Researched and written by economist and international analyst, Moin Siddiqi
Into the fifth year of The Arab Spring, Tunisia, despite stiff challenges, offers a genuine success story among the Arab countries in transition, including Egypt, Jordan, Libya, Morocco, Tunisia and Yemen. The country’s socio-political evolution stands in stark contrast to much of the region, which finds itself in turmoil. As The Guardian newspaper put it: “One nation, which stands as an exception in the Arab world for having peacefully completed a democratic electoral process after the downfall of its dictator, is Tunisia. It deserves support.” As post-Revolution Tunisia lays the foundations for a new development model, financial and technical assistance are required on comprehensive structural reforms and a coherent public investment programme.
Undoubtedly 2015 marked a crucial milestone in Tunisia’s history, with the formation of a new inclusion Government in February headed by President Beji Caib Essebsi – following the adoption of a new Constitution in late 2014, which obligates the State to effectively manage public resources, and serve its citizens by adhering to clear rules of transparency and accountability. The authorities are now confronted with the task of rectifying the legacy of the Zine el Abidine Ben Ali regime (1987- 2011) and building the foundations of a new and optimistic Tunisia.
Tunisia’s lack of hydrocarbon resources, compared with its vast desert neighbours Algeria and Libya, is more than offset by other assets including a youthful, well-educated population; talented entrepreneurs; a traditionally open and diversified economy with huge potential for development in tourism, agriculture, manufacturing, and services; technical sophistication; a rich natural and cultural heritage and a strategic geographical location –making the country an ideal base for re-exports to southern Europe and the Gulf Cooperation Council (GCC) markets.
The pre-revolutionary development model failed to generate inclusive growth. The new Tunisia needs to build on these assets in order to deliver economic opportunity and greater social cohesion.
In September 2014 international conference “Invest in Tunisia: Start-up Democracy” presented a long-term development strategy and 22 new projects open to inward investment, valued at €22bn ($25bn) in strategic sectors (aeronautics, basic electronic components for automotive, pharmaceutical, textile, information and communication technologies, health services and tourism).There are many additional opportunities for foreign expertise, which are needed to assist in reforming the banking sector, developing the capital market and modernising the infrastructure sector.
Navigating the National Recovery
In a period marked by increased spillovers from regional conflicts, a prolonged transition, recurring social unrest, and fragile global economic conditions, Tunisia has shown remarkable resilience and national resolve to overcome exogenous shocks. Indeed, the economy has avoided outright recession – with real GDP growth averaging 2.9% per year over 2012-14 and inflation capped below 6%, thanks to a prudent monetary policy and lower food prices, while foreign exchange reserves stayed above the critical three-months’ import threshold.
Public debt has risen steadily since 2011 due to fiscal stimulus measures. Energy subsidies were reduced, thus freeing scarce resources for priority expenditure in capital projects, health, and education. However, at 15.2% official unemployment rate, there is the need to push ahead with growth-enhancing reforms and investments, chiefly in disadvantaged regions to meet the aspirations of the people for shared prosperity. The International Monetary Fund (IMF) praises Tunisia’s move to stabilisation, but stressed it needs at least three more years of painful and politically difficult reforms to revive growth in the aftermath of 2011 revolution.
Tepid growth in the Eurozone has impacted Tunisia firstly through trade links since over 70% of exports are to the European Union (EU). Recent IMF analysis suggests that a one percentage point decline in Europe’s growth translates into a 0.6 percentage point decline in Tunisia’s growth. The EU also provides funding for major capital projects, but clauses in the agreement prohibit non-EU countries from participation in EU-funded projects in Tunisia.
The second channel of transmission is through the country’s tourism sector, which represents 7% of Tunisia’s GDP and employs over 400,000 people. Nearly half of the tourists (45% exactly) are Europeans. In 2014, European arrivals dropped by 26% and revenues were 15% down on 2010 receipts. By contrast, Tunisia in 2012 had attracted nearly 6mn international visitors, behind only South Africa (9.5mn) and Morocco (9.2mn) on the African continent, according to World Travel and Tourism Council figures.
The cowardly attacks at the Bardo Museum and in Sousse also inflicted a further blow to Tunisian tourism, with 2015 tourism receipts expected to be 50% lower than last year. The IMF has revised down 2015 growth projection to 1% compared to initial 3% forecast – reflecting a slowdown in the first-half, heightened insecurity and drop in service exports (principally tourism).
In the wake of the more recent regional terrorist outrages Tunisia has responded robustly – stepping up security at tourism hotspots and encouraging diligence and cooperation against the threat. And at Sousse in particular, the local response received praise from around the globe.
In June 2013, the IMF granted Tunisia a 24-month Standby Arrangement worth $1.74bn in support of 2013-15 reform programmes. It was extended for another seven months to enable Tunisia to strengthen budgetary and external flexibility in the face of recent external shocks. The effective implementation of IMF programme will underpin investors’ confidence.
Tunisia’s (Ba3 stable) credit profile continues to benefit from its smooth democratic transition and improved funding environment, says Moody’s Investors Service. It noted whilst domestic political risk has receded, Tunisia remains exposed to geopolitical risks including instability in Libya. “While the expected reduction in fiscal and external imbalances over the next two years support Tunisia’s credit profile, its rating is constrained by challenges related to the investment climate and growth potential.”
The rating agency added: “the instalment of a broad-based unity government counteracts the polarisation between political parties that emerged during the transition process, and contributes to a reduction in domestic political risk.” The country’s large foreign-currency debt exposure is further mitigated by ample recourse to official funding sources at favourable terms.
On the external front, Moody’s expects a gradual reduction in Tunisia’s current account deficit from the peak reached in 2013, underpinned by improving external demand from EU trading partners, lower oil prices, and a boost in food exports following a record 2014-15 olive oil harvest season. Timely implementation of IMF backed structural reforms would also be ‘credit positive’, including public bank recapitalisation.
Growth in the Euro-Area is slowly reviving thanks largely to the European Central Bank’s ongoing quantitative easing monetary policy, which bodes well for Tunisia in terms of export and investment prospects. Weak commodity prices benefits Tunisia; a $10 per barrel drop in oil prices is estimated to reduce ‘twin deficits’ – the fiscal and current account by 0.6% of GDP. This is a large windfall for Tunisia as for many other oil importers.
Having completed the political transition culminating in the formation of Tunisia’s first post-transition Government on February 5th, 2015; the authorities are now moving ahead with critical structural reforms focusing on a sound banking system, a conducive business climate, strengthening tax policies and administration as well as creating a social safety net to protect vulnerable segments of the population. “A growth friendly budget, an efficient financial system, and a first-rate business climate can lay the foundations for a vibrant economy. These are difficult reforms, they can no longer be postponed and need to be implemented quickly in order to meet the aspirations of Tunisia’s people. And the message to the world will be clear: Tunisia is determined to transform its political accomplishment into an economic triumph,” observed Christine Lagarde, Managing Director of the IMF.
Why Invest in Tunisia?
* Tunisia’s sound macroeconomic fundamentals, underpinned by a diversified industrial base and good infrastructure by regional standards, reinforces its resistance to exogenous shocks;
* Its proximity to and trade agreements signed withthe huge market offered by the EU-28 (the world’s largest trading bloc) are strategic assets for investors. Tunis is on average, a two hour flight from the major European capitals;
* Its location as a hub for expansion into Africa, Europe, and the Middle East, combined with strong medium-term growth potential, the transparency, and rule of law it offers as Tunisia moves toward genuine democracy;
* The country’s credit-worthiness guarantees its access to international capital markets. In January 2015, Tunisia issued a US$1bn 10-year sovereign bond in London, with a 5.75% coupon, below the rates charged to Greece and Spain recently. This demonstrated strong international investor confidence in Tunisia’s capacity to repay and its renewed stability. Tunisia has never defaulted on its financial commitment and such a scenario is unlikely in future;
* Tunisia ranks relatively high on general business indicators based on the World Bank Doing Business 2015 report, which ranks the country 60 out of 189 economies, above all other Middle Eastern & North African (MENA) economies outside the six-member GCC bloc;
* Tunisia has a qualified, productive labour force (arguably the best in MENA region) at competitive salary levels. In addition, a well-developed tertiary education system reinforces the modernisation of the country. The Paris-based think tank, Organisation for Economic Co-operation and Development (OECD), reported that Tunisia has the world’s ninth highest rate of private tutoring, with participation rates of 70%;
* The Tunisian Investment Code and subsequent amendments provide investors with fiscal incentives, including multi-year tax relief on reinvested revenues and profits, exemption on value-added tax (VAT) on many imported capital goods, and depreciation schedules for production equipment.
* Tunisia has a market-oriented economy that attracts sizeable foreign direct investment (FDI). Real estate, tourism, textile/apparel manufacturing, electronics, automobile parts, aerospace and aeronautics and energy sectors are popular with foreign companies. The sectoral distribution today shows a clear shift towards industrialisation. According to official statistics, 3,068 foreign or joint-venture firms were based in Tunis in 2012.
FDI projects currently represent 10% of productive investments, generate one third of exports and 15% of the total number of jobs. A recent decline in FDI during 2013-14 was largely due to the global downturn (particularly in the Eurozone) and geopolitical and security concerns. However, inward FDI is expected to increase over coming years thanks to more stable political environment and positive spillovers on business sentiment and output growth. The country boasts high potential in ICT, offshoring (call centres), professional services, air and maritime transports and logistics, tourism. A significant share of FDI in recent years has come from the privatisation of state-owned enterprises, notably in telecommunications, banking, insurance, manufacturing, and fuel distribution.
Major Investors in Tunisia
British Gas (BG) is Tunisia’s largest single foreign investor with $4bn invested to date. It developed the Miskar offshore gasfield in 1996 costing $650mn and is investing a further $500mn for new development. BG accounts for over 60% of Tunisia’s gas production. The UK remains No.1 partner in the energy sector. This position will be reinforced with the potential entry of Shell, Enquest and Nur Energy, who all have contracts awaiting approval by the Tunisian authorities. In addition, Austria-based OMV, an oil and gas firm, plans to establish gas extraction operations in Nawara, Tunisia. The $685m development will be developed jointly with Tunisia-based Enterprise Tunisienne d’Activites Petrolieres (ETAP). When operational in 2016 the venture is expected to produce 10,000 barrels of oil equivalent per day.
The largest single foreign investment was made by TAV Airports Holding (Turkey) in 2007 with the construction of the Enfidha-Hammamet International Airport (costing EUR550mn) under a 40-year concession. JAL Group, originally part of an Italian-owned group producing safety footwear for export markets, was recently purchased by U.S. investors and, with a staff of over 4,600, is now the largest U.S. employer.
Most FDI-related real estate projects are urban residential and commercial – mostly from GCC countries. In March 2014, the Government of Tunisia (GoT) signed an agreement with Gulf Finance House (Bahrain) for the construction of Tunis Financial Harbour, a mega U$3bn residential and financial project that when completed may create up to 16,000 jobs. The clothing sector, which accounts for almost half of manufacturing jobs in Tunisia, supplies global brands from Adidas to Hugo Boss.
Other principal foreign presence by key sectors includes:
* Telecoms & Electronics: Alcatel-Lucent, Lacroix Electronique, Sagem, Stream, Siemens, Philips, Thomson, Cisco Systems, Hewlett-Packard, Orange, Qatar Telecom (Q-Tel), Kuwait’s Wataniya and Dubai-based TECOM;
* Automotive industry: Lear Corporation, Draxlmaier, Autoliv, Leoni, Valeo, Toyota, General Motors, Tsusho, Pirelli and Johnson Controls;
* Aeronautics: Zodiac Aerospace, Aerolia, Eurocast, Airbus, SEA Latelec;
* Food services & Drink: Coco-Cola, 3 Suisses, Sara Lee and Nestlé);
* Pharmaceuticals & Consumer goods: Sanofi Aventis, Pfizer, Unilever and French multinational retail chain Carrefour.
Tunisia is a signatory to agreements on guaranteeing and protecting investments with several European countries, including the UK. It is also signatory to the Multilateral Investment Guarantee Agency (MIGA), which offers private sector political risk insurance guarantees. Tunisia has signed the World Trade Organisation (WTO) Agreement, bilateral accords with the Member States of the European Free Trade Association (EFTA), bilateral/multilateral agreements with Arab League members and Turkey. The legal system based upon the French Napoleonic code meets EU standards.
Strengthening the Investment Climate
Tunisia’s significant funding requirements, bridging the technological gap and enabling local businesses to become competitive necessitate attracting much higher levels of FDI, reforming its investment code, upgrading physical and financial infrastructures and simplifying complex administrative formalities. Historically, Tunisia has encouraged export oriented FDI in key industrial sectors: light manufacturing, electronics, aerospace, automotive parts.
The Current Investment Code divides inward FDI into two categories:
 Offshore, where foreign capital accounts for 66% of equity and at least 70% of production are destined for export markets (with some exceptions for the agricultural sector);
 Onshore, in which foreign equity is limited to 49% in most non-industrial projects. Onshore industrial investment can have up to 100% foreign equity. Under 1993 Investment Incentives Code, foreign investment that results in equity interest above 50% in certain services sectors is subject to prior authorisation by the Investment Commission.
Micro-policies and efficient institutions are needed to improve and reduce the cost of doing business in Tunisia, which is impacted by burdensome regulations (i.e. red tape). According to the World Bank’s Doing Business Indicators, it takes 93 and 39 days, respectively, to get a construction permit and register a property, while over 50% of sectors in the economy face investment restrictions. Such regulations stifle the private enterprise, cloud the clarity of rules, and hinder new investments and jobs.
According to the OECD FDI Regulatory Restrictiveness Index, Tunisia has a more restrictive regulatory environment for foreign investors compared to OECD and non-OECD averages especially for services sectors. Most of the barriers relate to foreign equity restrictions and prior-approval requirements in key sectors such as retailing and distribution but also agriculture.
Tunisia is updating its framework for concessions and public procurement, developing a law and regulations for Public-Private Partnerships (PPPs) in national infrastructure and preparing new privatisation programmes for cement plants, power generation, telecommunications, water desalination, and building motorways, dams, waste water and solid waste treatment facilities.
The government has also undertaken extensive public consultation on the new Investment Code to replace the 1993 Investment Incentives Code, as well as the law on competition and prices, designed to liberalise product markets and remove discretionary practices. Its clear Parliamentary majority should enable the approval of structural reforms delayed during the transition period, including banking and laws on competition, bankruptcy and PPPs. The goals of new Investment Code (compliance with global standards) include faster job creation, reducing regional economic disparities, and infrastructure development in less-developed west and south-central regions.
The adoption of a new Code would also provide investors with a greater degree of transparency and the opportunity of introducing some long overdue reforms, notably a progressive opening of services markets. That, in turn, would stimulate new sources of inward investments, growth and employment. Recent OECD analysis using the Services Trade Restrictiveness Index (STRI) shows that even modest reforms to liberalise services can offer significant benefits. Depending on the sector, modest reforms can increase exports by 3-7% and lower import prices by as much as 10%.
Compared to peer Arab Maghreb economies, Tunisia has historically integrated well into the global value chains (GVCs), mainly in three sectors: textile/apparel, leather and footwear; food products, beverages, and tobacco; and mechanical, electrical and electronics industries. The greatest evolution took place in the latter, thanks to the development of automotive and aeronautics components, with annual exports rising by an average 18% from 2000 to 2012. The three sub-sectors account for 75% of the country’s exporting firms and more than two-thirds of industrial jobs in Tunisia.
The GVC integration strategy to date has largely relied on progressive trade liberalisation and the creation of a free trade zone with the EU, in addition to decades’ long existence of the ‘offshore regime’ – which provides financial incentives in the form of exemption from corporate tax and import duties on inputs for exporting companies, according to OECD. New activities in the ITC and electronics sectors (such as in aeronautics), have developed recently, but their integration in GVCs trade is limited to subcontracting links with modest added-value for wider economy, while they remain concentrated geographically along the coast, thus reflecting poor infrastructure in inland regions.
Four of the top five main exported intermediate products have remained broadly the same during the past 20 years; the same holds for imports, indicating plenty of scope for improving product diversification. Moving up the ‘value chains’, however, requires further improvements in trade and investment policies, the business climate, logistics, transport and technological transfers.
The challenge for Tunisian firms is climbing up the value added ladder and increasingly become competitive in a high-tech manufacturing industry. There are scopes to divert from a strategy based on insertion into GVCs via an incentive-based system towards engaging in industrial reforms to upgrade Tunisia’s position in GVCs and attract better quality investments, whilst moving from pure ‘sub-contracting’ to ‘co-contracting’ functions.
Business partnerships between foreign firms and local small- and medium enterprises (SMEs) can be further encouraged. The examples of Malaysia illustrate how proactive linkage promotion measures can help domestic firms or suppliers via transfers of skills, know-how and technology – thereby helping to expand a country’s GVC penetration.
The objectives of Tunisia’s industrial strategy are summarised in “Stratégie industrielle nationale à horizon 2016”. The strategy targets a wide range of different groups such as exporters, foreign investors, SMEs, and specific high-value added sectors, using different policy instruments. It identifies textiles, agro-processing, and mechanical, electrical, and electronics industries as priority sectors. It also added two services sectors to this historical list: ITC and business process outsourcing (BPO). The Strategy’s aim is to double exports and move beyond traditional sectors to more sophisticated activities.
Building Pillars of a Strong Economy
A bold developmental agenda is a prerequisite for nurturing knowledge and an intensive and innovation driven economy. To achieve such ambitious goals, however, demands gradual shifting away from state-dominated to private investment and from protected/rent-seeking enterprises to export-led growth and value creation. Deep regional disparities, high unemployment, and a fragile banking sector are key challenges that need addressing.
The Government’s vision is to put the economy on a path of durable growth aimed at reducing unemployment and raising the standard of living, while consolidating the successful and peaceful political transition to democracy. To that end, corrective policies have been adopted in recent months. The key elements of this ‘home-grown’ reform programme are to:
* Build up financial buffers with prudent macroeconomic policies;
* Tackling vulnerabilities in the banking sector through restructuring;
* Improving the investment climate through growth-enhancing reforms (namely, PPPs, competition, taxation and FDI regimes);
* Strengthen social safety nets to protect the vulnerable, whilst improving public service delivery, especially in the rural hinterland which remains underserved both in terms of social and physical infrastructures;
* The far-reaching reform of the educational and training system designed to upgrade skills and create high value added jobs for young people.
An efficient banking system underpinned by strong supervision and open to competition is required to increase access to finance and credit allocation for larger companies and SMEs – engaged in productive activities. The World Bank calculated that improved banking sector performance could increase the level of credit to the private sector by at least 10% of GDP. That, in turn, could generate in excess of $10bn in new investment for re-injection into the economy over the next decade, corresponding roughly to an additional 38,000 extra jobs per year.
Currently, public banks led by the top-three – Société Tunisienne de Banque (STB), Banque Nationale Agricole (BNA) and Banque de l’Habitat (BH) – accounted for 40% of sector assets but had the highest rate of non-performing loans NPLs (i.e. bad debts), at around 30% in mid-2013, compared to a 9% NPL rate in the private sector. Recapitalising these banks and restructuring others (in line with best global practices), setting up an Asset Management Company, a proper bank resolution mechanism and changes in the governance framework, are important steps toward a modern banking system and increasing financial sector intermediation.
Reforms should also focus on boosting competition among banks and upgrading their financial infrastructure, deepening capital markets and developing their investor base, and making available alternative financing instruments, Islamic finance, and microfinance for SMEs – the engine of job creation.The Government plans to issue US$1bn of dollar-denominated Sukuks (Islamic bonds) once the Parliament has ratified a new Sukuks law.
Reviving Tunisia’s growth potential requires re-orienting public spending towards higher capital and social expenditures – coupled with fiscal reforms – specifically broadening the tax base and improving the efficiency of tax collection. The government has also reduced regressive energy subsidies, thus diverting more resources for welfare projects. This was achieved through increased transfers to vulnerable groups and introducing a social electricity tariff that protects householders consuming less than 100 kilowatt hour (KWh). Phasing-out subsidies on energy-intensive industries and raising electricity and fuel prices for industrial users will result in an additional reduction in public spending of 0.5% of GDP in 2015, according to official estimates.
The IMF advised: “Countries in transition need to create efficient social safety nets (SSNs) to protect the vulnerable in cost-effective ways. In transitioning from costly generalised subsidies to targeted forms of social protection, countries should increase their spending on existing safety net programmes and improve their coverage; priorities interventions such as conditional cash transfers that strengthen human capital; invest in SSN infrastructure such as unified registries for beneficiaries; and increase the use of modern targeting techniques.”
The country’s labyrinthine bureaucracy needs streamlining, with a view to making the civil service more efficient and improving the administrative capacity of departments to execute reforms, which is limited in some of them. Besides political constitutional reforms, it is vital to improve the accountability of major state institutions to prevent misuse of power (i.e. the scope for discretion), whilst improving business regulation (i.e. cutting excess red tapes) and reducing the informal sector. Nurturing a skilled workforce demands greater emphasis on science and technology, particularly ICT in higher education, coupled with a strong focus on vocational training schemes.
Deepening trade integration offers significant benefits to Tunisia. Besides hefty gains from external trade and export-orientated FDIs, trade integration serves as a catalyst for business reforms in other areas to help firms compete in global markets. It also opens access to advanced economy markets, but requires reducing further high tariffs and non-tariff trade barriers, whilst focusing on important areas of trade facilitation and export promotion.
Therefore, a sound banking sector, more efficient bureaucracy, a fair tax system, investment-oriented public spending and increased exports as well as a business climate more tune with investor risk-taking and a modern welfare state are all critical for Tunisia’s future prosperity.
Sustained annual GDP growth of about 8-9% is required to make significant inroads into unemployment. Attaining robust expansion demands boosting fixed investment towards the East Asian average of 30% of GDP/year and solid gains in total factor productivity. However, given a modest domestic savings rate, Tunisia’s own resources to undertake huge capital investments need to be supplemented by ongoing external support (including inward investments) to full the annual funding gap. Tunisia has pledges of continued funding from both private and official lenders.
Tunisia’s basic infrastructure compares favourably within the MENA region. In 2013, the transport sector; telecommunication and postal services; and the water, electricity and gas utilities contributed respectively 7.3%, 6.3% and 1.1% to GDP. The country ranks highly in terms of the availability of public services: 99.5% of households have access to electricity and more than 95% to drinking water. However, Tunisia needs further modernisation – notably an improved transport network and better broadband connectivity.
Trade infrastructure, particularly ports, railroads, rural roads has deteriorated in recent years as Tunisia’s ranking dropped from 60th to 118th, spot in the World Bank’s Logistics Performance Index (LPI) between 2007 and 2014 – reflecting lack of maintenance and insufficient capital spending. Moreover, basic infrastructure suffers firstly from geographic imbalances between the coastal regions and the hinterland, which prevents inland regions from fully sharing the benefits of economic growth. The country is also not particularly well connected with its neighbours. The construction of highways and railroads connecting the country with Algeria and Libya has been delayed, hampering intra-Maghreb trade. In addition, the maritime sector faces efficiency and capacity constraints and requires rehabilitation.
Such infrastructure shortfalls pose policy challenges, especially in light of the ambition to upgrade Tunisia in GVCs. “There is a need for a consultative long-term strategy that identifies priority projects and ensures consistency with the overall development model that the country has chosen. This should be backed by a broad and efficient mechanism that involves local authorities and the private sector, and that considers the imperatives of inter-modal infrastructure development. National infrastructure planning should not only aim to expand infrastructure networks and increase private investment in physical capital, but also focus on improving the quality of existing services – notably by enhancing competition and regulation of network industries while improving the governance of state owned enterprises,” noted the OECD in a special publication “Better Policies Series: Tunisia 2015”. Well-designed infrastructure projects create more jobs and spur higher output growth.
Tunisia aims to develop green renewable energy in regions by setting a power generating capacity of 1,000 megawatts (MW) by 2016 and 4,700 MW by 2030 (wind and solar combined). Concurrently, the government has established a legislative framework to incentivise investment in clean energy. The law allows private power production from renewable sources, and offers a range of tax benefits for investors in this sector.
The African Development Bank (AfDB) notes: “Ambitious public investment will help to reduce regional disparities by linking under-served regions, thereby inducing a ripple effect on the private sector so as to stimulate growth while enhancing its inclusiveness. Thus, besides providing support to technological hubs, special attention should be paid to all basic infrastructure assets, be they transport (including rural roads), logistics, telecommunications, education or social services.” In essence, Tunisia needs first-world infrastructure for achieving a more robust, inclusive growth trajectory.
A Promising Future
Tunisia today is at a crossroad pursuing a new development strategy to enable growth ‘take off’ and solid integration in the global economy – representing a radical departure from the rent-prone economic system of the previous ‘Paternalistic State’. The new model aims to eliminate privileges, open up opportunity to all Tunisians, and boost prosperity across the nation by enabling private initiatives and a level playing field for domestic and foreign investors.
Soft policies covering capacity-building, fostering technical and scientific skills, and promoting human capital and research to capital investments in infrastructure (chiefly transport, telecoms, and energy) and prudent macroeconomic policies (openness to trade, competitive exchange rate and fiscal incentives), coupled with supporting business development and harnessing foreign capital are pre-requisites for Tunisia becoming a highly sophisticated economy on a par with peer upper middle-income countries.
“Significant strides toward a more open and fairer society have been achieved since the 2011 revolution, laying the foundations for a new social contract embodied in the new 2014 Constitution. Advances in terms of citizens’ participation and agency, and improved governance in the economy and in the society at large would in fact unleash the potential for higher growth thanks to a more dynamic private sector, higher productivity and innovation and a more efficient public sector, all enhancing human and social capital,” commented the World Bank. The Bank has recently granted US$500mn to Tunisia for maintaining momentum on key ongoing reforms.
Tunisia, the birthplace of the Arab Spring, has inspired to become a role model for stability and democratisation in the Arab World. The international community stands ready to continue assisting Tunisia in its economic transformation – thereby leading to a more productive and vibrant economy and greater opportunities for increased trade and investment in coming years.