The Report: Tunisia 2017

Economy

Tunisia’s economy has been buffeted in previous years by the fallout from factors such as domestic and regional political and security instability, and the eurozone slowdown. While a strong recovery has yet to materialise, growth prospects have been ticking upward over the past 12 months and, with a successful political transition now behind it, the country has a strong base from which to boost output and revenues. Equally importantly, Tunisia is seeing improvements in export competitiveness and the trade deficit. To help encourage this trend further, the authorities are implementing a range of economic reforms and initiatives, such as a new investment law passed in September 2016 that should help raise the pace of economic expansion in coming years.

This chapter contains interviews with Lamia Boujnah Zribi, Former Minister of Finance; Mohamed Fadhel Abdelkefi, Minister of Development, Investment and International Cooperation; Boutheina Ben Yaghlane Ben Slimane, General Manager, Caisse des Dépôts et Consignations; and Noureddine Taboubi, Secretary-General, Tunisian General Labour Union.

Banking

The banking sector in Tunisia has benefitted from a history of relative stability, thanks to a steady hand from the regulator, a focus on banking fundamentals and a comparatively high level of sophistication, particularly in terms of services like leasing. In 2016 several indicators continued to rise, including assets and lending. However, creeping weaknesses, in terms of both public sector institutions and competition, have become more prevalent and are prompting a period of change. The industry, which is currently facing a tight liquidity environment, is also widely thought to be ripe for consolidation, though new players continue to enter the market, attracted in part by the limited level of financial inclusion, which points to extensive greenfield opportunities. Changes such as the recent recapitalisation and restructuring of the country’s public banks, and plans to move the sector towards Basel III norms by 2020 should all help reinforce the stability of the banking system in the years ahead.

This chapter contains interviews with Chedly Ayari, Governor, Central Bank of Tunisia; and Ahmed El Karm, President, Tunisian Professional Association of Banks and Financial Institutions.

Capital Markets

Tunisia’s stock market has seen steady growth in capitalisation in recent years, and while the number of initial public offerings (IPOs) was limited in 2016, the exchange registered a positive performance over the year due to strong results in the industrial, consumer goods and financial sectors. The near-term outlook appears equally encouraging, with several IPOs in the pipeline. The bourse is looking to accelerate that momentum by bringing in new products and calling for supportive measures from the government to further raise its level of development. The extent of economic growth, successful efforts to attract increased financing and investment, and whether or not the government goes ahead with previously suggested listings of major state-owned firms will strongly influence market performance and development going forward.

Insurance

As one of the most developed markets in North Africa, Tunisia’s insurance sector has seen a steady increase in premiums and penetration in recent years, with life and medical insurance segments in particular experiencing notable growth. On the back of this momentum, the market is turning to diversified insurance products to further increase penetration and profitability. Segments including life insurance, bancassurance, micro-insurance and takaful (Islamic insurance) are all expected to grow rapidly in coming years. Growth in such product lines will help boost overall penetration, but the extent to which the wider sector grows and penetration levels rise will depend in part on trends in investment and the wider economic situation. Efforts to stimulate countrywide investment through measures such as the revised investment code are encouraging in this respect.

This chapter contains an interview with Nejla Harrouch, General Manager, Assurances BIAT.

Industry & Retail

Since the 1970s Tunisia has opted for an economic model geared toward exports and industrialisation, sustained by the implementation of investor-friendly legislation, as well as supportive public investment in infrastructure and human capital. The approach has been successful for decades, with manufacturing forming the basis of GDP growth over the last 40 years. However, manufacturing industries experienced a dip in production during the post-revolution years as a result of broader instability, more frequent labour disputes, a slowing of capital spending and heightened international competition. The challenges are far from minor and, in the broader context of the macroeconomic slowdown, industrial producers have some way to go. However, as a whole, the economy benefits from some encouraging fundamental traits, and growth in Tunisia is projected to improve in 2017 and 2018 on the back of new capital spending on transport infrastructure and a new law governing investment, which came into force in 2017, and which is expected to shore up investor confidence and stimulate activity. As in other North African markets, the Tunisian retail sector has been predominantly controlled by a myriad of small shops. However, modern distribution channels have gradually emerged over the past 15 years with the expansion of international supermarket chains and franchises across the country. Despite some economic downturn, the modern distribution sector has continued to thrive, with the expansion of international franchising and supermarket brands, and the proliferation of large retail outlets. During the next few years the sector is expected to keep posting strong growth, driven by a growing population and rising purchasing power. However, from a purchasing power standpoint, retail performance will also be reliant on the country’s capacity to attract foreign tourists, boost the economy and create jobs.

This chapter contains an interview with Habib Fekih, President, Airbus Africa and Middle East.

Telecoms & IT

The Tunisian telecommunications market is seeing large increases in mobile phone plans over fixed-line subscriptions, as smartphones continue to offer voice-over-IP services and messaging applications that enable consumers to call and text via mobile internet. Though the sector has been liberalised for many years, Tunisie Telecom remains the dominant operator; however, competing operators Ooredoo Tunisie and Orange Tunisie have gained market share in recent years. The determining element that sets operators apart will now likely be the speed with which they roll out their 4G coverage nationwide. With the progressive deployment of 4G services, as well as the expected arrival of Virgin Mobile to the market and the growing presence of Lycamobile, it is likely that competition for users will grow even fiercer. Over the years Tunisia has become a regional hub for ICT thanks to a strong array of comparative advantages: a well-educated and competitive IT workforce, relatively low operating costs, close proximity to Europe, and a strong network of IT and telecoms infrastructure. With the country facing increasing competition from neighbouring Morocco and more anglophone-focused markets due to growing demand for English in offshoring activities, the Tunisian government is looking to implement policies designed to cement its population as a competitive and attractive IT-oriented market. However, obstacles to the sector’s growth remain. In order for Tunisia’s IT sector to unlock its full potential, the public and private sectors must work together to upgrade existing technoparks and IT infrastructure, as well as open additional digital centres to enable young entrepreneurs to create.

This chapter contains an interview with Nizar Bouguila, CEO, Tunisie Telecom.

Tourism

The previous years have been marked by highs and lows for many countries in the MENA region. The Tunisian tourism industry, however, has begun showing small signs of recovery following a sharp drop in international arrivals in the aftermath of two acts of terrorism. The Tunisian government and tourism industry actors have been working to capitalise on a renewed sense of stability by tapping into new markets, as well as reconceiving the way Tunisia approaches tourism. Beyond the traditional mass-market segment, the country is looking to diversify its selection by offering luxury accommodation, attracting major international hotel brands, expanding its medical tourism offering and developing alternative forms of tourism, such as bed and breakfasts and vacation rental home options. These attempts have begun to show results. The combination of new markets, new tourism offerings and new investors is beginning to lay the foundations for positive development in the next few years.

This chapter contains interviews with Salma Elloumi Rekik, Minister of Tourism and Handicrafts; and Amine Moukarzel, President, Golden Tulip Hotels and Resorts, MENA Region.

Energy

While Tunisia has far fewer oil and gas reserves than its neighbours, it was not until the late 1990s and early 2000s that the country’s demand began surpassing domestic production. It was then that Tunisia became dependent on foreign energy imports, and began diversifying its energy mix through renewables and efficiency campaigns to curb consumption. Local authorities are now looking to revise Tunisia’s hydrocarbons code and further promote foreign investment in the country’s relatively small oil and gas industry, especially given the low lifting and breakeven costs. Nevertheless, developing local energy production through renewables and domestic oil and gas requires a number of reforms that have proven challenging to implement against the backdrop of post-revolutionary governmental and economic uncertainties.

This chapter contains an interview with Saïd Mazigh, General Manager, Carthage Power Company.

Transport

The transport sector has long played a key role in Tunisia’s development given the country’s focus on exports and tourism. A combination of low logistical costs and proximity to European markets helped it attract visitors and export everything from olive oil to airplane components. As part of the Tunisia 2020 strategy, the government has been looking to regain logistical competitiveness and appears to be on track to do so, with private investors pledging approximately $15bn in infrastructure investments during the November 2016 Tunisia 2020 Conference. However, following through with the development strategy will depend on the government’s ability to attract further foreign investment, improve the business climate and channel the social aims of trade unions. The transport sector is crucial for Tunisia to restore confidence, recover its role as an industrial workshop for Europe, and convert itself into a key logistics hub between Europe and Africa.

This chapter contains interviews with Anis Ghedira, Minister of Transport; and Anis Riahi, General Manager, Express Air Cargo.

Construction & Real Estate

The construction sector in Tunisia is at the beginning of what may prove to be a long-lasting recovery. In the aftermath of the 2011 revolution, contractors saw a slowdown in activity as a result of lower public investment levels, sluggish growth in the property sector and broader macroeconomic instability. However, an increase in donor-backed transport infrastructure projects and the recent announcement of Tunisia 2020 – a $60bn all-encompassing capital development programme – is painting a more optimistic picture. Although activity has been subdued in recent years, Tunisia’s construction sector is poised to rebound, with growth forecast to reach 1.54% in real terms in the 2016-20 period. Driven by fast-paced urbanisation and strong population growth, the Tunisian housing sector has expanded rapidly over the past decade. While the government continues to have a strong presence, the private sector has become the largest source of residential and non-residential development. Albeit one of the most solid in the region, Tunisia’s housing market has nonetheless been grappling with several challenges in recent years, including rising costs, land and labour shortages, and administrative bottlenecks. With construction costs outstripping property price ceilings for social housing units, most developers are catering to the mid- to higher-range segments. However, authorities are keen to re-energise the social housing segment with the introduction of new tenders.

This, in addition to the implementation of the Tunisia 2020 strategy, which prioritises the sector, could see an increase in activity in the country’s real estate sector in 2017. This chapter contains an interview with Ahmed Bouzguenda, General Manager, Société Bouzguenda Frères.

Agriculture

Although its share in Tunisia’s economy has declined over the past few decades, agriculture contributes 9% of GDP, employs 16% of the workforce, and accounts for 9% of investments and exports. During the post-revolution years, the sector has appeared as one of the most resilient of the economy. It has experienced double-digit investment growth, and is expected to boost value added in strategic segments such as cereals and olive oil. The growth of the agriculture sector, however, will largely depend on the government’s ability to prepare for a series of upcoming challenges, including droughts brought on by climate change, farmers’ growing debt loads and land fragmentation. The country’s capacity to accelerate the development of new agri-business subsectors, such as bottled olive oil and processed dates and vegetables, is also key.

This chapter contains an interview with Abdelmajid Ezzar, President, Tunisian Union of Agriculture and Fisheries.

Health & Education

Health care has been a national priority for the Tunisian government since the country gained independence from France in 1956. A focus of continued investment, the health care sector has since seen the development of a nationwide network of public hospitals and health centres, with the country quickly becoming a model in North Africa. The combination of private sector investment and public sector reforms positions the sector for continued growth. In recent years, private health care has taken the lead in terms of investment, with the construction of a number of new health clinics. This development is set to help the country to solidify its position as a regional medical tourism destination. In the decades following independence, Tunisia was among the countries with the highest investment in education in the region. This enabled it to introduce important legal changes, such as compulsory basic education, which led to high enrolment and literacy rates. However, in the face of deteriorating quality standards and high unemployment rates among young graduates, authorities are now looking to overhaul the education and vocational training system with a series of upcoming reform measures that could significantly reshape the face of Tunisia’s education system in the coming years.

This chapter contains an interview with Tahar Ben Lakhdar, Co-founder and CEO, Esprit.

Tax

This chapter contains an overview of Tunisia’s taxation system and examines the country’s efforts to encourage growth via prudent fiscal policy, including through a new investment framework, which offers improved incentives and guarantees.

This chapter contains a viewpoint from Moncef Boussannouga Zammouri, Managing Partner, KPMG.

Legal Framework

This chapter contains a breakdown of the most recent legal reforms and changes in Tunisia, including an overview of the new finance law.

This chapter contains a viewpoint from Ghazi Meziou, Associate Lawyer, Meziou Knani & Khlif.

The Guide

The guide contains listings of some of Tunisia’s leading hotels and contacts for important government offices and services, alongside useful tips for visitors on topics such as visas, business hours, and language and culture.

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