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The Report: Tunisia 2018

Tunisia is working to gradually improve its economic indicators by means of tough yet necessary structural reforms. Although significant strides have been made since 2011, the country continues to face acute macroeconomic imbalances, while coincident reforms have suffered from changing administrations in the years following the revolution, negatively affecting economic growth.

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Sections

  • Country Profile
  • Economy
  • Banking
  • Capital Markets
  • Insurance
  • Transport
  • Energy
  • Construction & Real Estate
  • Telecoms & IT
  • Industry & Retail
  • Tourism
  • Agriculture
  • Health & Education
  • Tax
  • Legal Framework
  • The Guide
  • Table of Contents

Country Profile

Tunisia has a small, principally homogeneous population, emerging from a diverse background of civilisations, which makes the modern population a mix of Arab, Ottoman and Berber, to name but a handful. In 1956, the country gained independence from France and established a constitution modelled on the French system. In 2011, during the Jasmine Revolution, President Zine El Abidine Ben Ali, who ruled from 1987, was ousted. Following the Tunisian revolution, the country has been transitioning into a democracy and adopted a new constitution in January 2014. This chapter contains a viewpoint with President Beji Caid Essebsi; and an interview with Akinwumi Adesina, President, African Development Bank.

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Economy

The country is working to gradually improve its economic indicators by implementing tough, yet necessary, structural reforms. Although significant strides have been made since 2011, Tunisia continues to face acute macroeconomic imbalances. While reform efforts have suffered from changing administrations in the years following the revolution, in 2018 growth is projected to pick up to 3%, according to the IMF, or 2.8% by government estimates. Both are higher than the trend Tunisia has experienced in the years since the 2011 revolution, which have seen average growth of 2% per annum. This chapter contains interviews with Youssef Chahed, Head of Government; and Samir Majoul, President, Tunisian Union of Industry, Trade and Handicrafts.

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Banking

Despite the challenges to Tunisia’s economy, the banking sector has experienced positive growth in recent years. Several risks, however, still threaten the overall health of the sector, including a reduction in available liquidity, low levels of capitalisation and credit risk. In an effort to address these issues, the Central Bank of Tunisia has been implementing significant structural reforms, however, barriers to consolidation may limit activity in the short term. In the longer term, the financial system will be instrumental to diversifying the economy’s sources of funding away from traditional banks, with more inclusive opportunities stemming from the Islamic banking, microfinance and leasing segments. This chapter contains interviews with Chedli Ayari, Former Governor, Central Bank of Tunisia; and Habib Ben Hadj Kouider, Director-General, Banque Nationale Agricole (BNA).

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Capital Markets

While Tunisia has faced weak economic growth and high inflation in recent years, the country’s stock market continued to grow over the 2016-17 period, even though its contribution to private investment financing remains relatively modest compared to that of the banking sector. Measures to deepen the market, however, are under way, aiming to attract an increased number of small and medium-sized enterprises to the bourse, while improving its security and transparency standards to entice further institutional and foreign investors to join the currently retail investor-dominated exchange. With economic growth expected to continue to pick up, market observers are cautiously optimistic regarding the development of the country’s capital markets. This chapter contains interviews with Bilel Sahnoun, CEO, Tunis Stock Exchange; and Walid Saibi, General Manager, Tunisie Valeurs.

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Insurance

Despite relatively low penetration, Tunisia’s insurance sector has been growing steadily, with the rapid expansion of existing segments, such as life insurance, and the development of new ones, like takaful (Islamic insurance) and micro-insurance. Among the factors that should contribute to growth in the future are the General Insurance Committee’s ongoing reforms to the regulatory framework, which aim to support the development of new insurance segments and improve customer care. Efforts to raise profitability by investing in risk-management tools are expected to contribute to better pricing and service quality, both seen as essential for boosting the sector’s appeal and penetration. This chapter contains interviews with Hassène Feki, CEO, STAR Assurances; and Lamia Ben Mahmoud, CEO and Chairman, Tunis Re.

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Transport

Leveraging its geographic positioning at the centre of the Mediterranean, Tunisia’s transport sector has been crucial for the country’s economic progress. Well-connected shipping and air transport lines have proven essential to developing the tourism sector and raising commercial trade levels in international markets. Key industrial segments such as aeronautics, automotive components and agro-industrial processing have been built on the premise of efficient transport networks that interlink the country’s production base with international value-chains, such as those in Europe.

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Energy

Despite its comparably lower volume of hydrocarbons reserves, Tunisia has largely been able to effectively allocate them to meet its development needs. However, as its oil and gas reserves diminish, the long-term energy strategy will increasingly rely on diversified sources. Although an uptake in exploration efforts may yield new exploitable reserves, an acceleration of renewable energy generation will be required to reduce the country’s vulnerability to energy shocks. Equally challenging and necessary will be to continue reducing subsidies and eliminating market distortions. Increasing energy security will likely remain the sector’s primary priority, and drive public and private investment over the medium term. This chapter contains interviews with Nabil Smida, Chairman and CEO, Société Nationale de Distribution des Pétroles AGIL; and Moncef Harrabi, Chairman, Société Tunisienne de l’Electricité et du Gaz.

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Construction & Real Estate

Because of its effects on employment and supply chains, Tunisia’s construction sector has always been a central component of the economy. Despite its importance, however, the challenging macroeconomic environment has had a toll on public and private spending, but a return to more stable levels is expected to come through government-backed infrastructure development plans. While real estate is recognised as one of the most interesting markets in the region due to its stability and development potential, recent years have nonetheless brought some challenges, including regulatory blockage and rising scarcity of land to expand housing options. In hand with this, rising construction costs and the difficulty gauging demand patterns due to uncertainty have somewhat increased risks for real estate developers. Despite these challenges, the sector continues to demonstrate growth potential.

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Telecoms & IT

Following global trends, the Tunisian telecoms industry has continued to move from fixed telephony into mobile, sustained by a rise in data use and the ongoing expansion of smartphone penetration rates. This has opened up the sector to new product development and expansion opportunities, despite the market’s small size relative to some of its regional neighbours. The telecommunications sector is certain to remain fundamentally important to Tunisia’s economic and social development in the years to come. However, the country’s continued sensitive fiscal position – which has pushed the government to look for additional revenue – presents a risk of lowering of the sector’s growth potential over the short-, medium and long term.

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Industry & Retail

Building on years of experience, Tunisian manufacturing capacity has been able to capitalise on the country’s geographic position and track record for quality. This, plus the improvement of transport infrastructure and enacting business-friendly regulations, has encouraged the emergence of a handful of significant industrial subsectors, which have aided in employing a growing number of Tunisians and diversifying the economy. However, Tunisia’s overall business environment has been negatively impacted by the post-revolution climate, with a decline in foreign direct investment. Tunisia’s retail sector has been affected by political instability, falling consumer confidence and currency devaluation in recent years. Still, improving security and the positive performance of international industries that rely on Tunisian suppliers underline the resilience of the local industry and retail sectors. This chapter contains interviews with Slim Feriani, Minister of Industry and Small and Medium-sized Enterprises; and Nabil Chaibi, CEO, Ulysse Hyper Distribution – Carrefour Tunisie.
 

 
 

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Tourism

Building upon its strong performance in 2017, the Tunisian tourism industry is poised to carry on growing both in terms of the number of arrivals and overall revenues. Since ebbing to a low point in 2015, owing to two security incidents, the sector has rebounded to nearly 2014 levels. The government has significantly improved the security situation since 2015, particularly in major tourist destinations. New markets and investors are generating meaningful gains, and both the government and private sector appear committed to the sector’s continued development, solidifying the industry’s position as an integral part of the economic future. The strong performance of the sector in 2017 and early 2018 gives the industry reason to be optimistic. This chapter contains an interview with Ahmed Khalaf, General Manager, Four Seasons Hotel Tunisia.

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Agriculture

Agriculture plays an important role in the Tunisian economy which consists mostly of olive oil, cereals, dates, fruits and vegetables. Together with fishery, it accounted for 9.1% of GDP in 2016, generating €3.1bn. The sector has had to deal with several challenges, including land fragmentation, which contributes to poor access to credit; a considerable technology gap; climatic fluctuation and weak irrigation infrastructure, which has led to low productivity. In the face of increasingly constrained public funding, the government has chosen to lay the groundwork for attracting further private investment to help modernise the sector, with raising access to irrigated water one of the top priorities in the Tunisia 2020 strategy. This will be to the sustainable growth of Tunisia’s agriculture. This chapter contains an interview with Chokri Bayoudh, CEO, Office Nationale de l’Huile d’Olive.

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Health & Education

Investing in Tunisia’s health and education sector has been a major priority for the government. In recent times, Tunisia has witnessed strong improvements in key health outcomes, thanks in part to the provision of health care coverage to the bulk of the population. Also, the private health care industry is growing rapidly, bolstered to some extent by a well-established medical tourism sector. In the education sector, industry figures point to ample room for investment and expansion, provided the country continues to make progress in areas such as gaining international accreditation for local institutions and improving transport links with promising source markets. This chapter contains an interview with Hatem Ben Salem, Minister of Education.

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Tax

In conjunction with KPMG, this chapter explores the taxation system and Tunisia’s efforts to build an investor-friendly environment. It also contains a viewpoint with Moncef Boussannouga Zammouri, Managing Partner, KPMG.

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Legal Framework

This chapter introduces the reader to the different aspects of the legal system in Tunisia, in partnership with Meziou Knani & Khlif. It also contains a viewpoint with Ghazi Meziou, Associate Lawyer, Meziou Knani & Khlif.

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The Guide

This section includes information on hotels, government offices and other listings, alongside useful tips for visitors on topics like currency, visas, language, communications, dress code, business hours and electricity.

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Table of Contents

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