A Country That Works.(Tunisia )

The computer programmers drink mint tea with pine nuts. The offices are decorated with delicate tiles of azure blue and canary yellow. But aside from the Arabic details, you might mistake the Tunis Technology Park for any high-tech enclave in Silicon Valley. Walls are plastered with posters advertising multimedia fairs and Linux training sessions. Firms like Alcatel and Ericsson are here, as is one of the country's top technical colleges, where twentysomethings in T shirts hover over laptops, talking code. Two of them, Mohamed Sadok Mouha and Mohamed Ramzi Abdelhak, recently launched a software firm, Progress Engineering. "We want to be as big as Microsoft," says Mouha.

That may take a while, since Tunisia's GDP is a fraction of Microsoft's market cap. Yet lofty ambition doesn't seem totally out of place in a country of 10 million people that is defying the tragic decline of the Arab world, where vast oil wealth and billions in foreign aid have been squandered by corrupt and incompetent regimes. Alone among Arab states, Tunisia has made real progress building an economy based on resources other than oil. It's also the only Arab economy to create a strong non- oil export sector, and a record of at least moderate economic growth (about 5.2 percent) in the last decade, according to a recent report from the World Economic Forum, which holds a Middle East summit in Jordan next month. Even more striking, Tunisia has achieved all this with neither great oil wealth (it's a net importer) nor huge foreign aid (like the billions that keep Jordan afloat). In contrast to the decay of its neighbors, Tunisia bills itself with some justification as "a country that works."

What makes Tunisia different? Tunis, the capital, feels like a European city, at least on the surface. Stylishly dressed men and women sip Turkish coffee in outdoor cafes, conversing fluently in both French and Arabic. Poverty is low; women fill 25 percent of the jobs, far more than in most Arab states. Literacy is high, but look closer: the media and Internet are censored. Portraits of President Zine El Abidine Ben Ali are everywhere. Speaking out against Ben Ali is a quick ticket to jail, even torture--but not to a grave. This is an important distinction. Diplomats in Tunis say Ben Ali runs a soft dictatorship, more like Singapore or South Korea in the 1980s than like some other Arab countries today.

Only 80 miles from Europe, Tunisia, like its Arab neighbors, has long been a crossroads for traders and emperors. The crucial difference: Tunisia had a relatively benign experience under French colonial rule, and emerged noticeably less bitter at the West. The postcolonial boundaries created a 98 percent Arab and Sunni Muslim population, so there was little of the ethnic and religious conflict that radicalized other new Arab nations. The first president after independence, a French-educated lawyer named Habib Bourguiba, was a common-sense reformer, not a strict follower of the Nasserite socialism that came to dominate the Middle East. Bourguiba was the first Arab ruler to outlaw polygamy, and he forced parents to send girls as well as boys to school. He was an Arab nationalist, but one who invested in health and education rather than an army, and left the capitalist class largely intact, allowing traditional industries like textiles to flourish. "Tunisia has by and large managed its wealth for the benefit of the population," says Theodore Ahlers, director of the Maghreb region (which includes Tunisia) for the World Bank.

By 1987 Bourguiba was losing power to a rising fundamentalist movement, and the then-Prime Minister Ben Ali took his place in the presidential palace. In a bloodless coup that became known as The Change, Ben Ali squashed the fundamentalists and launched market reforms that made Tunisia a model for the International Monetary Fund. In 1995 he became the first Arab leader to sign a free-trade agreement with the European Union, capping Tunisia's unique export boom, which rests largely on sales of textiles and light-manufacturing goods like car parts and insulated cable to Europe. While Tunisians identify themselves ...