Energy, textiles, clothing, cement works. Foreign businesses from all these sectors have increased their investment in Tunisia over the last few years thanks to political stability and a more open economic and financial stance in the country. In a study for Femise, economist Sonia Seghir looks at what lies behind this success.Energy, textiles, clothing, cement works. Foreign businesses from all these sectors have increased their investment in Tunisia over the last few years thanks to political stability and a more open economic and financial stance in the country. In a study for Femise, economist Sonia Seghir looks at what lies behind this success.
Now an open market, Tunisia saw foreign direct investment (FDI) increase from TND 402.9m in 1997 to TND 1,015.7m in 2005.
“Low cost of labour is key to FDI, but it is losing its importance because the technological revolution is gradually taking hold in traditional business sectors. In addition, the Tunisian economy faces stiff competition in terms of labour cost from Morocco, Egypt, Turkey and Portugal,” explains Samia Seghir in a Femise report entitled “Les boucles d’investissement intérieur – Investissement étranger et la croissance des pays Méditerranéens” [“The links between domestic and foreign investment and the growth of Mediterranean countries”]. In the report, Ms Seghir looks closely at changes in the textiles and clothing sectors.
Simple Centralised Administrative Procedure
Both tourists and the major multinational companies are attracted by social and political stability as well as by a business environment that has been enhanced by various reforms, including privatisation.
The state’s withdrawal from industrial and major infrastructure sectors opened the way for foreign investment in cement works, electricity production, water desalination plant construction, motorways, banks, solid and liquid waste treatment, telecoms, etc.
As well as fairly simple centralised administrative procedures, foreign investment is encouraged by tax breaks. And then there is the qualified workforce, access to the Euro-Mediterranean market and credit lines from the European Investment Bank.
With so much going for it, Tunisia is attracting the French, Italians, Germans, British, Spanish and Americans, and, increasingly, new nationalities as well.
At the end of 2005, there was foreign investment in 2,703 companies in Tunisia, representing 259,842 jobs.
FDI in Tunisia accounts for 10% of the country’s production investment and generates a third of exports and one sixth of jobs. Ms Seghir, however, issues a note of caution: “Relying on privatisation to stimulate foreign investment could be a limited strategy.” The economist continues: “Companies put forward for privatisation are unlikely to bring in vast sums of money because they are fairly small and there aren’t many of them.”
The FEM31-20 report is available on the FEMISE website.
Photo by NBC, Econostrum.
Article by Nathalie Bureau du Colombier, Econostrum. It belongs to a series of articles published in the context of the partnership between Econostrum and Femise for the year 2010. These articles also feed the “Grand Angle” part of the Econostrum Website. You can find this topic and all information at the following address: www.econostrum.info. Registration for the Econostrum newsletter is available here:http://www.econostrum.info/subscription/