Looking forward to project Tunisia as one of the favorite destinations for foreign investors, the state government is working on reducing fiscal and external imbalances, while also taking firm steps to reinvigorate structural reforms in the country.
The adoption of the crucial private-sector legislation and successful hosting of the ‘Tunisia 2020 – Road to Inclusion, Sustainability and Efficiency’ in November 2016, have given the state machinery a new self-belief to start approaching potential investors.
“We need increased FDIs (foreign direct investments) and Tunisia is pursuing the right track. Markets are oozing strong confidence, which is required to attract global investors. Right now, we have 80 companies listed on the stock exchange authority and they are doing really well. But we are expecting this number to increase in the coming months,” Bilel Sahnoun, the chief executive officer of the Tunis Stock Exchange, tells TRENDS.
Industry experts believe that Tunisia 2020 managed to project the North African nation in the right light and it could be a turning point in the economic history of the nation.
“We consider the investment conference Tunisia 2020 a landmark event as it brought together investors from various countries on the same platform. From what I observed, the meetings held during the conference were very fruitful. Behind all the meetings, there was a monitoring mechanism to ensure the sustainability of the projects that were discussed. We are very confident of the positive outcomes to come before everyone in the coming months,” added Sahnoun.
‘The best choice’
Addressing the Tunisia 2020 initiative, President Béji Caid Essebsi highlighted why the country could be the best choice for foreign investors, mainly counting on the nation’s country’s geographical and economic advantages.
“In addition to its privileged geographical position, Tunisia benefits from a developed infrastructure of high human skills and an open economy integrated into the world market. These assets predispose it to become a true platform for investment and exports to European, African and Arab markets,” President Essebsi pointed out. “As a result of various reforms, we aspire to increase the volume of foreign investment by 80 percent as part of the 2016-2020 development plan compared to the 2011-2015 five-year period.”
Given the fact that Tunisia lacks natural resources, unlike its neighboring countries, the government is looking forward to harness unconventional means to boost investment and tourism sector features as the top priority. In fact, tourism used to be the country’s largest generator of foreign currency income before the 2011 revolution.
According to the officials concerned, there are several promising initiatives that indicate a real recovery of the tourism industry. In order to ensure the safety of tourists, strict security measures have been imposed across the country in the past couple of years.
The latest official statistics show that currently, the tourism industry is accounting for less than seven percent of Tunisia’s Gross Domestic Product (GDP), whereas it used to account up to ten percent before 2011.
“For decades, authorities did not do anything to interconnect interior regions to areas on the coastal side, which are very important to boost the tourism sector,” stated Sahnoun.
Further, he added: “We expect the state to play a prominent role in ensuring a balanced disbursement of investment, allowing the development of both remote interiors and coastal areas. We have many hidden tourism destinations that can attract good number of foreign tourists.”
Introducing structural reforms
The Tunisian government also passed a new investment law in September 2016 that was aimed at making foreign investment easier, as it relaxes bureaucracy and eases restrictions on the transfer of funds out of the country.
Under this new law, foreign investors and companies will enjoy tax-free profits on several major projects for a period of up to ten years.
President Essebsi said that one of the main priorities of the government is to implement structural reforms to improve the business climate, particularly through the adoption of a new investment law. The new law enshrines the freedom to launch innovative projects and encourages the creation of fresh businesses and wealth.
Working in the direction, Tunisia 2020 conference played an instrumental role in attracting potential foreign businessmen to come and invest in Tunisia. The conference saw firm commitments, from partner states and donors, which represented an overall amount of more than 19 billion Tunisia dinars.
According to the authorities, the state’s commitments will be deployed in various forms, including through direct donations, direct investments, or the conversion of the Tunisian debt or loans in preferential payment terms.
Learning from the past
Since the 2011 revolution, Tunisia has managed to obtain support from various foreign partners, as they were keen to see the new democracy achieving success. However, the North African country has remained the victim of poor domestic policies and social riots, as the pace of economic reforms have lagged behind the political changes.
In February this year, the country’s Finance minister Lamia Zribi told Reuters in an interview: “The wage bill in Tunisia rose to 14.4 percent so far and is among the highest level in the world. We will cut it to 14 percent by the end of 2017 and approximately 12.5 percent in 2020.” Zribi was referring to the public wage bill as a proportion of GDP.
Notably, as part of the government’s policies, plans have been made to sell some companies that were confiscated from the family of ousted President Zine El Abidine Ben Ali. These companies are operational in various sectors, such as media, telecommunications and in the service industry.
According to the Finance Minister, the country expects to earn roughly $300 million from the sale of these companies.
In February this year, the International Monetary Fund (IMF) mission chief to Tunisia Björn Rother stated that still significant macroeconomic challenges persist in the nation.
“Growth is expected to pick up to 2.5 percent in 2017 from 1.3 percent in 2016. The IMF and Tunisia agree that urgent action is needed on fiscal policies and delayed reforms. The IMF welcomed the government’s resolve to move ahead with the modernization of the civil service,” said Rother.
Tough road ahead
Despite ongoing efforts, experts believe it will not be an easy task for the Tunisian government to ensure a continuous flow of fresh investments into new projects.
“Foreign investment in Tunisia has fallen by 25 percent over the past two years. We need to open up more for the major investor countries, especially China and for other big economies from Asia,” Mohamed Sadok Jabnoun, an economist and an investment strategy consultant, tells TRENDS. “Tunisia has a lot to gain from opening up to China, which is one of the biggest investors in the world today. The country should also open its doors for the African market, as it could also gain much from there. There is a basic need to present the country as a central pole of technology and industrial hub to attract major investors.”
He maintains that while Tunisia 2020 was a massive hit, it’s too early to conclude whether it would act as a game-changer in terms of attracting FDIs.
“The event marked a turning point in the history as it tried to put Tunisia back on its previous track to attract investment, the track that was disturbed following the severe economic crisis. The main objective of the conference was to attract new investments, but it still needs a real confirmation, because we noticed that this event mainly saw the financing of only public projects by international donors,” he says. “Nobody spoke about new investments but rather focused on the credit financing of old projects that had been blocked since 2009, mostly in the sectors of infrastructure and health.”
Further, Jabnoun says authorities have retained the old model of project development, where 75 percent of the focus is on coastal regions and only 25 percent is on the development of inland regions. “This distribution comes from the old model, which pushed the country toward the revolution in early 2011. The inland regions continue to be the weakest link and remained marginalized,” he explains.
New promises, new investments
Tunisia 2020 was the country’s second attempt at attracting international investors, after the failure of the ‘Invest in Tunisia’ conference held in 2014. It witnessed the participation of more than 4,500 stakeholders from the world of business and politics from nearly 70 countries. So far, it has managed to stir the economic corridors by attracting good commitments worldwide.
The European Investment Bank (EIB) has decided to invest €2.5 billion in Tunisia by 2020. Other international institutions that have made financial commitments toward Tunisia include the Arab Fund for Economic and Social Development (AFESD), which has committed $1.5 billion; the World Bank, which has decided to grant $1 billion annually over the next five years; and the International Finance Corporation (IFC), an organization of the World Bank Group, has decided to provide $300 million aid to the private sector.
Furthermore, the European Bank for Reconstruction and Development (EBRD) has decided to invest up to $620 million in the Tunisian private sector.
Several countries, such as France, Canada, Germany, Qatar, Kuwait, Switzerland, Turkey and Saudi Arabia, have also showed their support to boost the Tunisian economy. France, through the French Development Agency (AFD), has granted Tunisia a total of €250 million, while Canada has committed $24 million over the next four years. Germany will provide a financial support worth €300 million. Qatar has announced a grant of $1.25 billion and Kuwait has agreed to a $500 million loan over a five-year period. Switzerland will extend a loan of $250 million over a seven-year period. Both Turkey and Saudi Arabia have pledged to deposit the sum of $100 million each for the development of Tunisia.
However, the real challenge for the government now is to ensure that all of these projects are implemented in time through the establishment of monitoring committees, ensuring that timelines are met and there is an inclusive and sustainable impact on the economy and the society.