Government seeking to promote exports, while a new agreement with the EU is expected to positively impact Tunisian exports

As part of efforts to promote economic development, reduce unemployment and bring down the country’s persistent current account deficit, the authorities are seeking to promote and develop exports. Tunisia’s 2016-20 development plan aims to raise the value of sales of goods abroad to 42% of GDP by 2020.

The government supports exporters through a range of initiatives and organisations, old and new. The Export Development Centre (Centre de Promotion des Exportations, CEPEX), which has been in place for over 40 years, provides firms with facilities such as information on exporting opportunities and procedures, and coaching and sectoral marketing services, as well as organising trade missions abroad. Exporters can also get support from the country’s Export Development Fund (Fonds de Promotion des Exportations), which has been in place since 1985 and works primarily with small firms and artisans that have limited abilities to invest in export development.

Export Support

In December 2015 the authorities launched a new $22m fund to boost exports, the Support Fund for Competitiveness and Export Development (known as TASDIR+). The fund, which will provide support to around 1000 companies over a five-year period, was launched under the rubric of the country’s third Export Development Project, a five-year initiative supported by $50m of World Bank funding that began the previous November.

Riadh Attia, deputy director-general of CEPEX, said the main challenges facing exporters included know-how among companies and financing-related difficulties for small and medium-sized enterprises (SMEs). “We are focusing heavily on building up a culture of exporting among companies and helping their staff to develop competencies in the area, as well as trying to help SMEs to find appropriate solutions to financing difficulties,” he said.

Promising Niches

Attia told OBG that one of the most promising strategies for boosting exports was adding value to traditional exports, such as textiles – by for example focusing more on finished goods and fashion clothing – and agricultural products. “There are good opportunities for exports of bottled olive oil for example, as margins are better than on bulk sales,” he told OBG, adding that the same held true for processed versus raw dates. Currently, around 90% of olive exports are in bulk (see Agriculture chapter). “Organic and halal products also present promising export opportunities for the agricultural sector,” he said. Away from such traditional areas of strength, Tunisia is also developing a range of other industries with strong export potential, including pharmaceuticals and renewable energy products, and CEPEX is also focusing in particular on new high-value-added products and services in the high-tech sphere, seeking to help them access high-potential new markets.

As regards textiles, a 2014 World Bank study notes that while Tunisian exports in the sector have been falling in recent years (in parallel with a wider decline in textile exports throughout the region), the country’s comparative advantage in some segments of the industry such as synthetic fabrics and carpets is growing. The report further argues that while the country faces high competition from Asian textile producers for standardised clothing items, its proximity to Europe could prove a particularly strong advantage should it be able to meet demand for niche and small orders based on frequently changing specifications – though it notes that tariffs on inputs and relatively high sectoral wages represent constraints.

Broadening Markets

The World Bank report notes that Tunisia only exports to a small proportion of the countries that import goods of which it is a significant producer, suggesting substantial opportunities to broaden the country’s export markets. The report notes that sales to the US and regional peers are particularly weak compared to their potential, and that Tunisia “has only started to scratch the surface of the potential for exports” to the EU. The authorities are thus seeking to diversify export markets as well as products, and to expand outbound trade with other EU nations in particular. “Exports to the EU primarily go to France, Italy, Germany and Belgium, so we are trying to increase sales to other markets within the bloc such as the Scandinavian countries,” Attia said. Beyond Europe, the body is focusing on exports to sub-Saharan Africa, and West Africa in particular, while Attia said that countries such as Brazil and Russia also offered opportunities.

Trade Agreements

A potential further boost to trade and investment is in the pipeline in the form of a new agreement under negotiation with the EU, Tunisia’s largest commercial partner. Tunisia in 1995 became the first southern Mediterranean country to sign an association agreement with the EU, which established a free trade zone between the two covering trade in goods (primarily industrial goods). The zone was fully implemented in 2008, when all Tunisian import duties on European industrial goods were eliminated. A so-called privileged partnership was established between the two in 2012, paving the way for the launch in October 2015 of negotiations on a new agreement, the Deep and Comprehensive Trade Agreement (DCFTA). If the agreement goes ahead, it will include further steps to facilitate trade in goods as well as to extend free trade provisions to the services industry and agriculture, improve economic governance in Tunisia and protect and prioritise European investments in the country.

A 2013 assessment of the impact of a DCFTA commissioned by the EU found that the agreement would, in the long term, raise Tunisian GDP levels by around 7%, as well as boost exports by around 20% and imports by a slightly lower 18%, thus helping to reduce the country’s trade deficit. The study found that the agreement would have a positive effect on Tunisian agriculture and on the vegetable oils sector in particular, as well as on manufacturing and especially the production of machinery. However, the study reported a negative effect on sectors including textiles and leather goods and petrochemicals.

Martin Henkelmann, director-general of the German-Tunisian Chamber of Industry and Commerce, noted that an agreement would be a major boost for the economy. “A DCFTA would have a strong positive impact, especially as regards the liberalisation of the services sector, which could allow Tunisia to emerge as a regional services hub,” he told OBG, while adding that implementing any agreement would take time and would need to involve a process to modernise affected parts of the economy before opening them up to competition. The European Parliament, which approved the opening of negotiations between Tunisia and the EU in late February 2016, also called for an “asymmetric and progressive” agreement between the two that takes into account the differences in sector development and size, and provides for transition periods for some sensitive industries while exempting others from the accord entirely.

Concerns Over Terms

While there has been a push by both parties to ensure that any liberalisation happens on equitable terms, concerns have been raised in Tunisia’s press about the impact on local firms. The agreement also faces substantial domestic political opposition, notably from trade unions and other civil society organisations.

The services sector benefits from a number of regulations limiting outside competition, through for example restrictions on foreign ownership of services providers operating in the onshore sector – the World Bank states that “all main areas of services remain closed to investors and protected by restrictive regulations” – and other barriers to entry in the onshore segment, in which the services segment is located. As a consequence, increasing liberalisation in certain service sectors would potentially have a significant impact on the local competitive landscape.

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The Report: Tunisia 2016

Economy chapter from The Report: Tunisia 2016

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