The Report: Tunisia 2016
Tunisia has been going through a watershed period in its modern history, with the revolution of 2011 bringing much-needed change and reform. While the country has avoided much of the instability of the wider region, it has nonetheless undergone a spell of turbulence, testing the country’s newly found democratic bonds.
Country Profile
The land now known as Tunisia has a rich and distinguished history. It has been ruled over by Berbers, Phoenicians, Romans and Arab dynasties. Modern Tunisia, and the country’s name itself, came into being when the region was a French protectorate in the late nineteenth century. Tunisia gained full independence in 1956. Two presidents, Habib Bourgiba and Zine El Abidine Ben Ali, dominated much of the post-independence republican period. However, following protests, which began in December 2010, Ben Ali fled into exile in January 2011, marking a new era for Tunisian politics. Following this period of protest, which helped ignite the Arab Spring, the country has held two sets of successful elections. The parliament also voted overwhelmingly in favour of a new constitution in 2014. Emerging relatively strongly from the Arab Spring, Tunisia is respected diplomatically and remains a key player in a volatile neighbourhood. With more than 1000 km of Mediterranean coastline, the country has a strong tradition of commerce and openness to the wider region. This chapter contains a viewpoint from President Béji Caïd Essebsi; and interviews with Habib Essid, Head of Government; Tobias Ellwood, MP and Minister for the Middle East and North Africa, UK Foreign and Commonwealth Office; Suma Chakrabarti, President, the European Bank for Reconstruction and Development (EBRD)
Explore chapterEconomy
One of the most developed and diversified economies in the region, Tunisia has for years attracted praise for relatively prudent management. However, the country has suffered from reduced growth following the 2011 revolution, which in turn has exacerbated a number of structural problems. A pair of terrorist incidents in 2015 further complicated the situation, dampening the performance of the tourism sector – a key employer – but hopes are high that 2016 will see a recovery in growth. Furthermore, the government – with strong support from international donors – is pursuing a wide-ranging series of reforms aimed at streamlining the economy and boosting foreign investment in order to put the country on a strong and sustainable long-term development path. Providing that the government can maintain stability and continue to push through and implement its reform agenda, on which the IMF says the medium-term economic outlook depends, factors such as the country’s well-educated workforce and proximity to Europe should help to attract more investment and boost long-term growth levels. This chapter contains interviews with Slim Chaker, Minister of Finance; Yassine Brahim, Minister of Development, Investment and International Cooperation; Wided Bouchamaoui, President, Union Tunisienne de l’Industrie, du Commerce et de l’Artisanat (UTICA); and a viewpoint from Adnène Zghidi, Managing Partner, BDO Tunisia.
Explore chapterBanking
The Tunisian financial services industry, of which banking is by far the largest component, accounted for 3.7% of the country’s GDP in 2014. Sector activity rose by 3.8% in 2014 and a further 3.3% during the first nine months of 2015 compared to the same period a year earlier. The sector’s trajectory is largely positive, with lending and leasing activity growing rapidly in recent years, but the stability and profitability of the sector has been negatively affected by poor performance at several large state-owned banks as well as by market fragmentation. However, year 2015 saw several of these institutions recapitalised alongside changes made to their management structures. The recapitalisation of key public banks is set to return the sector to comparative health as well as help to address the wider issue of tight liquidity in the market. While it is uncertain if management changes at the banks can ensure they do not again start to build up poor loan books, the improvement of the democratic environment should reduce pressures for politically-connected lending that occurred in the past. This should in turn help to bolster financial sector stability, as should plans to raise prudential ratios under the new banking law, which will also help to support continued rapid growth in emerging niches including Islamic banking and leasing. This chapter contains interviews with Chedly Ayari, Governor, Central Bank of Tunisia (CBT); and Ahmed Rjiba, CEO, Banque de l’Habitat.
Explore chapterCapital Markets
Tunisia has an active stock market that has seen a large number of equity listings in recent years. Furthermore, there are regular government and corporate bond issues, though the secondary market is relatively shallow and bond trading activity is minimal. Both markets, and particularly the corporate bond segment, are dominated by the financial sector. Following strong growth in 2014, the country’s all share index, Tunindex, had a good first half of 2015 but lost all of the period’s gains following a terrorist attack in June that dented economic confidence. Industry players are hopeful that the market will perform better in 2016, and the Tunindex’s strong growth prior to the attack, as well its good start to 2016, suggests that such hopes may well be fulfilled, provided the security environment fully establishes. This chapter contains an interview with Bilel Sahnoun, CEO, Tunis Stock Exchange; and a viewpoint from Fadhel Abdelkefi, General Manager, Tunisie Valeurs.
Explore chapterInsurance
Although insurance penetration levels in Tunisia are low by international standards, overall premiums are growing steadily and the life segment is expanding rapidly, as are new niches such as takaful (Islamic insurance) and micro-insurance. The industry regulator is also working on a number of reforms to bolster sector development, including changes in the rules on pricing mandatory third-party liability vehicle insurance, which is among the largest product lines sold in the country but is also loss-making. While the life market has been growing quickly in recent years, low overall penetration rates present insurance firms with wide-ranging opportunities. As the market expands, reforms should help to boost profitability from vehicle insurance, allowing firms to invest in less developed areas of the industry. This chapter contains an interview with Lassâad Zarrouk, CEO, STAR Assurances.
Explore chapterTransport
The instability generated by Tunisia’s 2011 revolution resulted in the delayed roll out of important infrastructural projects and needed maintenance of existing infrastructure. Although Tunisia’s utility infrastructure (water, electricity and gas) ranks strongly by regional standards, its transport-related infrastructure – historically one of the country’s important comparative advantages, with high levels of productivity and reliable performance – has deteriorated in recent years. From 2010 to 2014, the country dropped 49 places on the World Bank’s Logistics Performance Index, falling from 61st to 110th. To reverse the decline of recent years, and in turn improve maintenance, capacity and efficiency, the country is rolling out several initiatives to boost connectivity, in collaboration with external donors and private sector partners. Among the new projects mooted are a new Africa-focused freight carrier, highway upgrades and a pending open skies agreement – all of which, if executed in a timely fashion, should help Tunisia begin to move up the rankings. Policy changes and increasing the private sector’s role through partnerships will serve to encourage further investment. This chapter contains an interview with Sami Battikh, CEO, Office of Merchant Marine and Ports (OMMP).
Explore chapterEnergy
Tunisia’s energy balance shifted from surplus to deficit in 2000, and the country has since remained a net importer of energy. With domestic production falling and demand rising, Tunisia is looking to diversify its energy mix through renewables, higher imports and by promoting energy efficiency through a gradual scaling back of subsidies. Overall, attempts to promote efficiency and alternative energies have moved slowly in Tunisia, in part due to the post-revolution uncertainty of recent years, a reflection of the a high degree of state intervention in the energy sector. Despite challenges, Tunisia’s efforts to establish a more efficient, diversified energy portfolio could move forward in 2016. The split, in January 2016, of Tunisia’s Ministry of Industry, Energy and Mines, and the subsequent formation of the Ministry of Energy, could serve to refocus attention, previously shared with industry and mining, back on the energy sector. It is also true that if the new ministry is able to deliver a more cohesive sector strategy, as called for by industry players, this could help reduce the country’s reliance on imports and allow it to tap into the underutilized potential of its hydrocarbons and renewable resources.
Explore chapterConstruction & Real Estate
Unlike many economies elsewhere on the continent, Tunisia’s construction market is dominated by local firms, which are also becoming increasingly active abroad, not only in nearby countries like neighbouring Algeria, but also in parts of West Africa. The domestic market is primarily driven by government investment and, following a slowdown in 2015 – a result, in part, of low implementation rates of state-backed projects – there has been a push to improve tendering and contracting procedures. An improvement in the fortunes of the domestic construction market will depend on a range of factors, including the government’s ability to address bottlenecks in project implementation, the extent to which the tourism sector can recover from the major downturn it has entered since 2011, and improvements in the real estate market – which in turn depend on factors such as banking sector liquidity and the pricing and availability of affordable land. The Tunisian real estate development industry is fragmented, with a large number of developers for a comparatively small market. Property, and especially land prices, has seen consistently strong growth in recent years, but 2015 was a difficult year for developers due to factors such as rising construction costs, land shortages and reduced banking sector liquidity. However, industry figures indicate that revenues could improve in 2016 as several important projects under construction come on-line. The government is also looking to stimulate activity by increasing housing access for lower-income families and providing targeted support for larger developments. This chapter contains an interview with Radhi Meddeb, CEO, Comete Engineering.
Explore chapterTelecoms & IT
With high bandwidth, coverage and network reliability, Tunisia’s telecoms infrastructure is well developed, particularly by regional North African standards, though competition is low in some segments, leading to high prices for international calls. However, following the launch of a mobile virtual network operator (MVNO) in 2015 and the completion of a new undersea cable the previous year, infrastructure and competition are set for a further boost in 2016 through the planned activation of 4G networks, which may also see the arrival of a fourth mobile operator. Investors in segments such as off shoring, however, are still looking out for further moves to bolster competition, in particular in terms of international traffic, without which costs are expected to remain high. Addressing these challenges will be key to future sector growth. Bolstered by a well-educated workforce, competitive costs, proximity to Europe and strong telecoms infrastructure, Tunisia has emerged as a regional centre for IT-related businesses and export-oriented industries such as off shoring and business process outsourcing (BPO). However, it is now facing growing competition from nearby markets such as Egypt and Morocco. A vibrant start-up community is also helping the country move up the value chain, and it is home to an increasing number of local companies producing and exporting proprietary content. This chapter contains a dialogue with Didier Charvet, CEO, Orange Tunisia; and Nizar Bouguila, Chairman and CEO, Tunisie Télécom.
Explore chapterIndustry & Mining
Tunisia boasts Africa’s sixth-largest manufacturing sector, and the country’s geography is an important asset for growth, offering direct access to the Mediterranean Sea and proximity to the European market, to which the bulk of the country’s exports are destined. Despite such logistical advantages, labour productivity, the size of the informal sector and problems in some subsectors – such as textiles – suggest significant room for improvement. Meanwhile, segments such as agribusiness, construction materials and machinery manufacturing have proven relatively successful in recent years. In the years since Tunisia’s 2011 revolution, manufacturing growth has sometimes stumbled, declining from approximately 2.3% of GDP in 2014 to 1% in 2015. This chapter contains interviews with Romdhane Souid, CEO, Groupe Chimique Tunisien; and Amine Ben Ayed, CEO, Misfat.
Explore chapterTourism
In the years leading up to 2011, Tunisia was a popular destination for many European holidaymakers in search of a nearby, safe and affordable sun and sea destination. For more than 40 years, Tunisia’s resorts in beachside cities like Sousse and Hammamet had catered to a primarily package tourist crowd, attracting visitors from France, Germany, Italy and the UK. The country’s attractions are unique – from the ksours (castles) of Tataouine to the beaches of Djerba to the ruins of Carthage – however, recent years have proven challenging. The 2011 revolution led to a drop in visitor numbers in the immediate aftermath in turn exacerbating structural issues, such as a lack of diversified offerings. This was further impacted by a pair of terrorist incidents in 2015, which slowed the pace of the industry’s recovery from the 2011 revolution. However, while the short-term outlook is somewhat uncertain, the efforts adopted by the government under Vision 3+1, provide cause for optimism in the medium to long term. The ability of the sector to diversify its offerings and provide a wider selection of accommodation and activities should help buffer revenues in the future and ensure a more sustainable growth trajectory. This chapter contains an interview with Radhouane Ben Salah, President, Tunisian Federation of Hoteliers.
Explore chapterAgriculture
Agriculture performed strongly in 2015, driven by outstanding production and olive oil exports, which generated nearly 920m in revenue. The sector, which accounts for around 10% of GDP, has not been spared the instability affecting the country since the 2011 revolution, prompting efforts to initiate structural reforms, including enhanced organisation to boost productivity and stabilize output. Profitability is also a concern, as farmer debt is soaring amid rising input costs. Given the role that the sector has come to occupy in securing foreign revenues and bolstering the country’s trade balance, Tunisia is set to further tap into existing assets, such as its geographical location and favorable climate, to boost exports to Europe. There is also significant potential to enhance exports to neighbouring Libya and Algeria, where non-tariff barriers are less of an impediment to trade than they are in Europe’s case. This chapter contains an interview with Abdelaziz Makhloufi, CEO, CHO Company.
Explore chapterHealth & Education
A national priority since independence, Tunisia’s health care system has been the focus of continued public investment that has seen an extensive network of public hospitals and health centres established nationwide. In recent years, however, the country’s private health care sector has taken the lead in investment, with the construction of new clinics intended to make the country into a regional medical centre. As a whole, Tunisia’s health care system can rely on its solid foundation, blossoming private sector and qualified workforce. However, according to the World Health Organisation, health system reform is needed in order to implement an integrated approach that is focused on primary care, prevention and provision of palliative care in order to better respond to the increase in non-communicative diseases. In addition, the government is focusing on policies aimed at identifying medium- to long-term reform measures that will reduce health inequalities and improve the system’s responses to the evolving demographic and epidemiologic situation. In the aftermath of decolonisation, Tunisia was among the top investors in education in Africa, promoting socio-economic development and boosting human capital, which led to rapid progress in literacy, access to primary education and high enrolment figures. Today, the authorities are focusing on overhauling the educational and vocational training system, as well as bolstering private education, as a means to uplift educational standards and cut the rising unemployment rate among young graduates. Although Tunisia has continued to prioritise investment in education, it has paid too little attention to the requirements of the labour market. This has led to a mismatch between qualifications and the needs of the employment market. The authorities will have to continue overhauling Tunisia’s higher education system by providing improved career guidance and ensuring better employability for new graduates. This chapter contains interviews with Saïd Aïdi, Minister of Health; and Chiheb Bouden, Minister of Higher Education and Scientific Research.
Explore chapterTax
In conjunction with EY, OBG explores the taxation system, examining Tunisia’s investor-friendly environment. This chapter contains a viewpoint from Noureddine Hajji, Managing Partner, EY Tunisia.
Explore chapterLegal Framework
OBG introduces the reader to the different aspects of the legal system in Tunisia, in partnership with Meziou Knani & Khlif. This chapter contains a viewpoint from Ghazi Meziou, Associate Lawyer, Meziou Knani & Khlif.
Explore chapterThe Guide
This section includes information on hotels and phone numbers for government offices and other useful contacts, alongside tips for visitors on topics like currency, visas, language, communications, dress, business hours and electricity.
Explore chapterTable of Contents
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