The healthy bilateral relations between the UK and Tunisia were reinforced by the recent visit of Michael Savory, the lord mayor of the City of London. The three-day work trip from February 17-20 aimed to promote British interests already in Tunisia and encourage further investment. With the UK still a major investor in Tunisia, both countries were keen to build upon existing ties and look towards the future.
This latest Tunisian-British meeting comes less than a month after Baroness Symons, the British Secretary of State for North Africa and the Middle East, spent two days in Tunis during a tour of the region. It also reflects the mounting interest which western European investors are showing in the Tunisian market.
Tunisia must raise its image in order to attract British investors,” Savory told an economic debate jointly organised by the Tunisian Union of Industry, Commerce and Craft (UTICA) together with the Tunisian-British Chamber of Commerce and Industry (CCITB) on February 18. He identified several key investment attractions, including tourism, infrastructure and health, whilst explaining to both groups that it was their task to “make known the advantages of Tunisia as an investment centre – the incentives, the transparency of the legal system, as well as investment opportunities and the success of British firms already established in Tunisia.”
The conference was co-presided by Alan Goulty, the UK ambassador to Tunisia, who also pointed out niche areas to be exploited by investors. These included Saharan and cultural tourism, golf, as well as health infrastructure and ecology. Given that numbers of British tourists visiting Tunisia in 2004 were up 35% on 2003, to a total of more than 300,000 visitors, this is certainly one area with scope – and need – for growth.
The British party also included a senior business delegation from the City of London – one of the most important financial hubs in the world – who talked to local business and trade figures about opening up the financial services sector. Although this a relatively unexplored area by foreign investors, other British interests in Tunisia are already considerable.
Packing by far the heaviest Anglo-Saxon punch is British Gas (BG), the largest single overseas investor in Tunisia. It employs over 900 people in natural gas fields off the Tunisian coastline, where it has been operating for more than 10 years, and holds other permits for future exploration. BG’s Miskar field currently supplies over half of Tunisia’s domestic demand and the multinational is due to bring a new 500-MW power plant online in 2006.
But aside from energy, other sectors of the economy have their work cut out if they are to attract British and wider foreign investments. The image of Tunisia with many London-based firms, Savory pointed out, is one of a stable country with plenty of promise, but which needs an accelerated level of privatisation in order to attract more interest.
Although levels of foreign direct investment (FDI) are reasonable, averaging out over the last few years at 2.2% of GDP, many experts agree that investment in Tunisia is far less significant than it could be. Many of the eastern European countries newly admitted to the EU, for instance, have managed to rake in far more foreign investment – up to 5% of GDP in some cases.
One of Tunisia’s disadvantages is the high level of public debt, estimated at a rather off-putting 60% of GDP. A further problem is that privatisation, begun in 1987, has been a halting process. Sales to private companies, for instance in the telecoms sector, have been limited. In Europe – to which Tunisia often likes to compare itself – telecoms are a highly competitive market, with at least three or four major players jostling for position. In Tunisia, though, consumers can choose only between the state-owned mobile network, Tunisie Telecom, and one private competitor, Tunisiana. Fixed-line telephony is still a state monopoly.
The state has not been completely lax in attracting FDI, however, and sugary incentives for foreign investors do exist. Amongst these are generous tax breaks for income derived from exports, whilst offshore companies – defined as firms with at least 66% foreign ownership and 80% export-directed production – enjoy zero customs duty on imports of capital goods, raw materials and semi-finished products. State subsidies exist for firms investing in less favoured zones such as arid areas or non-coastal regions, whilst Tunisia’s skilled workforce, geographical handiness and political stability are also a carrot for potential investors.
Two further, more specific proposals were made at the conference. Hedi Djilani, the president of the UTICA, is firstly pushing to set up an Anglo-Tunisian economic forum which would bring together Tunisian business heads and British investors. The idea is that Tunisia could also be used as a springboard for investment from wealthy European firms into other North African countries.
Second, Djilani is keen to seduce Gulf financiers into investing in Tunisia’s hotel and real estate market – a vital component of the country’s infrastructure if tourism is to develop still further. Linked to this is a plan to ship in British expertise to manage and further the country’s tourist industry, which is currently recovering from several gloomy years. Given that Tunisia is still a relatively unknown country for Britons holidaying abroad, any chance to raise the country’s profile should be grasped with both hands.
In all, the continued good relations between the UK and Tunisia are evidence of the importance that both countries attach to their mutual trade. As this latest visit highlighted, though, Tunisia needs to be even more proactive if it wants to pull in FDI not only from the UK, but from other trading partners too. Most foreign investors would doubtless agree that one of the best ways of achieving this is to accelerate privatisation across the entire economy.
Source: Oxford Business Group
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