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 the country attract visitors and export everything from olive oil to airplane components. Foreign tourist inflows increased 23.6% in the first two months of 2017, while exports were up 4.7% in the same period. In total, the transport sector drew in €2bn in 2016, accounting for about 5% of Tunisia’s €40.5bn in GDP. The sector also employed some 160,000 workers.
However, Tunisia’s logistical competitiveness has gradually deteriorated since the mid-2000s as a result of ageing infrastructure, a lack of investments and a rising number of social and administrative bottlenecks. The country saw its position downgraded from the 61st to the 110th place in the World Bank logistics performance index between 2010 and 2016, though the bank awarded the country a weighted score of 93 when taking into account its overall performance.
Still, the declining score is the result of the constrained ability of the government to fund new infrastructure projects in recent years, on the back of slow growth in export revenues. To tackle this problem, in 2015 the government announced the ambitious Tunisia 2020 five-year development plan, worth $60bn and aimed at reinforcing transport infrastructure, levelling out regional disparities and laying the groundwork for more inclusive economic growth. The plan outlines more than 50 major infrastructure projects for the rail, aviation, maritime and road segments, and relies on an increased role for the private sector – a distinct change from past policy, which has resulted in state-owned entities accounting for roughly 70% of sector ownership. Indeed, 40 of the plan’s projects have been designated as public-private partnerships (PPPs). In November 2016 the government organised the Tunisia 2020 Conference with the aim of procuring financing from international financial institutions and foreign investors. More than TD30bn (€12.9bn) was raised for selected infrastructure projects, including TD5.4bn (€2.3bn) from the French Development Agency, TD3bn (€1.3bn) from the Arab Fund for Social and Economic Development, TD1.55bn (€66.5m) from Saudi Arabia and TD500m (€214m) from the EU.
While Tunisia has increased its integration in the global economy over the two past decades, with its share of exports to GDP rising from 33% in the early 1990s to 50% in 2016, the country has seen a decline in its logistical competitiveness. As a whole, logistical costs accounted for 20% of GDP in 2016, as compared with just 12% in 2010 – a similar rate to that of Morocco, but higher than in most emerging economies (15%) and industrialised nations (10%). According to the World Bank, in addition to infrastructure upgrades, Tunisia’s logistical supply chain would be bolstered by increasing storage capacities and road haulage.
As well as large-scale infrastructure needs, modernisation of logistics services would also support growth. Moez Chakchouk, chairman and CEO of La Poste Tunisienne, told OBG, “Better use of e-commerce and IT applications would significantly reduce export costs, especially for smaller businesses.”
As elsewhere in the region, freight by road accounts for the bulk of cargo transport, with a share of 85%, prompting authorities to systematically prioritise road infrastructure to boost connectivity. However, road transport has been structurally affected by deep fragmentation and poor performance of the road haulier subsector, characterised by a limited service supply, predominance of the informal sector and a low level of investment. For example, the sector offers very little refrigerated transport service or courier services. As a result, half of industrial companies assume their own transportation operations, encouraged by a system of tax cuts for vehicles they transfer to subsidiaries. Tunisia also suffers from a shortage of adequate storage infrastructure, but the government has proposed PPP projects to develop logistical zones in Zaghouan, Zarzis, Ghannouch and Radès that will produce new warehousing areas, totalling 380 ha.
Tunisia boasts a dense road network by regional standards, with 419 km of highways and 20,000 km of roads. The sector is managed by Tunisie Autoroutes, a state-owned concessionary company in charge of the construction and maintenance of the whole network. The existing highway system includes a 51-km section between Tunis and Bizerte (A4), a 67-km section between Tunis and Oued Zarga (A3) and a 247-km section between Tunis and Sfax, each equipped with a toll system, with the tolls going back to Tunisie Autoroutes. Another 54-km section between Oued Zarga and Boussalem was completed in November 2016, for TD430m (€184m). Several other sections are also under construction, including a 140-km extension of the highway between Sfax and Gabès – which was nearing completion in early 2017 – and a TD817m (€350m) 84-km section from Gabès to Ras-Jedir at the Libyan border, part of the Trans-Maghreb highway, a corridor that is to connect Morocco to Libya over an 800-km route.
Nor are those the only projects under way. The Tunisia 2020 development plan set a target of 1000 km of highways by 2020, which means over a third remains to be built. The strategy envisages the development of, among others, a highway section between Bousalem and Jendouba to reinforce road connections with Algeria, a 100-km highway section between Le Kef and the A3 as well as an 188-km highway section between Tunis and Jelma. This latter constitutes the first phase of a larger $570m road development plan aimed at connecting Kairouan, Sidi Bouzid, Kasserine, Gafsa to Tunis.
In recent years, authorities have also been looking to upgrade the primary and secondary road networks. The Ministry of Equipment, Housing and Territory Planning has recently invested TD530m (€227m) for the doubling of a 60-km road section between Siliana and El Fahs and a 55-km route between Kairouan and Sousse. As part of Tunisia 2020, authorities are looking to further upgrade its road network, with plans to double all expressways between the western governorates (Kasserine, Sidi Bouzid and Gafsa) and the coastal governorates (Sfax and Gabès) and refurbish 1450 km of rural roads for $570m and $225m, respectively.
However, much of the recent work is focused on rehabilitation and maintenance of existing routes, with financing supported by donor institutions. In 2016 the African Development Bank granted a $210m loan to support the implementation of Tunisia’s Road Infrastructure Modernisation Project, a plan aimed at rehabilitating 719 km of roads in the country’s west, centre-west and north-west governorates as well as ensuring periodic maintenance of 2500 km of roads. In addition, the European Investment Bank granted a €150m loan to upgrade large stretches of roadways south of Greater Tunis and build new roadways in remote regions such as Sfax or Nabeul.
Given its importance in supporting tourism as the country’s primary foreign exchange earner, it is unsurprising that the aviation segment also plays an important role in Tunisia’s economy, accounting for 2% of GDP and around two-thirds of tourist arriv-als. Tunisia’s air transport infrastructure consists of nine international airports: Tunis-Carthage, SfaxThyna, Enfidha-Hammamet, Gafsa-Ksar, Tabarka-Aïn Draham, Tozeur-Nafta, Gabès-Matmata, Monastir Habib Bourguiba and Djerba-Zarzis. All are managed by the state-owned Office of Civil Aviation and Airports (Office de l’aviation civile et des aéroports, OACA), with the exception of Monastir Habib Bourguiba and Enfidha-Hammamet, which are managed under concession by Turkey’s TAV Airport Holding.
Traffic at the nation’s airports has been on a downward trend in recent years, as a result of political uncertainty, which was exacerbated by a broader economic slowdown and regional volatility. This has caused total visitor numbers to decline steadily. In 2015 there were a total of 7.2m passengers compared to 10.7m who came to the county in 2014.
With the economic outlook brightening and the country’s security situation improving, passenger traffic on airlines began to steadily increase in the first half of 2016. While full-year statistics were not available as of early 2017, the figures indicate the segment could be turning around. For example, Tunisair, the nation’s flagship carrier, saw traffic rise 7.5% for the first eight months of 2016. Thought it is just one data point, the positive move may indicate that the declines experienced by the industry have bottomed out and are set to begin an upward trend. With plans for Open Sky agreements being considered, the future of the segment is looking brighter.
The air market has not been liberalised, which is common within the region (though it does lag behind tourism destinations like Morocco). However, this may be set to change in the near future. Following several years of negotiations, an Open Sky agreement with the EU is expected to be signed mid-2017. As it stands, the deal would include all airports except for Tunis-Carthage, which would be liberalised in 2019 as part of the same plan, in order to give national carrier Tunisair time to restructure.
Tunisair has grappled with competitiveness issues in recent years. After experiencing a 25% drop in travellers and a similar decline in revenues in 2015, the carrier’s management rolled out a large-scale restructuring plan to reverse the decline. The first phase of the programme had a number of targets, including increasing the fleet’s daily operating times from six to 10 hours, reducing the wage bill by TD130m (€56m) with the voluntary departure of 400 employees and improving staff productivity via training programmes. Another key pillar of the airline’s strategy is to capitalise on increased interest in nearby – and faster-growing – economies, by establishing itself as a regional air hub between Africa, the US and Europe. The strategy pits it against other carriers such as Royal Air Maroc, Turkish Airlines and Egypt Air, but has positively affected Tunisair’s routes and flight frequency. In 2016 it inaugurated new routes to Montreal and Niamey and plans to connect to Conakry, N’Djamena and Douala, as well as the Libyan market.
Tunisair was not the only local carrier to embark on an expansionary campaign. Local private airline Nouvelair recently inaugurated a new route from Tunis to Algiers, benefitting from a 2015 memorandum of understanding signed between Algeria and Tunisia in 2015 to increase air connectivity. The company has plans to open new routes to Oran, Setif and El Oued, which should help air traffic between the two countries to increase to 2m passengers in 2017, up from 1.5m passengers annually previously.
As part of its 2016-20 development strategy, OACA is planning to invest approximately TD1bn (€400m) to upgrade Tunisia’s air infrastructure. Aside from some refurbishment work on airstrips at Djerba and Gafsa’s airports, most of the investment will be directed toward upgrading the 830-ha Tunis-Carthage airport and bringing it into conformity with international standards. Estimated to cost TD700m (€300m), the project is intended to increase the airport’s capacity from 5m to 10m passengers per year, via the development of a new terminal fully dedicated to Tunisair. There have also been proposals by the government for an airport in Bouhnach, about 25 km from Tunis and connected to the Tunis-Medjez El Bab highway. According to OACA’s estimates, the construction of this new airport would cost nearly $1bn and could take between seven and 10 years to be completed.
As is the case in many of the MENA region’s markets, the bulk of freight is transported internally by road and externally by ship. Air freight accounts for only 3% of total cargo transportation, however, the air cargo market has seen double-digit growth over the past three years. Express Air Cargo, a new Tunisian firm started activities in November 2016, operated its maiden flight from Tunis to Paris in February 2017. Express Air Cargo will operate its fleet of 10 aircraft from hubs in Tunis and Enfidha, along with facilities in Paris and Casablanca by 2018.
Given that 96% of Tunisia’s foreign trade is conducted by sea, Tunisia boasts a substantial port infrastructure, with a total of eight ports, including: Radès Port in Tunis which accounts for 25% of total traffic and 63% of container activity; Radès specialises in container and roll-on/ roll-off traffic; Sfax, which is multi-purpose; the ports of Bizerte and Skhira, whose traffic is dominated by oil products; Tunis-La Goulette, which is a key destination for passengers and cruisers; Sousse, which is used for general cargo; Gabès, which is used for chemicals; and Zaris, which handles salt and oil. The sector is regulated by the port authority, the Merchant Marine and Ports Authority (Office de la Marine Marchande et des Ports, OMMP), while the state-owned Tunisian Stevedoring and Handling Company (Société Tunisienne d’Acconage et de Manutention, STAM) serves as the handling concessionaire in all ports bar Skhira. Roughly 80% of the country’s container traffic is handled by three multinationals, namely Maersk, MSC and CMA-CGM.
Overall, volumes softened over the course of 2015 in line with the broader macroeconomic slowdown, but figures from 2016 are painting a more encouraging picture. In 2015 traffic in ports was down 3% to 28m tonnes of throughput, compared to 29m tonnes in 2014, following a drop in raw phosphates exports. However, according to the Ministry of Transport, port traffic expanded 4% in 2016, as a result of a 10% increase in dry bulk throughput and an 11% rise in liquid bulk traffic. The nation’s commercial ports also processed 10% more containers, though rolling traffic declined 6%.“Container traffic, which accounts for roughly 50% of general cargo traffic in Tunisia, has stagnated in recent years as a result of the country’s slow GDP growth, but the recent increase in activity shows an uptick in industrial activity,” Brahim Gafsi, the director of exploitation and development at OMMP told OBG. “This should be further supported by improved port infrastructure such as a deepwater port,” he added. In recent years costs have also risen due to a series of lingering bottlenecks, which have led to longer waiting periods at the quays and congestion in storage areas. Among the bottlenecks is a low level of productivity, with handling times in the post-revolution era averaging eight to nine containers per hour. Negotiations are under way between stevedores and unions to review the status of personnel and re-establish 24-hour operations.
Tunisia’s ports have long been limited to handling smaller feeder vessels, generally up to 1200 twenty-foot equivalent units (TEUs), due to a maximum draught of 10 metres. This in turn contributes to higher costs and congestion, limiting the ability to handle larger trans-shipment activity. The authorities have been looking to build a 17-metre-draught deepwater port in Enfidha, as a means to improve logistical competitiveness and capture a slice of the increase in trans-shipment activity in the Mediterranean basin. Estimated at a TD3.2bn (€1.2bn) cost, the project falls under the Tunisia 2020 strategy and is slated to be tendered as a PPP.
Authorities are seeking to create a logistical zone behind Radès Port in order to reduce congestion and enhance storage container capacity. As it stands, the Port of Radès has seven docks, with four of them exclusively dedicated to roll-on/roll-off shipping and three to container traffic, with a handling capacity of 450,000 TEUs. STAM has acquired six new gantry cranes for TD40m (€17m), in an effort to improve handling capacities to 15 containers per hour.
Tunisia has also launched a number of initiatives to streamline port procedures, including the implementation of an online one-stop-shop, Tunisia Trade Net, which has substantially reduced Custom clearance times. In addition, a new Customs Code was recently implemented, which simplifies storage management, packaging, consolidation and deconsolidation operations for firms.
Tunisia’s railway network comprises 13 lines, stretching over 2167 km with 267 train stations. The National Railway Company (Société Nationale des Chemins de Fer Tunisiens, SNCFT) has operated the network since 1956, with passenger transportation making up most of its activity. The SNCFT’s commuter lines carried 37m passengers in 2015, along with 6m via long-distance trains. The SNCFT is currently looking to increase capital spending over the coming years, with funds going to, among other objectives, extending the existing coastal line between the eastern cities of Moknine and Mahdia, both near Monastir. Initially scheduled in 2012, the $60m project is expected to strengthen the inter-connectivity of cities within the coastal region and support the development of tourism in Mahdia.
In addition, the country is part of a trilateral proposal to build a high-speed railway line through the Maghreb. The plan would see a rail link stretch to Algeria and Morocco from the east of the country, with commercial operations currently slated to begin by 2025. The first phase of the Tunisia portion of the project includes the $90m construction of a first 75-km section between Gabès and Medenine.
While the country’s passenger traffic has been comparatively steady, freight activity is far more limited, with nine-tenths of the country’s internal trade occurring by road. The bulk of freight activity by train is tied to the phosphate sector, which transports 8m tonnes of phosphate by rail annually. However, as part of the Tunisia 2020 strategy, the authorities have been looking to increase freight usage, in a bid to reduce shipping costs and encourage industrial investment in the interior of the country. Among other projects, the plan envisages the development of a link between the coastal tourist town of Sousse and Kasserine in the interior. Estimated to cost $165m, the project would involve the rehabilitation of 157 km of railway and the construction of an additional 138 km. The SNCFT is also looking to invest $133m to re-open the Mateur-Tabarka railway line in an effort to link the north-western regions to the north-eastern part of the country, with work expected to start in 2020. Additionally, the SNCFT has announced plans to invest $115m to upgrade the existing Tunis-Kasserine railway.
Currently, public transport infrastructure in Tunis is made up of a 48-km network of six tramway lines managed by the Tunisian Transport Company (Société des Transports de Tunis, TRANSTU) as well as a 23-km network of suburban trains and the Tunis-Goulette-Marsa, or TGM, an 18.8-km long light rail electrified line operated by the SNCFT. In a bid to improve public transportation in the Greater Tunis Area, authorities have sought to develop urban railway infrastructure with the creation of a network of five express lines called Réseau Ferré Rapide (RFR) expected to transport 600,000 passengers every day. The first phase of the RFR includes the construction of the D and E lines – totalling 18.5 km – scheduled for completion in 2018.
TRANSTU also manages the capital’s public bus system, capacity of which has suffered in recent years as the fleet has aged and limited investment in new stock or maintenance work has been unable to keep up. However, in a bid to renew the ageing fleet and meet the rising needs of the population, TRANSTU signed a TD180m (€77m) agreement with the SAYARA/SETCAR group in December 2016 for the acquisition of 494 new buses.
In March 2014 the government passed new regulations for public tenders and contracts to improve transparency. The legislation introduced the obligation to publish public tender notices online; eliminated clauses related to minimum local content rates; separated audit, control and consulting functions; and outlined guidelines for increasing participation of the private sector for the drafting of public purchasing policies and procedures. In parallel, the European Development and Reconstruction Bank has been offering assistance to the Tunisian government to reinforce award and dispute resolution capacity, improve the efficiency of both tenders and awards, and reduce bureaucracy.
However, to ensure the smooth execution of infrastructure projects, the authorities will also have to ease a series of administrative bottlenecks, such as the lengthy expropriation procedures, which have delayed or stalled an increased number of transport projects over the past few years. In 2016 authorities prepared a draft bill, expected to be submitted in 2017, to facilitate expropriation procedures.
With logistical costs rising from just 12% of GDP to 20% between 2010 and 2016, the government has opted for a new economic model largely based on private initiative, as a move to reduce the footprint of struggling state-owned companies and reverse the effects of instability since the 2011 revolution. As part of the Tunisia 2020 strategy, the government has been looking to regain logistical competitiveness and it appears to now 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 continue to attract foreign investment, improve the business climate and channel the social aims of trade unions. The transportation sector is key 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.
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