of the project include: (i) pilot programme is implemented in one region; (ii) 50 cleanTech companies created; (iii) capacity of the ministry of vocational and training for employment enhanced.

3)Project Description:

The project components include (a) policy options for investing in youth through a comprehensive review of youth employment issues and challenges that will be carried out by the OECD; (b) developing and implementing Green Jobs Platform throughyouth professional development in the field of Green Jobs Market including integrated training, eco experience; coaching; mentoring; and green business creation and financial support; and (c) Capacity Development of local Partner through training of employability, employment and integrationadvisors.

4)Project Cost Estimate and Financing Plan:

in US$ Million

No / Description / Transition Fund / BTS* / GOT / Total
Amount / % / Amount / % / Amount / %
I / Invest in Youth: Tunisia Report / 0.52 / 100.00 / - / - / - / - / 0.52
II / Developing and implementing the Green Jobs Platform / - / - / - / - / - / - / -
Youth Professional Development in the field Green Jobs Market / 1.80 / 100.00 / - / - / - / - / 1.80
Green Business Creation / 0.90 / 90.00 / - / - / 0.200 / 20.00 / 1.10
Financial Support / - / - / 1.75 / 100.00 / - / - / 1.75
III / Capacity Development / 1.10 / 90.90 / - / - / 0.100 / 9.10 / 1.20
IV / Budget Breakdown of Indirect Costs Requested (USD). / - / - / - / - / - / - / -
For grant preparation, administration and implementation support / 0.100 / - / - / - / - / - / 0.10
Grand Total / 4.42 / 68.31 / 1.75 / 27.05 / 0.300 / 4.64 / 6.47

*Tunisian Bank of Solidarity

5)Implementation Arrangements:

The Ministry of Vocational Training and Employment (MVTE) of the GOT will be responsible for the overall coordination of the project. IDB will also be Implementation Support Agency (ISA) to oversee the implementation, procurement and judiciary aspects of the project The OECD and GOTare responsible for the implementation for the investing in youth component. The Green jobs platform component will be managed by a steering committee consisting of representatives of the MVTE, BTSand the Cleantech enterprises. The project is expected to take 4 years to complete starting from the date of its approval.

6)Project Justification:

The unemployment rate in Tunisia remained above 14% between 1999 and 2009, peaking at 44% among those aged between 15 and 29 years and young graduates. This situation raises questions about the employability of job seekers and the quality and orientation of education. Employment in the informal sector is still high, and the informal economy represents 30% of Tunisia’s GDP. One key policy challenge to set Tunisia on a path of sustainable growth will be strengthening the human capital basis and the skills of its population, starting from the young generations. Against this background, the focus of this joint proposal to the MENA TF is on two complementary aspects of Tunisia’s broader efforts to shit to a greener economy and to enhance the employability of the youth.

7)Recommendations:

To approve the appointment of IDB as the Implementation Support Agency (ISA) for the preparation and implementation of the Strengthening the Employability of Youth During Tunisia’s Transition to a Green Economy.

1

REPORT AND RECOMMENDATIONS OF THE PRESIDENT OF THE IDB ON THEPROPOSED STRENGTHENING THE EMPLOYABILITY OF YOUTH DURING TUNISIA’S TRANSITIONG TO A GREEN ECONOMY PROJECT.

  1. BACKGROUND
  1. The MENA TF is under Deauville Partnership with Arab Countries in Transition, which is an international effort launched by the G-8 at the Leaders Meeting in Deauville, France in 2011. The MENA TF is unique grant financing facility designed to complement existing bilateral and multilateral programs to support the Governments in the region in carrying out necessary economic and social reforms. IDB is part of the steering committee of the Fund for project’s processing and approval.
  1. The project will be co-financed by the MENA TF and the Tunisian Bank of Solidarity (BTS). The portion financed by the BTS will be executed by the Government of Tunisia (GOT) and will consist in extending microfinance schemes to support youth entrepreneurs to setup CleanTech start-ups.The portion financed by the MENA TF will be jointly executed by the GOT and the OECD. The portion executed by the OECD will serve to provide GOT with a set of policy options to: (i) address skills mismatches; (ii) encourage transition from precarious and low quality jobs to stable ones; (iii) reinforce youth employability in formal activities; (iv) support the transition towards a “green economy” model, leading to the emergence of new employment opportunities, respectful of the need to safeguard the environment.
  1. The portion executed by the GOT under the MENA TF will consist in the launch of an innovative pilot project aiming at increasing employability of young graduate job seekers. The GOT will lead the implementation of this project portion, in particular through local experts, increased staff and continuous feedback.
  1. The IsDB will be the Implementation Support Agency (ISA) responsible for the oversight and management of the funds used for the country-executed portion.
  1. The RRP was prepared based on a project proposal submitted to the Bank by the report prepared by the IDB and OECD and the findings of an country dialogue mission to Tunisia10th – 14th April 2013.

Lessons Learnt

  1. Lessons learned from previous IDB involvement in the education sector in Tunisia include: (i) undertaking of studies prior to embarking on new projects, (ii) full involvement of the executing agency in the design of the project is critical to ensure appropriation and ownership (iii) close coordination and harmonization of activities with IDB enhances efficiency of utilization of resources, (iv) existence of a stable and effective project management team is crucial to successful project implementation; (v) monitoring and evaluation are critical to managing risks and enhancing achievement of results; (vi) extensive supervision of the project activities by the Bank is crucial to successful project implementation and (v) reinforcement of the preventive and curative maintenance mechanism as guarantee for durability of the infrastructure.
  1. THE SECTOR
  1. The problem of poor labor market outcomes for the young is not new to Tunisia and has generally been recognized as one of the key factors leading up to the Arab Spring, which originated in the country. The unemployment rate in Tunisia remained above 14% between 1999 and 2009, peaking at 44% among those aged between 15 and 29 years and young graduates. This situation raises questions about the employability of job seekers and the quality and orientation of education. Employment in the informal sector is still high, and the informal economy represents 30% of Tunisia’s GDP. 46% of young people prefer to work for the public administration, which already employs many people.
  1. To this day, youth employment remains one of the key policy challenges in the country’s transition. It is important to note that the country is experiencing the highest rates of unemployment ever and more so for the educated youth. This situation is further complicated by the return of an estimated 100,000 Tunisian workers from neighboring Libya. In 2010, there were 500,000 unemployed young people: 157,000 post graduates (31%), 139,000 graduates (27%) and 204,000 high school leavers (42%). The breakdown for university graduates and post graduates is as follows: 20% science; 16% economic, management and law; 15% humanities, and 7% medicine, pharmacy and engineering.
  1. At the macro level, the Tunisian economy is not generating enough jobs to absorb the high number of university graduates (an average of 70 000 expected to graduate every year until 2016) who enter the labor market annually. With nearly 400 000 students, higher education in Tunisia faces great challenges in terms of the system’s quality, its relevance and the degree to which it is adapted to the needs of the economy and society. At present, Tunisia lacks modern, well-designed vocational education/apprenticeship/internship programmes, which could facilitate school-to-work transitions, provide more attractive alternatives to university education and provide a steady supply of middle-level and technical skills. Attention should therefore be paid to the policies that Tunisia could implement to create productive and sustainable jobs through a comprehensive approach which tackles supply issues (education, vocational training, etc.), demand issues (macro policy, structure of the economy, sector mix, etc.), and institutional issues (policy development and coordination, implementation, monitoring and evaluation, and social dialogue) to be developed over the short, medium, and long term.
  1. Strong and sustained economic growth is obviously a first requirement to foster the transition to a “new” Tunisia. It serves to create jobs, while at the same time generating the self-worth and motivations that individuals need to trust both institutions and government. One key policy challenge to set Tunisia on a path of sustainable growth will be strengthening the human capital basis and the skills of its population, starting from the young generations. While this is a challenge for all countries, it is even more compelling for Tunisia, a country which, in the comparison with other MENA neighbours, appears relatively weakly endowed with natural resources. However, making the best utilisation of Tunisian human resources and enhancing the employability of youth should not be seen as a priority in itself. It is an essential vehicle if Tunisia wants to jumpstart into new, more productive and diversified economic opportunities, such as the activities linked to the expansion of the green economy.
  1. Against this background, the focus of this joint proposal to the MENA Transition Fund is on two complementary aspects of Tunisia’s broader efforts to shit to a greener economy. One is on the general labour market and education policies that need to be in place in order to allow Tunisia become increasingly adaptable to the needs of flourishing new productive sectors. This will include a focussed attention to the institutions that will encourage the absorption of Tunisian youth labour force by the greener sectors. The other is a pilot project on green jobs – The extensive proposal of a Green Jobs Platform.
  1. RATIONALE, OBJECTIVES AND KEY RESULTS
  1. Rationale for Country and Sector Support:The proposed project is in line with the objectives of the newly adopted Social Pact and the National Vocational Training Strategy of the Government of Tunisia (GOT), which aims at supporting the employment policies and increasing the work return. The project responds to the recommendation of the National Dialogue on Employment on exploring emerging sectors such as green jobs, which represent an untapped source of jobs for youth, by anticipating needs for qualifications and encouraging entrepreneurship.
  1. The Project Objectives:The main objective of this project is to support the GOT in its endeavour to design and implement a comprehensive approach for improving the employability of Tunisian young generations. The programmespecifically will support the creation of an enabling environment, conducive to the formation of the right skills mix needed to integrate Tunisian youth into the formal labour market, while at the same time accessing more stable and better quality jobs.
  1. Key Results: By 2019, At completion, the key expected results of the project include: (i) current characteristics of Tunisian youth labour market assessed and related main policy challenges identified; (ii) policy options for reinforcing youth labour markets and the employability of youth identified, including key elements for a youth action plan; (iii) policy options for transition to green jobs proposed; (iv) 50 cleanTech companies created;(v) capacity of the ministry of vocational and training for employment enhanced; (vi) 300 direct and indirect jobs are created through incubators; and (vii) 50 MVTE staff and qualified unemployed trained. The results based logical framework of the project is attached as Annex-1.
  1. THE PROJECT
  1. Project Location. The project locations will be decided during the implementation based on the following criteria; (i) the availability private sector, economy and green jobs to absorb the graduates (ii) the unemployment rate; (iii) regional disparities; (iv) priorities of the GOT. The Map of Tunisia and project locations are attached as Annex-4.

Project Components

Component 1: Policy Options for Investing in Youth.

  1. This OECD report will aim at providing GOT with a set of policy options to: (i) address skills mismatches; (ii) encourage transition from precarious and low quality jobs to stable ones; (iii) reinforce youth employability in formal activities; (iv) support the transition towards a “green economy” model, leading to the emergence of new employment opportunities, respectful of the need to safeguard the environment. Pending consultations with the MVTE and other relevant Tunisian authorities and stakeholders about the precise scope and coverage, the OECD report would tackle the following policy areas:
  1. Overview of youth labour market challenges including: (i) an assessment of the situation of youth in the labour market, with a particular attention on, unskilled youth and poorer youth, including from disadvantaged regions as well as on young women; (ii) a look at the adequacy of the education and training system in equipping young people with relevant skills (skills shortages and mismatches, including the regional dimension of skills mismatches; (iii) a look at the factors hindering school-to-work transitions, including a strong dependence on public sector jobs; and (iv) a discussion of the size and characteristics of informal employment in Tunisia.
  1. The role of education and training policies with a particular focus on Vocational Education and Training (VET). Policy options for:(i) developing and implementing an expanded set of high quality and relevant VET programmes; (ii) strengthening the role of apprenticeship programmes for low-skilled youth, drawing from the practical country experiences with implementing successful school-to-work pathways; and (iii) skills upgrading, with particular attention to raising the productivity of informal workers as a means to enhance their opportunities for moving to formal jobs.
  1. The role of labour market institutions that affect the demand for labour. Policy options for: (i) reducing the segmentation of the labour market between regular workers -- typically prime-age workers with permanent contracts, often employed by the public sector -- and non-regular workers -- typically vulnerable youth working in more precarious and low quality jobs; (ii) using the minimum wage as a vehicle to enhance youth employability (for example, lessons from country experiences with sub-minimum wages); options for reviewing the burden of social security contributions on non-wage labour costs; and (iii) addressing discriminatory practices resulting in “unreasonable” differences in wages and/or benefits between workers performing similar jobs.
  1. The role of active labour market policies and the social welfare system in reinforcing employability in the formal sector. Policy options for: (i) improving the social welfare system through cost-effective instruments that encourage the transition of youth workers from the informal to the formal sector and their access to more stable jobs; (ii) strengthening the role of the Public Employment Services and improving their coordination with job creation schemes and training; and (iii) creating tax and benefits policies that reinforce youth work incentives, including through the introduction of a system of earned income tax credits, the design of wage subsidies schemes and cash transfer schemes; supporting young job seekers without creating benefits dependency.
  1. A focus on green jobs: (i) a look at the expected characteristics of Tunisia’s economic transition. As Tunisia shifts to a greener economic model, certain business activities will start declining; other will supply the same outputs using greener production processes; at the same time, other and completely new activities will be created; (ii) the supportive role in facilitating this transition of policy reforms in the labour market, education and training areas; and (iii) examples of what other countries are doing to face similar challenges and adjustment needs.
  1. The OECD report will be supported by an extensive use of international indicators, as a mean to put the case of Tunisia in international context.

Component 2: Developing and implementing the Green Jobs Platform