Trade & Investment

The Tunisian Stock Exchange: small but efficient
With a 30 percent annual return over the past two years, the stock market is representative of the buoyancy of the Tunisian economy

The Tunisian stock exchange was first created in 1969, but not until 1995 when it was privatized did it become an integral part of the Tunisian financial market. Now, the capital is split equally between the 28 brokerage firms in the market. Having averaged a 30 percent return over the past two years, the stock market is representative of the buoyancy of the Tunisian economy.

The financial market was reformed according to international standards in 1994. The CMF (conseil de marche financier) is the regulatory body equivalent to the SEC in the United States. Parallel to this, the STICODEVAM is the clearing corporation and acts as the central depository for the market. All trades are done through brokers. Because of the regulatory and supervisory infrastructure, Tunisia’s financial market is considered by many in international financial circles to be among the best in the African and Arab world.

The Stock Exchange experienced two difficult years in 1996 and 1997 but regained strength in 1998 as reforms were put in place to increase efficiency and transparency. They included the introduction of a new trading system based on the French SUPERCAC electronic trading system, which ensures a high degree of price transparency and real-time price quotations on Reuters.

The market remains small with total capitalization of about $3.6 billion but has performed remarkably well with a price-to-earnings ratio of 12 in 1999. Trade volume increased 57 percent last year. It is non-speculative. The stock exchange has set an acceptable variation of 4.5 percent for its index. Beyond that, it closes until the following day. This decision was made in the spirit of equity to give individuals the opportunity to react to fluctuations. It has also protected the market efficiently against speculators.

A few companies have seen their stocks soar. For example, the stock of SOTETEL, a subsidiary of the phone company traded at about $20 at the beginning of its offering in 1999; now it is worth about $215. The value of the stock of another company, CFBI, involved in agribusiness has increased threefold this year alone.

Foreigners can participate within the limits of 50 percent of the offering of a company. Above 50 percent, an authorization is necessary. Foreigners currently account for 25 percent of the total capitalization. They appreciate the modernity of the market as well as its return but its smallness remains the main constraint. As the market grows foreign investors are expected to play a proportionally important role.

Based on the previous examples, the stock market certainly has achieved its goals in terms of returns. What is surprising, however, is that the accumulation of wealth of participants was not the sole objective. Indeed, Tunisia was faithful to its basic dogma when it created the stock exchange.

Hamza Knani, president of the Tunisian Brokers Association explained, “Ever since independence, Tunisia has differentiated itself from other developing countries in numerous areas, notably giving equal status to women, education opportunities for all and a widespread social program to form the current middle class.” In the past 10 years, the per capita GDP in Tunisia has doubled. Seventy percent of the population now belongs to the middle class.

Knani added, “We remain in the logic instituted by the Change (the period when Ben Ali became president). Our objective is to have the total population, 9 million Tunisians, with access to the stock market. As such, Tunisians become employers and employees at the same time and this is an essential element of stability.” Today, 120,000 Tunisians trade on a small scale.

The instruments have been created with the idea of facilitating access for all. The government has also granted financial incentives to make it even more attractive. The Compte Epargne Action is similar to the Individual Retirement Account in the United States. Tunisians can contribute minimal sums at regular intervals for a minimum of five years. Half the amount that they contribute is deducted for tax purposes up to a maximum of about $4,500.

As the economy grows, the stock market’s total capitalization should also grow. For now it represents only 15 percent of the gross domestic product. Knani, who is also the assistant director of Arab Financial Consultants, explained that cultural differences exist at both the commercial and individual levels. The mentality of hiding the money under the mattress still exists. Knani and his colleagues try to develop the mentality of using the stock market through training seminars at companies and universities.

Their success is important for the economic development of Tunisia. Until the 1980s the financing of companies was done almost exclusively through the banking system. The idea is now to bring together those who have the capital and the companies that need it without going through the intermediary of a bank.

Forty-four companies currently have their stock listed. Last year, they were 38. Participation has been timid. Aside from cultural differences, Knani explained that companies are also being courted by foreign exchanges such as London and Paris. Nayera Amin, general director at Citibank, noted “ the stock market is small and efficient. Its invigoration will depend on two things. One is transparency because to be listed, a company has to issue quarterly statements. Secondly, credit is cheap in Tunisia and for a company to be accredited in the stock market, it needs to have a certain level of capitalization and notation from a rating agency or they would have to issue a guarantee by a prime bank. This process costs money. As of now there is no inherent interest for companies to be listed in the stock market”

The government has recently put in place fiscal advantages to incite companies into listing their stock on the Tunis stock exchange. For example, companies will get a 20 percent to 35 percent decrease in their corporate income tax for a period of five years when they list at least 30 percent of their capital in the stock market. Considering that the infrastructure is already in place and that the economy is doing so well, it is likely that the stock exchange will double the number of quoted companies in a relatively short period of time.

Social and economic development: Dual goals of equal importance
U.N. places Tunisia among ten best countries for development

In many developing countries, the increase in the creation of wealth benefits the elite while the rest of the population remains impoverished. The international community is now more aware of the issue of poverty around the world. The initiatives taken by the G8 and multilateral organizations to reduce the debt burden have been welcomed in the developing world.

Over the past 10 years some developed nations, among them the United States, have experienced unsurpassed growth. During the same period of time, poverty has touched an additional 100 million around the world while the amount of international aid for development has decreased by 20 percent since 1992. Within this context, the challenges for developing nations are greater than ever. In the face of globalization, there is often a tradeoff between the adoption of stringent measures to make an economy more competitive and the welfare of a people. The difficulty lies in making the changes in the right amount and at the right time so as to cause minimal harshness on the population and to avoid social unrest and wars.

Tunisia has understood from the beginning of its modern history that social and economic developments go hand in hand. As defined by the United Nations, human development is a process that opens wider possibilities to each person. Three conditions must be present: a long and healthy life, the acquisition of knowledge and the access to necessary resources to enjoy an acceptable standard of living.

Under the leadership of President Zine El Abidine Ben Ali, Tunisia has emphasized social development based on a strategy of correlation between economic development and the development of different areas such as education, health and the status for women. To illustrate this priority, the country’s first World Bank-funded project in 1960 was for education; so was the 100th project in 1997. To date, the World Bank has funded more than 120 projects in Tunisia. Most have been geared to educational programs, environmental protection and water resources management.

The United Nations has recognized the results of this policy as one of the best in the developing world. Last month, a Euro-Mediterranean conference on solidarity and human development was held in Tunis. Two hundred fifty representatives from 23 countries in Europe, Africa and the Arab World attended the summit. Tunisia presented the results of its program of local human development. This program was partially financed by Italy following a bilateral agreement signed in 1997.

Tunisia has sustained an average annual rate of growth of 5 percent over the past 10 years. The rate of poverty stood at 40 percent in the 1960s. Today, poverty afflicts only 6 percent of Tunisians. The majority of the population now belongs to the middle class. Eighty percent own their own home, a rate not even achieved in the United States. Education is now compulsory for boys and girls between the ages of 6 and 16. It is free at all studies levels. The adult literacy rate (15 years of age and more) reached 69 percent in 1997 against 16 percent in 1960. Health services have been improved and are now available to all remote areas. All children are vaccinated. Tunisians have a life expectancy of 72 years today compared to 51 years in 1966.

Birth rate has decreased to 1.2 percent. The rate of electrification in rural areas has reached 87 percent and 80 percent of the population has access to potable water.

To attain the dual goals of social and economic development, Tunisia has throughout the years put in place programs to benefit critical areas such as social policy, education, women and health. Tunisia’s social policy has established the foundation to promote the development of the country and alleviate poverty.

The National Solidarity Fund (FSN, commonly called fund 26-26 from the number of the postal account in which money is deposited) is a special fund created by President Ben Ali in 1993 to help finance interventions for low-income populations and rural areas that lack essential infrastructure and services. The fund was created after an unofficial visit by the president to some impoverished regions of Tunisia. Fund 26-26 receives money from individuals and public and private enterprises, the state, national and foreign nongovernmental organizations and institutions. Between 1993 and 1999, the FSN has intervened in 1,232 impoverished zones, benefiting more than 171,000 families with a total cost of about $430 million of which about $53 million went toward creating micro-projects.

In addition to benefiting impoverished areas, the social policy aims to improve the conditions of vulnerable populations such as the elderly, the handicapped, the children and those with special needs.

For example, mobile teams have been created in six governorates to provide social and medical assistance for the elderly who live with their families. Programs have been set up to educate and train the handicapped and encourage their employment.

Education has been one of Tunisia’s basic tenant for development since its independence in 1956. President Habib Bourguiba, the father of the nation, first made education universally available. President Ben Ali reinforced measures along the same line. This policy has resulted in an enrollment rate of 99 percent for children aged 6. Remarkable progress has been made in the enrollment of girls. Access to higher education has widened with the creation of additional universities and high-level institutions such and the National Institute for Applied Science and Technology.

The status of women in Tunisia has been given special consideration since the inception of the Code of Personal Status in 1956. This code was revolutionary for its time and reorganized the family based on the equality of rights. Since then, new laws have been enacted and the situation has improved for women in different areas such as civil rights, health coverage, education and labor force.

The Tunisian health care system is formed of three components, the public sector, the parastatal sector and the private sector. The entire population is guaranteed access to the system. The share of the gross domestic product devoted to health in Tunisia increased from 4.3 percent in 1987 to 6.2 percent in 1997. Tunisia is now upgrading its health system to international standards. The country has implemented a new program to retrain the public health facility staff. Physicians, pharmacists and dentists have received incentives to participate in national and international scientific events.

In spite of the obvious improvements, some problems persist. Unemployment is high at around 15 percent. Job creation has become the government’s highest priority. A new fund called 21-21 has been created. It will help create job opportunities and further adjust training and educational programs to the needs of the job market.

The achievements of Tunisia in its 44 years of independence are nothing short of extraordinary. If this small North African nation had a motto, it would probably be “always forward, always better.” The economic, political and social landscape of Tunisia today has little to do with that of Tunisia 15 years ago. It seems that a new country is being born. It is perhaps symbolic that new construction is taking place throughout Tunisia. More than 50 projects are currently under way for a total value $4.5 billion.

The new Tunisia is intent on fully participating in globalization and not being a victim of it. All policies are geared at transitioning Tunisia from a developing country to a developed nation. Tunisia is entering a new phase characterized by the opening of a pluralistic dialogue. The opposition won 20 percent of the seats at the last parliamentary elections. President Zine El Abidine Ben Ali is also insisting that the media take a bigger role in pluralistic debates. He recently convened a meeting with the press to come up with suggestions aimed at introducing changes to the country’s press laws and further liberalizing the media.

Not much is known about Tunisia. Tunisians are modest, and it is unlikely that they will boast about their achievements. Tunisia has not been exposed in the international press like the many countries on the continent ravaged by war, conflict and disease.

Tunisia has led a peaceful revolution, one that is characterized by a population of nine million with a standard of living three times higher than that of 12 years ago. Tunisia has channeled all its resources and energy into its economic development.

International institutions frequently have cited Tunisia as a “model for success” in economic structural adjustment. Summarizing its 1999 consultation mission, the International Monetary Fund found that “Tunisia’s economic performance remains highly satisfactory in a difficult international environment” and that “strong policy coordination has contributed to the clarity of objectives and the effective implementation of the government’s economic strategy.”

The World Economic Forum ranked Tunisia first for competitiveness on the continent last year, and foreign investments have increased tenfold in the past 10 years.

All economic and social indicators have improved. Abdellatif Saddam, minister of economic development, summarized the situation, “In the period 1987 to 2000 the economy has been growing at a faster rate, surpassing 5.5 percent annual growth for the first time. More than 60.000 jobs are being created annually. What is amazing is that the growth has not led to inflationary conditions. On the contrary, inflation has decreased continually with a 2.7 percent rate last year, the lowest since 1972. The budget deficit has decreased to 2.7 percent and the balance of trade deficit stands at 2.1 percent. More importantly, the debt ratio has been decreased to 47 percent of gross domestic product in 1999 compared to 58 percent in 1986.”

The improvement of the macroeconomic indicators has been paralleled by the improvement of social development indicators. Per capita gross domestic product has nearly tripled since 1986 reaching about $2200. Six percent of the population lives in poverty compared to 33 percent in 1966. Seventy percent of the Tunisian population now belongs to the middle class. Ninety-nine percent of children attend school. Women have equal rights as men. Tunisians now have a life expectancy of 72.6 years.

These achievements are the result of prudent macroeconomic policies. Tunisia has taken on the formidable task of restructuring its economy, raising its living standards to the level of industrial nations and decreasing unemployment.

The leadership of Ben Ali has been instrumental in these achievements. Ben Ali became Tunisia’s president on Nov. 7, 1987, a day known as the Change. Many things have changed since then. Sweeping reforms were introduced in the political, economic and social spheres.

Ben Ali did away with “presidency for life”. Now a president is elected for a five-year term for a maximum of three terms. In June 1999, a constitutional amendment paved the way for the country’s first contested presidential elections. The opposition won 20 percent of the seats during the last parliamentary elections.

Structural reforms are changing the economic landscape of Tunisia. Starting in 1987 structural reforms have aimed to liberalize the economy and reduce the role of the state in competitive sectors. The reforms have touched all sectors. The banking sector is being consolidated and restructured. The industrial sector is being upgraded to prepare companies for the upcoming competition from European companies. The privatization and liberalization of the economy has been continuous. “The period 1987 to 1991 was significant because it allowed Tunisia to transition from an administered economy to a liberalized one” noted Saddam.

In 1986, the Tunisian economy was on the verge of collapse. As an indication, the Central Bank reserves were limited to one week of foreign exchange. All aspects of the economy were controlled by the state. Prices, investments, credit and profit margins were fixed. Following the widespread reforms, the economy regained strength. Exports increased, the productivity improved, and the economy became more diversified.

In 1995, Tunisia was the first country south of the Mediterranean to sign a free-trade agreement with the European Union. This agreement has already led to a significant increase in foreign investments. A market of 350 million consumers is now open to goods produced in Tunisia.

Tunisia is putting in place all the elements to become a regional leader. The country has signed agreements with several North African and Arab countries and has emerged as the leader in the proposed unified Maghreb.

On a domestic level, privatization and diversification of the economy are following their course. The private sector still contributes only half to the national economy. Saddam noted, “We need to improve our competitiveness on a qualitative and quantitative level. We need to further diversify the economy.”

Tunisia is also addressing its biggest challenge to date. Unemployment remains very high and is expected to grow at the onset of the EU-Tunisia free trade agreement before decreasing again. The National Employment Fund, called Fund 21-21 will help create job opportunities and further adjust-training and educational programs to the needs of the job market. Perhaps the achievements of Tunisia are best summarized by Nayera Amin, general director at Citibank Tunisia, who says, “Tunisia is doing a fabulous job. The economy is well managed. They are aware of all the issues and are tackling them.”

Large increase of foreign investments in Tunisia
Foreign companies establish a presence to take advantage of a new trade agreement with the European Union

In the recent “Africa Competitiveness Report” published by the World Economic Forum, Tunisia ranked first out of 24 countries in the overall competitive index. The index was calculated based on an average of six indices: openness, government, finance, labor, infrastructure and institutions. Mauritius ranked second and Botswana third.

Foreign investors have observed the improvement in the general business climate in Tunisia and have reacted accordingly. In 1990, foreign direct investments (portfolio investments excluded) stood at about $70 million. In 1998, that figure had increased to $760 million.

Currently, 1,950 foreign investors are in Tunisia. Over the past three years alone, more than 500 foreign companies decided to invest in Tunisia. Different factors explain these developments. Authorities view the attraction of foreign investments as an integral part of the economic development of Tunisia and have implemented measures to facilitate the investment process. Fathi Merdassi, minister of International Cooperation and Foreign investments noted, “We consider foreign investments as a complement to our national effort. Today, foreign investments contribute about 10 percent to the national economy. We wish to increase this number because we have chosen the path of globalization. This choice is irreversible. We feel that Tunisia must be able to attract foreign investments in the context of globalization. We have put in place the legislation necessary for companies to work in the best possible environment.”

Foreign investments are viewed as a way to create employment, to promote the transfer of technology and know-how and to bring value added to Tunisian products and services. Since 1987, steps have been taken to give the private sector a greater role in the economy, and the state has relinquished the ownership and management of numerous activities. Tunisia became a member of the World Trade Organization in 1990. In 1993, the Ministry of International Cooperation and Foreign Investment was created. The FIPA (foreign investment promotion agency) is the body within the ministry responsible for promoting investments in Tunisia.

While foreign investments used to be largely concentrated in the textile sector, they are now in all sectors of the economy. In 1999, the manufacturing and energy sectors proved to be the most attractive to investors. Investments have also become larger, a development that is representative of the increased level of confidence of foreign investors. For example, British Gas (BG Tunisia) is the country’s largest investor and supplies about 65 percent of Tunisia’s total gas requirements. The company recently reached an agreement with the Tunisian government to expand the Miskar gas field and develop the Hasdrubal gas and condensate discovery. With this new capital input, British Gas total investment in Tunisia will reach the $1 billion mark. BG Tunisia is currently looking at imaginative ways to develop a low methane content gas field. Sean Sutcliffe, president at BG Tunisia, noted, “What we find is that the government is flexible in terms of looking at imaginative ways of developing resources. It takes time to get things developed but if one takes the time to understand what the political and strategic requirements are, the analytical and the logical approach is one that works well. One of Tunisia’s advantages is that decisions are based on logical and economic drivers. You know that if you have a good project, it will become concrete.”

European companies account for the majority of foreign investments. American investors have favored the energy sector. This trend will continue considering that an American company has recently been awarded a large contract for the realization of an electric power plant. American investments remain limited in the other sectors. Some attribute the low interest level to Tunisia’s geographic situation. It is wedged between Algeria and Libya, two countries ignored by American investors. U.S. companies also have been reticent to invest in Africa in general considering the high level of risks in some countries. Yet, according to a report published by the United Nations Conference on Trade and Development last year, the average return on foreign direct investment in Africa has been higher than in any other region. Additionally, Tunisia could hardly be compared to some of the riskier destinations in the rest of the continent. Tunisia has proven over the past decades that it is a stable and safe country. Nayera Amin with Citibank give another reason for the limited number of American companies in Tunisia. “There have not been many efforts until recently to promote Tunisia.”

American investors are welcome in Tunisia. Merdassi said, “We want to invite American investors to come to Tunisia. Nabisco, Pfizer and Citibank are already here. One hundred American companies are already present through direct and indirect investments in Tunisia. I believe there are great opportunities especially in the pharmaceutical and high technology sectors. Our country offers distinctive advantages for foreign investors.”

The limited size of the domestic market has been another concern for American investors. With the recent signing of the free-trade agreement with the European Union, industrial products produced in Tunisia are now able to gain free access to a market of more than 350 million consumers. Merdassi said, “This agreement represents a great advantage for American companies. Tunisia is now a gateway to Europe.”

In addition, Tunisia enjoys reduced customs duties in accordance with the general system of preference for manufactured goods, agricultural products and handicrafts with Japan, Canada, the United States, Switzerland and Australia. Tunisia also enjoys preferential trade agreement with North African and Arab countries.

Education has been a government priority for many years and it has paid off. Today, 53 percent of job seekers have a university or a professional degree. Sutcliffe of British Gas said, “Tunisia has a well-educated workforce. We have 220 employees and less than 20 are expatriates. They are highly professional. One of our Tunisian employees has just gone to Egypt to lead our health and safety loss prevention work.” Amin at Citibank added, “The best thing in Tunisia for business people is the very good quality of the educational system. At the bank, 98 percent of the employees are Tunisians. Foreign companies do not need to invest in expatriates, which is a big plus considering their costs.”

Most Tunisians speak both Arabic and French. Starting this year, all Tunisian children will start to learn English at the age of 11. An important factor for companies coming to Tunisia is that they will find here an educated population, open to the outside world and capable of adapting to new technologies at a reasonable cost.” said Merdassi.

The 1999 Report on Competitiveness in Africa published by the World Economic Forum at Davos ranked Tunisia the most competitive among all African countries. Moody gave Tunisia a rating of Baa3. Macroeconomic indicators have shown remarkable improvements. The growth of gross domestic product has averaged between 5 percent and 6 percent over the past 10 years, and inflation was brought down to 3.1 percent in 1999.

Tunisia has seven airports and eight commercial ports. The energy supply and telecommunications systems are reliable. Between 1997 and 2001 an additional $10 billion will be invested in the infrastructure.

Capital and benefits can be transferred freely. Transparency is the norm. Tunisia also offers a host of incentives for companies turned toward exports. Full exemption from corporate income tax is granted for the first 10 years for exports-derived revenues and total exemption is granted from import duties and taxes for imported equipment, raw materials and semi-finished products for fully exporting companies. Investment subsidies are granted for projects related to environmental protection, regional and agricultural development. On the downside, the level of bureaucracy is still high. Tunisia is aware of this issue and is starting to address it. President Zine El Abidine Ben Ali has communicated that computers will be used in all administrative offices.

All sectors are open to foreign investments although services remain protected. Sergio Martins, chief executive officer of Gabes Cements Co., noted, “I think there are quantities of opportunities to do something here, commercially, and tourist-wise, there is something to be done in every sector.” The sectors of opportunities are linked to Tunisia’s competitive advantages. A large pool of workers is available in the mechanical and electrical components areas for the automotive industry. Most European auto manufacturers are already present. Merdassi explained, “Comparative studies have shown that Tunisia is competitive in the labor-intensive industrial sector. We are not capable of competing solely on the cost of labor.” Tunisia wants to promote foreign investments but not at the cost of exploiting its population. Salaries remain fairly low but regular pay increases are negotiated between workers and the unions. “We do not compare ourselves to Asian countries but to European countries. When coming to Tunisia, foreign investors should compare total costs with Europe. This is a great advantage for American companies since we have signed the free trade agreement with Europe.”

The packaging and agribusiness sectors also offer opportunities. Tunisia is the fourth largest world exporter of olive oil and the largest exporter of dates. As exports continue to increase, the supporting industries will also grow.

Computer services, notably software development, provide another area of opportunity. Because of Tunisia’s higher level of development compared to the rest of Africa, Tunisia has the capacity to lead the region in this sector. Additionally, the country is well positioned to serve the European, African and Arab worlds.

The privatization program in Tunisia has been picking up pace with 60 percent of the total proceeds realized over the past 18 months. Total proceeds reached $1 billion this year, with nearly 150 companies having been privatized to date.

In Tunisia, privatization is seen as an important factor for stimulating foreign investments, especially those that contribute to technology transfer and exports. The program is being implemented through the transfer of assets, the selling of shares, public tenders and concessions. Foreign investments contributed to 67 percent of the transfers. The program offers wide opportunities for foreign investors in different sectors especially those related to improvements in the infrastructure.

Privatization in Tunisia began in the late 1980s. Judged to be slow at its inception by some, it has nonetheless been pursued without interruption. In 1987, Tunisia introduced the reforms that would guide it toward a free market economy. When all the reforms have been implemented, the Tunisian economic landscape will have been transformed from one almost exclusively state-controlled to a private-sector driven economy. Tunisia has started to reform all the components of its economic policies including the regulatory framework, taxation, foreign trade, investment and the banking and financial systems.

With the signing of the European Union-Tunisian free trade agreement in 1995, the country has stepped up the introduction of a new dynamic of competition and is laying the foundations for a more liberal economy. The terms of the agreements stipulate that custom duties must be eliminated over a 12-year period for a wide range of imports. Tunisian companies will have to become more competitive or risk going out of business. The government has accelerated its privatization program over the past three years in conjunction to the accord and in response to World Bank suggestions. Between 1987 and 1991, 38 companies were privatized. Between 1995 and 2000, 92 companies were privatized.

Fathi Merdassi, minister of International Cooperation and Foreign Investment explained, “We believe that the private sector is more competitive than the public sector. We are currently privatizing all companies in Tunisia. This process should be finished by next year.” Essid Bechir, general director for the privatization program overseen by the ministry of economic development, added “the Tunisian economy is gradually becoming liberalized and the state is looking to remove itself from competitive activities. The state is looking to go back to its original functions and wants to let the private sector take the initiative of production.”

Another objective of the privatization program is to ensure the companies’ durability. “We are convinced that the survival of companies depends on the initiative and the capacity of adaptation to the new environment and the flexibility in the management” said Essid Bechir.

The Tunisian government has chosen to remove itself gradually from the different sectors of production. Over the past two years, assets linked to the construction sector have been privatized. The sales of cement plants are the largest privatizations to date representing more than 50 percent of the total proceeds. Spanish, Portuguese, Sicilian and Italian companies have acquired different plants. The two remaining plants will have been privatized by the end of next year.

The Gabes Cement Co. is a subsidiary of Sesil, a Portuguese company. The plant Gabes acquired is now producing 20 percent of the cement sold in Tunisia. Sergio Martins, general director at Gabes explained, “we made improvements in two main areas; management and technical aspects” All operations have been computerized. When the plant was under public ownership, there were delays of up to six months for managers to get the information about the plant’s production. We have also started to implement a project to minimize costs and optimize the efficiency of the plant through training contracts and the transfer of know-how from our mother company. This year, the plant expects to increase its revenue by 20 percent.”

Martins praised the government’s actions during his privatization experience. “All the agencies are engaged in a professional manner to gradually liberalize the Tunisian market. The government respects its obligations. If foreign investors respect theirs, things will continue to move forward. My experience leads me to conclude that things are moving in the right direction so as to consolidate the opening of the market and the position of Tunisia in the Mediterranean and international market in a more open manner.” Tunisia has been recognized for the fairness and the transparency of the process. Current regulations regarding privatization call for the respect of three practices; competition, public notice and evaluation by professionals who are independent of the government.

The Tunisian government has placed minimal requirements on the companies that have acquired the privatized units. Under the agreement with the Gabes plant, for example, the plant must first respond to domestic needs before turning itself toward exports.

The approach to privatization in Tunisia has given special attention to the social costs of such programs. When Tunisia engaged itself in the process, it laid down principles within which privatization was to take place. The state is concerned above all with ensuring the durability of the enterprise being privatized. It also tries to maintain the largest number of jobs compatible with the firm’s efficiency and its profit-making potential. Merdassi said, “This is a gradual process because we are looking for both economic and social development. We have to develop the private sector but not at the expense of the general population.” The Tunisian government has put in place mechanisms to protect against this through social programs. The increase in unemployment is one of the main drawbacks of the program. Already considered to be Tunisia’s main challenge, it is expected to increase momentarily as the reforms take place. Merdassi said, “We want to avoid social exclusion. Some countries have privatized overnight and left thousands in the street. Our approach is gradual and through a consensus. All is being discussed and negotiated between the administration, companies and the employees.”

The receipts from privatization are partially directed at fund 21/21 created to address the issue of unemployment. A large share of the proceeds also goes to a restructuring fund for companies in difficulty. Resources in this fund are used to restructure the companies that are not considered viable enough to be privatized. Additionally, funds are being used to modernize the country’s infrastructure and to fund the budget deficit.

Considering the pressure that will be put on the Tunisian economy when its borders open, the privatization program is moving into a new stage designed to widen its scope and provide greater flexibility of procedures. All sectors are now being privatized. Tunisia started privatizing companies that were open to international competition through exports such as the textile sector, followed by tourism, then trade and construction. “For us, there is no sector that is closed to privatization, we have no taboos and are not driven by an ideology. Each developing sector can be privatized once it has competition,” noted Essid Bechir. Currently, the financial sector is being privatized. Two banks will be consolidated and privatized. The insurance sector and maritime transports are also on the list. The telecommunications sector is now open to competition. A second GSM license has been granted to a private operator. A second public offering for Tunisair, the national airline company, is to take place this year.