The Horizon 2020 Policy Support Facility (PSF) is an instrument aimed at supporting Member States and countries associated to Horizon 2020 in improving the design, implementation and evaluation of their national R&I policies and systems. The PSF was set up by the European Commission, DG Research and Innovation (DG RTD), under Horizon 2020. Specific support services provide tailored advice, expertise and good practice to help Member States and Associated Countries in the design or implementation of a specific reform or topic concerning R&I strategies, programmes or institutions. This is carried out by an international and independent expert panel which formulates concrete and operational recommendations for the national authorities on the reforms necessary to address the specific objectives.

This report reviews the Tunisia research system[MR(1]. It has been produced at the request of the Tunisian authorities through the Horizon 2020 Policy Support Facility (PSF) of the European Commission’s Directorate General for Research and Innovation (DG RTD).

This specific support action addresses two key issues for the Tunisian economy and research and innovation system:

• The definition of research priorities – This would aim at effectively combining the bottom-up consultation process with top-down priorities. Ensuring both the appropriation of the strategic focuses by research and innovation stakeholders, and a smart specialisation towards areas of greatest relevance for Tunisia scientific capacity and economic development. The analysis will build upon the experience developed with the current consultation process, and lead to an improvement in how research strategic focuses are defined.

• The promotion of private participation in R&D – This would aim at analysing and formulating recommendations on the governance and instruments needed to: better valorise research results by creating stronger public-private cooperation; further stimulate private investment in research and innovation.

The emphasis will be on better integrating the private sector in the Tunisian R&D system, building on the existing science base, as the key objective is to foster stronger R&I performance in the private sector. The analysis will notably evaluate how research financing should be reformed and if specific incentives should be created for the private sector[MR(2]. The Specific Support will possibly recommend change in the R&I governance as well as in the instruments.

The PSF panel drafted this independent report on the basis of the documents analysed, the feedback of the Tunisian stakeholders on the panel’s preliminary findings, as well as by drawing on discussions with stakeholders and experts and comments received during the field visits.

The study is organized as follows: Chapter 2 of this report provides brief information on the structural context of Tunisia, summarizing the diagnosis carried oun in the Background Report to this study and discussing the challenges facing Tunisia in the area of R&D; Chapter 3 defines the methodology to identify relevant research priorities for the Tunisian research system; Chapter 4 deals with the issue of promoting private participation in R&D activities. Chapter 5 summarises the conclusions of the report and makes policy recommendations.

This report presents the views of the expert panel. These are not necessarily the same as those of the European Commission, which makes its views known through other channels.

The Polish report has an introductory part of some 20 pages describing governance and with lots of data comparing Poland to similar countries including a section on financing of the system. Since adding this was agreed upon in the meeting, I do not further comment.

Tunisia was the cradle of the Arab spring, which started in December 2010. The years following Tunisia’s revolution in 2011 were marked by strong political instability and security problems. Since the return to democratic rule in 2015, according to the 2018 OECD Economic Survey (OECD, 2018), Tunisia experienced improvements in living standards across all regions. Despite the progress made, the country faces substantial challenges posed by weak job creation, high unemployment and unsustainable public finances.

As most Arab countries, Tunisia so far has failed to create economic opportunities on a sufficient scale to absorb the growing pool of youth. Social tensions and regional development inequality remain one of the main risks in the country. Moreover, the government is facing the challenge of balancing between social stability and the need for fiscal consolidation, notably in the civil service, pension, subsidy, state-owned enterprise, and competition reforms (World Bank, 2017).

Despite high unemployment rate (15.6% of the economically active population in 2016) and regional inequalities, with 92% of industrial companies located around the three major cities of Tunis, Sousse and Sfax, Tunisia’s position versus its neighbouring countries in terms of GDP growth has improved in recent years. Tunisia’s economic model is oriented towards exports and the country has gradually become a solid trade partner of the European Union.

Tunisia has taken some steps to liberalise its economy and has received in the last ten years FDI in sectors such as energy, electronics, pharmaceuticals, agri-food, tourism and TLCs. However, the economic structure of the country shows all the characteristics of a ‘dual economy’, with a modern industrial base composed of 5 600 businesses with more than ten employees and a spread of under-capitalised small enterprises, most of them with a single person, and 80% concentrated in the services sector, particularly in commerce, transport and storage.

The local economy is largely oriented towards the service sector, which accounts for over 60% of the GDP and employs nearly half of the country's workforce. It includes the booming sectors of ICT and tourism. Agriculture is also a key sector of the Tunisian economy, accounting for over 10% of the GDP and employing over 12% of the workforce. Finally, Industry (manufacturing and non-manufacturing) represents over a quarter of the country’s GDP and employs one-third of the labour force. The sector’s production includes petroleum, mining, textiles, footwear, food and beverages.

Tunisia has a relatively low R&D intensity: its GERD accounted for 0.63% of GDP in 2015. Nevertheless, the country still has a higher level of R&D intensity than the average values for Northern Africa and the Arab States. Government is the main source of R&D funding in Tunisia, accounting for about 80% of GERD in 2015. The business enterprise sector accounted for just 20% and funding from abroad for 4%. [MR(3]Insufficient private investment in R&D is one of the long-standing challenges of Tunisia’s R&I system. The share of GERD financed by industry is higher than the levels observed in other lower middle-income economies, yet it is below the levels observed in other countries in the region. Moreover, the country suffers from very limited collaboration between industry and research institutions.

Tunisia has a high researcher density compared to other countries in the region. In 2015, Tunisia had a total of 21,294 FTE R&D personnel, accounting for 5.2 FTE R&D staff per 1,000 labour force. This high researcher density is largely explained by a steady flow of students and graduates of higher education leading to a research title and a good representation of women (nearly 60% of Tunisian researchers are women. However, The overall majority of the FTE researchers in Tunisia (90%) are employed in Higher Education and 7% in the government sector (i.e. in research centres and government labs). Only 4% of the FTE researchers are employed in industry.