The Tunisian Startup Act is a framework that aims to boost the Tunisia startup ecosystem through simplifying administrative processes, allowing access to financing, encouraging business formation, and facilitating access to foreign markets. The initiative behind the law stems from a bottom-up movement within the startup ecosystem
Problems and Purpose
Tunisia's economic performance remained weak five years after the 2011 revolution, with growth too limited to make a significant dent on unemployment, poverty and inequality, despite widening fiscal and current account deficits. The public sector dominated the Tunisian entrepreneurship ecosystem, the business sector's hierarchical structure in Tunisia prevented the entry of young entrepreneurs who were not yet part of established business networks but are usually eager to bring innovative, often unconventional ideas to the market. Finally, the concentration of business activity in Tunis and a few other coastal cities made job creation more difficult. 
The Tunisian Startup Act, also known as the "Startup Nation" law, was passed in 2018 as a way to promote and support the growth and development of startups in Tunisia. The law makes it easier to start and register a firm and offers a variety of incentives for entrepreneurs, including tax cuts and access to finance. The law aims to promote innovation and job growth in Tunisia by fostering a more favorable environment for the development and success of startups. It was initiated by Yassine Brahim, the minister of communication technologies and digital economy under the government of Habib Essid. The law is seen as a major advancement for the growth of Tunisia's technology and entrepreneurial sectors.
Background History and Context
Tunisia, which is a country in North Africa's Maghreb area, is surrounded by Libya, Algeria, and the Mediterranean Sea. Tunisia, which is considered to be the only completely democratic sovereign state in the Arab world, has been going through a political and economic transformation since the Arab Spring. The Arab Spring was a wave of anti-government demonstrations, uprisings, and armed rebellions that swept the Arab world in the early 2010s. It started in Tunisia as a reaction to corruption and economic stagnation. 
On December 17, 2010, a young Tunisian named Mohamed Bouazizi set himself on fire outside a municipal office in the town of Sidi Bouzid in central Tunisia. Bouazizi, who supported his family by selling fruit from a cart, became enraged when local officials demanded bribes and confiscated his goods. He doused himself in gasoline and set himself on fire after authorities refused to hear his complaint. His plight, which came to represent the injustice and economic hardship that many Tunisians faced under the Ben Ali regime, sparked street protests across the country against high unemployment, poverty, and political repression. When dozens of protesters were killed in clashes with police, the Tunisian government's response drew international condemnation.
A state of emergency was declared on January 14, 2011, and Tunisian state media reported that the government had been dissolved. This announcement failed to calm the situation, and Ben Ali resigned as president and left the country. Mohamed Ghannouchi, the prime minister, took office. The following day, Ghannouchi was replaced as interim president by Fouad Mebazaa, the former speaker of the Tunisian parliament's lower house. Both were members of Ben Ali's political party, the Democratic Constitutional Rally (French: Rassemblement Constitutionel Démocratique; RCD). Tunisia remained in chaos in the days following Ben Ali's departure. Protests continued, with many objecting to RCD politicians serving in the interim government. There were also isolated outbreaks of violence, which many Tunisians blamed on Ben Ali supporters attempting to destabilize the country.
On January 17 2011, Ghannouchi, acting as prime minister once more, announced the formation of a new unity government that included several opposition figures in cabinet posts as well as several sitting ministers from the Ben Ali regime. Ghannouchi defended the presence of former regime ministers in the new government, claiming that the ministers were not involved in Ben Ali's attempts to violently suppress protests. He also stated that the interim government would act quickly to restore economic stability and political freedom in Tunisia, including the release of political prisoners and the removal of media censorship. However, the interim government's future appeared to be jeopardized the next day when a number of the cabinet's new ministers from opposition parties resigned in response to new street protests over the inclusion of ministers from the previous regime. Mebazaa, Ghannouchi, and the interim government's cabinet ministers who had served under Ben Ali all withdrew from the RCD, attempting to signal a break with the past. The interim government announced new reforms, including the lifting of Ben Ali's ban on opposition political parties and the release of all political prisoners. The government officially suspended all RCD activities in February. 
The evolution of Tunisia to a democratic government has been long and difficult. This has presented both opportunities and problems for the nation. Tunisia's economy has begun to slowly shift toward becoming more market-oriented with the country's main economic activity being export-based, the majority of its exports going to the European Union.
Tunisia's economy has struggled since the 2011 uprising that overthrew a long-running dictatorship, as prices, inflation, unemployment, and the country's debt all continue to rise. For both citizens and the government, the economy comes first since prolonged hardship breeds discontent with citizens and, by extension, democracy. The extensive regulation of economic activity, the reduction in trade orientation, the low investment, and the limited innovation were all factors that contributed to a considerable fall in productivity growth. Tunisia became more reliant on the welfare state to fulfill its residents' hopes for better living conditions as growth and job results deteriorated. In the years following the revolution, job growth slowed because there weren't enough job possibilities, especially for college graduates and the prime working-age population. Market concentration increased, leading to entry barriers, while overall business costs remained high due to burdensome regulations on trade, investment, and licenses, limited access to capital, and an expanding public sector. The public debt grew quickly as a result of the state's rising involvement, reaching 40.7 percent of GDP in 2010. 
Organizing, Supporting, and Funding Entities
The Startup Act was created through a collaborative effort between the private sector, civil society, and the government (Startup Task Force).
The Startup Task Force reported directly to the Minister of Technology and was made up of the startup ecosystem's key stakeholders: entrepreneurs, investors, bank and accelerator representatives, and administrations (public sector entities like APII, the Tunisian Agency for the Promotion of Industry and Innovation). 
Tunisian startups took control of media coverage by coordinating the campaign and developing common terminology and discourse elements.  At the end, the Assembly of the People’s Representatives ratified Law No. 20 of 2018, more commonly referred to as the Start-up Act. 
Participant Recruitment and Selection
Participation in the Startup Act making process was by government appointment. Startup Acts are created through a participatory process involving the collaboration of stakeholders from the entrepreneurship ecosystem from both public and private sectors.
Methods and Tools Used
The Tunisian Startup Act process is a form of deliberative democracy. Deliberative democracy is based on the fundamental principle that the decision-making process must include discussion of all viewpoints, with none being excluded a priori.  The Startup Act process was a collaboration between the private and public sector and emphasized its focus on deliberative democracy.
The task force used social media and the new "Parliamentary Academy," a training module for members of the Tunisian Parliament established in 2016, to articulate their interests and increase pressure on decision makers in order to inform parliament and gain its support for the bill.  Initially, the Academy was intended to serve as a central learning hub for Commonwealth Parliamentarians, Clerks, and parliamentary officials. Today, that purpose has been expanded to include anyone interested in learning about parliaments and key thematic issues. The newly formed interest group, Tunisian Startups, handled public relations during this legislative process, resulting in favorable media coverage of the Startup Act.
In the final stage of the Tunisian Startup Act process, the council of ministers voted to be able to pass into law this act. When a decision must be made in either the Senate or the House of Representatives, a 'vote on the voices' is held first. This means that the Presiding Officer, either the President of the Senate or the Speaker of the House of Representatives, asks members of parliament to vote by saying 'aye' or 'no'. After hearing the response, the Presiding Officer announces the outcome. If no one objects to the outcome, the case is closed. A division is called if the result is challenged by more than one member of parliament. For this stage, 110 members voted for and none against.
What Went On: Process, Interaction, and Participation
The Startup Act initiative was officially launched in February 2016 after an early brainstorming session with over 70 members of the Ecosystem and an initial informal meeting with select Ecosystem representatives, both hosted by the former ICT Minister Noomane Fehri in 2015.
According to Noomane Fehri, a former Minister of Technologies, Information and Communications, they gathered stakeholders from different parts of the Startup Ecosystem - entrepreneurs, investors, academics, representatives of the ministry - in the Technopole El Ghazela, and then shared together the idea. They agreed on the need to launch the initiative and set 3 months to establish concrete proposals. To show the government's goodwill, he mandated 3 dedicated resources to work with them, and a mentor from Silicon Valley, with the promise to pass the recommendations on to the Council of Ministers and to the Parliament. 
Eight topical working groups were then formed, and they helped organize, prioritize, and discuss the loose collection of startup community comments and ideas. Topics like investment, market access, administrative rule simplification, internationalization/export, and financing were covered by the theme clusters. Finally, a coordinating team at the Ministry of Communication Technologies and Digital Economy received the working groups' chosen recommendations.
A Task Force took control of the process's ongoing management and orchestration after a protracted phase of brainstorming. It included a wide range of startup community participants as well as ICT Ministry representatives. During the regular discussion meetings of the Task Force, the various ideas and demands of the community could thus be discussed and evaluated with regard to their legal and political viability. Regular meetings with the community and sharing the outcomes of their agreements with ecosystem members in order to solicit feedback from the community helped them maintain the inclusive spirit of the process.
Many consultations with various administrative actors took place during the Startup Act's design process. Representatives from the ecosystem and the Task Force presented the draft law to each ministry, gathering ideas and concerns and incorporating them into the draft. This resulted in several new versions of the law text, including an eighth version that was finally approved by the Council of Ministers in December 2017. This participatory approach, combined with the inclusion of various stakeholders from the ministries and the Tunisian Central Bank, enabled the rapid resolution of emerging problems and the efficient removal of roadblocks. This resulted in the creation of several innovative legal provisions that were also considered politically and administratively viable.
As the voting date approached, the ecosystem increased its efforts to inform Parliament members about the Startup Act, close knowledge gaps, and thus transfer the inclusiveness of the development process to the level of public actors and decision makers. The focus was on the parliamentary commission in charge of enforcing the law. The fact that the Commission for Industry, Energy, and Natural Resources was in charge of the dossier proved advantageous to the project, as its members demonstrated a willingness to engage in a learning process alongside the startup community.
A central goal of the startup community's public information campaign prior to the Startup Act vote was to bring startup concerns from a niche to broader public attention. Media articles, interviews, radio broadcast invitations, and an information website spread environmental demands and legislative process information far beyond the community. To speak with one voice during this campaign, representatives of the organization "TunisianStartups" took control of media coverage by coordinating the campaign and developing a common terminology and discourse elements.
The Ministry organized a trip to Paris for the member of Parliament in order to make the members of the Industry Commission discuss the ideas of the Startup Act not only in theory, but also to convince them of the benefits of a functioning Startup Ecosystem through real-life experience.
A few days before the vote on the Startup Act by the Commission of Industry, a journée parlementaire dedicated to the Startup Act was held at the Academy. The law was approved by the Council of Ministers in December 2017. The tenth version of the legislative text was finally submitted to parliament for approval in April 2018. When it came to voting, 110 members of parliament voted in favor, with none voting against. Four members of Parliament did not vote.
April 2, 2018 was a memorable day for the Tunisian entrepreneurship ecosystem. On that day, the Tunisian parliament adopted a new law that had the potential to change the private sector landscape and create opportunities for thousands of entrepreneurs around the country. The new law, called the Startup Act, aims to boost the Tunisian startup ecosystem by simplifying administrative procedures, making it easier to acquire financing, encouraging the establishment of startups, and enabling access to global markets. Startup Acts provide policies, guidelines, and occasionally special institutions that improve the environment for entrepreneurship in a nation or jurisdiction. The law had a number of noteworthy provisions, including tax exemptions for new businesses for up to eight years, one year to launch a new business before returning to their previous employment, and a state-funded pay for up to three founders per company for the first year of operations. All of them seek to support young individuals with low financial resources in starting their own businesses. The law encourages the sector's globalization by allowing aspiring business owners to open a foreign currency account that they can use to purchase raw materials, open branches, or invest in foreign corporations. The act also established the accelerated processing of international patents.
The Startup Act's legislative passage was a ground-breaking process in Tunisia. In 2012, Italy passed a startup law for the first time and Tunisia became the first African nation to do the same in 2018.  The Tunisian Startup Act's legislative procedure is distinct from that of most other laws. The idea for the law came from a bottom-up movement within the startup sector rather than coming from government officials or lawmakers. From the first stages of brainstorming to the creation of the measures, the debate and vote in the legislative bodies, to the implementation of the law, members of the ecosystem pushed and supported the process. Since there was no model for this bottom-up method of legislating, each stage ended up being a learning experience for all stakeholders involved.
The implementation of the Startup Act is currently being coordinated by a specialized management company called "Smart Capital". It is governed by the Conseil des Marchés Financiers (Financial Markets Council) in accordance with an agreement with the Ministry of Communication Technologies and Digital Economy, Ministry of Finance, and the CDC. The agency's organizational structure is an innovative public-private mix, in keeping with the spirit of the entire legislative process: a public company in terms of shareholding, public-private in terms of governance, and private in terms of self-imposed operational efficiency standards. Smart Capital will be in charge of the Startup Act's implementation and operationalization in the coming years. The company, in particular, manages the establishment of a "Fund of Funds" consisting of more than ten funds for start-ups at various stages (seed funds, early stage funds, late stage funds), thereby creating a solid financing framework for start-ups. 
Influence, Outcomes, and Effects
The Start-Up Act has three components: first, a legal framework that simplifies the start-up launch process. Second, a €200 million Fund of Funds, established and allocated to specific verticals. The third aspect is a strategy to strengthen Tunisia's ecosystem and hubs. There are numerous benefits for different players in the start-up ecosystem. A one-year allowance for living costs for the co-founder and shareholder, state support for start-up patent registration procedures and service charges at the national and international levels, and a year off to fully commit to the launch and development of their start-up are all available to entrepreneurs. Benefits for start-ups include a portal for applying for start-up classification, the ability to open a special foreign currency account, and corporate tax exemption. Finally, investors benefit from tax-deductible start-up investment as well as capital gains tax exemption on profits from the sale of securities related to start-up participation. 
Startups labeled under the Startup Act also get a chance to fail honorably. The Startup Act encourages good failure by promoting the peaceful winding up of startups. 
According to Entrepreneurs of Tunisia (EOT), the number of startup coworking spaces in Tunisia has increased by 61.2% from 38 in 2018 to 62 in 2019. Due to the Startup Act's business-friendly terms, there has also been a significant increase in the number of startup founders across the country, as well as increased funding from investors.  As of December 2019, 169 of the 279 companies that applied under the Tunisia Startup Act had been granted startup status. Female entrepreneurs led 37 (21.9%) of the 169 businesses. So far, all of the startups have raised approximately $18.5 million in investment. 
While groundbreaking, especially in terms of the process of drafting and gaining support for it, the Startup Act is only the first step toward a thriving digital economy. Reforms in areas such as monetary and financial policy, as well as the education system, will be required. The participatory nature of the legislative process to pass the Startup Act, on the other hand, has the potential to set new standards for political dialogue and public-private cooperation, which can shape the necessary further reform process. 
Tunisian cities face logistical challenges, with the lowest performance in the MENA region. Local entrepreneurs shared that they face challenges because of poor logistics.  Briter Bridges  lists 29 tech hubs in Tunisia, and while most hubs are centered around the capital, some are emerging in Tunisia’s smaller cities. An online platform created by Entrepreneurs of Tunisia, is a useful tool for mapping the entrepreneurial players in the ecosystem, including investors, support organizations and other enablers. 
Analysis and Lessons Learned
The Startup Act is significant not only for the steps forward that the country is taking to build a thriving entrepreneurship ecosystem, but also because it is the first time in the Arab region that startups have successfully lobbied policymakers to change laws that affect them. 
Some aspects of this process can be used as a model for future bottom-up legislative processes aimed at increasing awareness, transparency, and stakeholder participation. Tunisia has a large and diverse set of players involved in the development and promotion of startups, all of whom interact and collaborate within a dynamic ecosystem. These include, in addition to entrepreneurs and startups, accelerators and investors, governmental agencies and support programs, co-working spaces and networking event series, enablers from large corporations, and national and international financial support structures. [ 16]
While most laws are negotiated behind closed doors, the startup community insisted on making the Startup Act's evolution transparent and traceable since the beginning of the bottom-up process. The ecosystem launched an information campaign at multiple levels, including decision-makers and the general public, in the run-up to the political vote on the draft law. The goal of the campaign was to portray the Startup Act as a collective project and a matter at the heart of the community.
Involving policy recipients in the process of co-designing and co-evaluating legislation and policies has proven critical for policymakers to better understand needs and foster ownership throughout the implementation phase. Participation of entrepreneurs and other ecosystem participants in the policymaking process offers three benefits in the case of The Tunisian Startup Act: 1. It enables policymakers to better understand the requirements of beneficiaries and incorporate their knowledge and preferences into their decision-making, 2, It enhances social capital by boosting local capacity for self-reliance and collective action, as well as by strengthening intra-ecosystem networks, cooperation, coordination, and information flow - in other words, by transforming individuals into public citizens and establishing shared norms for the public good, 3, It ensures ownership and implementation supervision, by allowing citizens to hold states and markets accountable. Deliberation, in particular, has been identified as a critical success component in such a participatory policy making process. It can cause changes in the drivers of actions and preferences, affect social norms, make coordination easier, and ensure more commitment from participants and elites.
Startup Acts are more than just a piece of legislation; they are also a participatory process that can serve as a catalyst for broader structural improvements. This process can be used to examine a country's entire entrepreneurship framework and to enhance its overall policy and regulatory instruments. The term ‘ecosystem’ was introduced into the entrepreneurship policy analysis primarily because the interaction between the components in the ecosystem is critical to comprehend the challenges that may impede entrepreneurship and potential remedies. Adopting an ecosystem approach is also a useful method to avoid the adoption of divergent, often contradicting measures because fragmented and overlapping programs can have negative consequences and inhibit good resource management. 
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