Tunisia: the next five years

Five years ago, Tunisia suffered from rising unemployment, stagnant economic growth, and dwindling foreign exchange reserves. Thanks to economic reforms put into effect during the seventh economic plan period (1987-91), the health of the Tunisian economy has improved dramatically.

In spite of two years of drought and economic jitters caused by the Gulf War, the economy has grown at an annual average rate of 4.2 percent, exports have expanded over 10 percent per year, and inflation has been held to about 7.5 percent per year on average. The Tunisian government's recently approved eighth economic plan (1992-96) calls for a shift in priorities from exportled growth to growth paced by private investment, domestic consumption, and exports, in an effort to transmit some of the gains made over the past five years into tangible benefits for the average Tunisian.

The main objectives of the eighth five-year economic plan include reducing unemployment from 15 to 13 percent, allowing domestic demand to increase, reducing the inflation rate from 8 percent in 1991 to 5 percent in 1996, and achieving an average of 6 percent real annual growth in gross domestic product (GDP). Other major goals are attracting more direct investment, making the Tunisian dinar convertible, and making the Tunisian economy more market oriented.

The reform process, begun under the seventh plan, will continue with further lifting of restrictions on imports and price liberation. Currently, 48 percent of products sold at the retail level are subject to price controls; during the eighth plan, this number will be reduced to 5 percent. The privatization program will also remain in place and several government-owned companies will be sold.

The largest increase in government spending under the economic plan is in the telecommunications sector. The plan calls for up to $188 million in government investment in 1992 alone. The government expects to increase phone lines from somewhat over 350,000 to 800,000 by 1996, including expanding service into rural areas. The government will also spend $110 million on cleaning up the Mediterranean and building waste water purification plants along the coast as part of a long-term environment protection project.

The service sector and the industrial manufacturing sector will be the engines that propel economic growth in the 1990s. Under the plan, the government will continue to offer incentives, including tax holidays and import duty exemptions on raw materials, to investors who establish export-oriented manufacturing facilities. The government is focusing on attracting investors interested in manufacturing such products as electronics, including consumer electronics and computers and computer equipment, such as circuit boards; software, especially French and Arabic language software; medical supplies and pharmaceuticals; spices, canned fruits, vegetables, and seafood; and telecommunications equipment. Other promising sectors for foreign investment over the next five years include tourism, agriculture, textiles, food processing for export, and packaging.

Tunisia markets itself as a platform for export to the lucrative European market, where most Tunisian products enjoy preferential access. The United States and Tunisia have negotiated a bilateral investment treaty, with provisions safeguarding investment and profit repatriation. Tunisia is placing a particular emphasis on attracting more American companies and investors and American goods and services enjoy an excellent reputation.

There are opportunities for growth in U.S. exports to Tunisia over the next few years in several areas, including: parts for oil and gas field equipment, a market which could total $50 million in 1992-93; parts for airplanes (Tunis Air concluded negotiations in December 1991 for the purchase of three more Boeing 737-500s, bringing the total to five Boeing aircraft scheduled for delivery between 1992 and 1996) and airport equipment; defense equipment; cellular telephone equipment (a market in its infancy in Tunisia) and other telecommunications equipment; packaging machinery and equipment; miscellaneous machines and mechanical appliances used in the textile and tourism industry; water well drilling and irrigation equipment; and environmental controls, apparatus, and services (a new sector in Tunisia with a $300 million government spending plan over five years).

In May 1992, the Overseas Private Investment Corporation (OPIC) and the Agency for International Development organized a successful investment mission to Tunisia. It was the first time a large group of American business executives had traveled to Tunisia to take a hard look at investment opportunities. Most of the participants said they were not sure what to expect. Most of the 14 participating firms said the mission exceeded their expectations. OPIC reports five firms indicated they will return to Tunis to pursue investment projects.

For American firms with long-term plans and the patience and persistence to learn about the Tunisian marketplace it may be time to look closer at the opportunities that Tunisia has to offer. The recently opened Washington, D.C., office of the Tunisian Agency for Promotion of Industry and the Tunisian National Olive Oil Office is providing information to U.S. firms about opportunities in Tunisia and is matching Tunisian opportunities to U.S. companies. The Agency can be contacted at (202) 223-8580. OPIC is planning to host a Tunisian delegation of private sector industrialists and government representatives who will visit the United States to present specific investment opportunities for American firms in Tunisia. This "reverse investment mission" is tentatively scheduled for February 1993. U.S. firms interested in attending should contact OPIC at (202) 336-8630. The Commerce desk officers for Tunisia can be contacted at (202) 482-1860 or (202) 482-4441.

COPYRIGHT 1992 U.S. Government Printing Office
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