Tunisia is the smallest country in North Africa. It has a history of conservative macroeconomic management. It has made good progress in social development, such as high levels of education and gender equality, but serious regional disparities remain and more people are entering the job market than it can absorb.
The former regime suppressed political and press freedom, tolerated and encouraged widespread corruption and discriminated against areas outside its political heartland on the coast.
Widespread dissatisfaction finally boiled over in December 2010 when a popular revolt started in the poor, central region. This was relayed to the world through the internet and other social networks. The unrest led to the overthrow of former president Zine El Abidine Ben Ali who fled the country on 14 January 2011.
Following the ousting of former president Ben Ali, achieving stability in Tunisia has proven challenging. However, the country held its first free and fair elections in October 2011 that brought to power (in a power-sharing arrangement) the moderate Islamist party Ennahda led by Hemadi Jebali as leader. Approximately 90% of the 4.1 million registered voters participated in the election.
The assassination of leftist opposition leader, Chokri Belaid, in February 2013 led to large anti-government public protests and the resignation of Prime Minister Jebali. In March 2013, Tunisia’s National Constituent Assembly's 217 members back by a majority of 139 a new government led by Ali Larayedh as prime minister. Tunisia is in the process of drafting a new constitution and the coalition government is committed to ensuring that a new constitution is finalized by mid 2013 and national elections are held by December 2013.
The UK was the first western country to engage with post revolutionary government. The Foreign Secretary William Hague visited Tunisia on 25 January 2011 and called on the Tunisian Prime Minister. He urged the transition government “to implement rapidly the wider commitments it has
made and stressed that the UK stands ready, with the EU, to support Tunisia as it moves to hold free and fair elections.”
- UK imports from Tunisia were £ 346 million in 2012, a 51 % increase from 2011 figures.
- UK exports to Tunisia totalled £ 159 million in 2012 , a 9% %increase from 2011.
There are 60 UK companies currently operating in Tunisia. The main UK investors in Tunisia are as follows:
- BG Group
- Lee Cooper Group
- Oxford University Press
- Regus International
- Coats Viyella
- Fashion Wear International
- Check Safety First
Tunisia is considered to have an investor friendly business environment. According to the latest 2013 World Bank Doing Business Report, out of 185 countries assessed for ease of doing business, Tunisia is ranked 50th. This places it well ahead of the regional average for the Middle East and North Africa which is 98.
Whilst Tunisia has a liberal regulatory regime, the US Department of State’s Investment Climate Statement 2013 reports that there is nevertheless a ‘strong preference for offshore, export-oriented FDI’. The report also claims that ‘investors in that category are generally free to establish and own businesses and to engage in most forms of remunerative activity’. However, it warns that ‘investment which competes with Tunisian firms, on the Tunisian market, or which is seen as leading to a net outflow of foreign exchange, may be discouraged or blocked’.
Strengths and weaknesses of the market
- Tunisia has the most diversified economy in North Africa. It is well positioned geographically, at the crossroads of Europe, Africa and the Middle East. It is well connected to Europe with daily flights to many major cities and good maritime connections to France and Italy.
- Costs may be higher than in Asia but these can be outweighed with the advantages of close proximity to UK and EU markets, particularly in sectors like manufacturing and textiles.
- The population is young, educated and generally open to Western ideas, often by shared connections to Europe. Arabic is the official language and the language of business and most government administration is French. English is now becoming more widely spoken among the young business and political elite.
- Under the previous regime dealing with the administration was challenging, something which should change as decision-making becomes more decentralised.
- Long-term prospects are good if the transition is smooth and orderly with a business-friendly government.
- Institutions and companies controlled by the former Presidential clan require investigation due to allegations of corruption and work to change them into transparent and profitable enterprises.
- Under the previous regime, enterprises sometimes had no choice but to accept local partners who were connected to the ruling family. In the wake of the uprisings, the business landscape remains complex and caution should be taken before any partnerships are entered into due to the risk of being associated with remnants of the Ben Ali regime.
- The financial sector remains fragile and requires more reform. For banks this means reducing non-performing loans (NPLs) and adapting to increasingly strict and globalised banking regulatory standards. The Tunisian Central Bank disclosed that Tunisian banks lent 2.5 billion dinars (about £1.1 billion) to businesses connected to the former ruling family. This was some 6% of all private sector credit. These loans made the Tunisian bank loan books more risky and threatened to reverse the progress made on driving down the rate of NPLs.
- Unemployment remains a major problem. It was one of the main causes of the revolution. There is also significant underemployment. Concern over joblessness dominates the national agenda.
- This translates into approaches to the workplace that British companies will find awkward. For example, Tunisia has been criticised in successive World Bank/International Finance Corporation Doing Business reports for having overly strong labour laws (e.g. making dismissal difficult). Laws providing protection for employees are likely to remain in place as the interim government faces strong pressure from unions and demonstrations to protect and create jobs.
- Strikes and other industrial unrest were not permitted under the previous regime. These are now widespread and likely to continue and could impact companies directly and/or their supply chains.
Before the revolution Tunisia was rebounding from the global financial crisis. The African Development Bank (ADB) estimates that the revolution cost Tunisia 4% GDP loss, with tourism alone dropping by 37% for the first ten months of 2011. Ongoing social unrest within Tunisia and instability in neighbouring Libya has precluded an improved economic environment. For 2013, the Tunisian Finance Ministry revised their growth estimates down to 4% from 4.5% and official figures released in May 2013 show that Tunisia’s economy grew by 2.5% in the first quarter, year-on-year.
Foreign investment fell in the first quarter of 2013 by 10.6% compared to the same period of 2012 to 393 million dinars (US$237.34 million). According to Tunisia’s Foreign Investment Promotion Agency (FIPA) 12 new companies with foreign participation were established during the first quarter of 2013, but the agency noted that this was down from 24 new companies in the first quarter of 2012. However, in April 2013 the International Monetary Fund (IMF) finalised a provisional US$1.75bn loan package with Tunisia which will provide the country with greater fiscal certainty and boost investor confidence. As part of the loan agreement, the IMF will support Tunisia ‘promote private investment, foster sustainable job-creation [and] reduce economic and social regional disparities’.
Strong EU Links
A weak economic recovery in the EU will continue to have a negative impact on Tunisian growth. The EU is Tunisia’s first economic and commercial partner and accounts for:
- 76% of Tunisia exports,
- 84% of tourism receipts,
- 88% of remittances, and
- 73% of all foreign direct investments.
In 2008 Tunisia and the EU achieved full trade liberalisation for industrial goods. In 2010 negotiations started with the EU on liberalisation of services and food trade. The EU Delegation in Tunis coordinates EU effort for market access improvement for EU exports through regular dialogue with the Tunisian administration.
The EU announced end of January 2011 its plans to increase the initial €240 million aid for 2011- 13 as part of its medium term global support plan. Funds should benefit not only industry and agriculture but also the legal system and good governance. Tunisia enjoys ‘privileged partner’ status within the EU which will allow for increased cooperation in areas such as job creation and financial assistance to improve Tunisia’s national economy. The long-term ambition is to achieve a Deep and Comprehensive Free Trade Agreement (DCFTA) between the EU and Tunisia.