Towards a more liberal economy the case of tunisia
المؤسسات لرؤساء العربي المعهد
Arab Institute of Business Managers- Tunisia
ECONOMIC REFORM AND LIBERALIZATION
Dr. Jameleddine BOUMEDIEN
Cairo 1-2 november 2010
Tunisia is in the process of economic reform
and liberalization after decades of heavy state
direction and participation in the economy.
Tunisia's economic growth historically has
depended on oil, phosphates, agri-food
products and tourism.
• Tunisia’s economic adjustment efforts started when a
decline in oil exports earnings and excessive public
investment causes a balance payments crisis.
Since 1986, a vast program of economic reforms aiming
to rehabilitate the market mechanism and the
international openness of economy, with the objectives
to develop private initiative and to achieve new levels
These reforms, which concern almost all areas, and in
particular the regulatory framework, taxation, prices,
foreign trade, investment, incentives system, the
banking and financial system have made it possible to
change the economic landscape of the country.
To ensure that external balances remain sustainable:
• It is encouraging export development (through the
mise à niveau Program) and foreign direct
investment (including through privatization).
• The fiscal deficit has been reduced through a
combination of expenditure restraint and revenue
• The exchange rate has been managed flexibly, while
maintaining overall real stability.
• Third, Tunisia is strategically managing its resort to
international capital markets to consolidate its past
record as a good credit risk able to borrow at the
low of emerging market spreads.
The government has totally or partially
privatized around 219 state- owned enterprises
since the privatization program was launched in
1987. Although the program is supported by the
GATT, the government has had to move
carefully to avoid mass firings.
• As a result, inflation has been significantly reduced at
around 3 percent. The external position (current account
balance, foreign currency reserves and external debt) has
also improved considerably.
• Promote exports which registered an average increase of
6.4% per annum in constant terms.
• This evolution allowed for the reduction of the current
deficit which passed from 5.8% of GDP during 1990-1998
to 2.5% over the period 2003-2008 .
• a greater private-sector participation in the development
effort, as shown through the increase of the share of
private investment, which stood at about 59.8% in 2008,
against 47.9% in 1986.
• More than 90% of prices become free.
Reform efforts have targeted two main
1) The legal framework
2) The trade openness
A transparent legal framework that
provides incentives….but some
• Tunisian legislation and regulations favor
transparency at all levels:
• Procurement contracts and privatization are
systematically done through bids
• Competition and price law applicable since 1991 try
to ensure transparency rules in commercial
• A standardized accounting system drawn from the
one in force in OECD countries.
Freedom to invest
Nationals and foreigners are free to invest in
Tunisia’s many sectors of activity.
All foreign investors can hold up to 100 % of capital
in a project in most sectors without any formal
authorisation. However, some service activities that
are not export oriented do need an authorisation
for majority holdings held by a foreign party.
Foreign portfolio investment
Non-resident foreigners can also freely purchase up
to a maximum of 49.99 % and without restriction
the shares listed or unlisted Tunisian companies.
Any purchase above this ceiling is subject to the
approval of the Investment Higher Board.
• Foreign investors can freely exchange profits
and capital. There are no constrains on
transfer of Tunisian dinars for:
• the real net product derived from invested
equity sale or clearance, by means of hard
• The procedures to start a company are done
at a “One stop windows” that gathers all the
concerned administrations at The Agency for
the Promotion of Industry and the Innovation.
The one-stop-shops (in Tunis, Sfax and Sousse)
rapidly allow for companies incorporation.
They are staffed with official representatives
• Tunisia joined a certain number of international
conventions and signed agreements with several countries :
• Agreement with the Multilateral Investment Guarantee
• Investment protection and double taxation relief
agreements with most OECD countries.
• Convention concerning the creation of an Arab organisation
to guarantee investments
• Inter-Arab Convention, Inter-Islamic Convention Inter-
Tunisia is also:
Member of the International Center for Settlement of
Intellectual property is protected by the provisions of
local law and international treaties related to it.
Conventions signed by Tunisia
1-Signature of the Paris Convention on patent
2-Signature of the UNCTAD agreement related to
licenses and registered trade marks protection.
3-Member of the World Intellectual Property
4-Member of the International Center for Settlement
of Investment Disputes, ICSID.
A competitive economy open
to the world
From January 1st 2008, Tunisia was the first country of the
southern Mediterranean shore to join the Free Trade Area of
the European Union.
The associative free trade treaty gives access to the EU market
.Tunisian industrial products will be totally exempt from duties and levies,
with no quotas.
• Agricultural products will enjoy preferential conditions.
Tunisian exports to the European Union market have undergone a
remarkable evolution. Their part in the export total increased from
55% in 1985 to 77% in 2009. Nearly 80% of exports to the European
Union are industrial products.
Tunisia has signed a number of preferential agreements
with Maghreb and Arab countries. Application of the
regional agreement signed in 1998 to introduce an
Arab free-trade zone has made good progress . Trade
with Egypt, Morocco, Jordan and Libya is governed by
bilateral agreements that set up a free-trade zone.
Other free-trade agreements are being negotiated with
other countries in the region.
Many reforms ...but a cautious approach
What is the impact of these reforms?
The latest report on global competitiveness
2010-2011 issued by the Davos World
Economic Forum ranks Tunisia 32 th out of a
total of 139 developped and emerging
countries in terms of global competitiveness
being hence ahead of several countries of the
A low-risk investment
Appraisals and ratings granted to Tunisia by specialized agencies get better and better.
Since 1994, Tunisia has received top investment grades from financial institutions and rating
Ratings for Tunisia in 2009
Standard & Poor’s BBB
European agency IBCA BBB
Japanese agency R & I A-
Corruption Perception Index
Rang Pays Score IPC 2009
14 Germany 8.0
17 United-kingdom 7.7
21 Belgium 7.1
24 France 6.9
32 Spain 6.1
63 Italy 4.3
65 Tunisia 4.2
71 Romania 3.8
71 Greece 3.8
79 China 3.6
84 India 3.4
89 Morocco 3.3
111 Egypt 2.8
Scale from 0-10 (10 high degree of transparency, 0 high level of corruption)
Transparency international, 2009
Tunisia has been one of the fastest growing economies
in (MENA) since the 1990s. Today with a per capita GDP
of about 8800 $ (PPP).Tunisians have more than three
times the real income their parents had 30 years ago,
and all indicators of their social and economic
wellbeing have improved significantly.
* By various indicators, Tunisia is a « moderately »
indebted country. Total external debt was estimated at
21300 MD as of end 2008, equivalent to 42% of GDP and
down from about 55% of GDP in the early 1990s.
* The debt service ratio payment of principal and interests
as a share of exports of goods and services is about 8.5%
at the end of 2008 versus an average of 25% in 1990s.
* In 2009, exports of goods and services accounted for 50%
* For many years FDI (Foreign Direct Investment) has
registered an important evolution representing up to
10% of productive investments, generating one third of
exports and 1/6 of total employment.
Almost all Tunisian children attend school compared to only 8o
per cent for the MENA region
female labour participation is high in a regional context
life expectancy is higher than the average for both lower-
middle-income and MENA countries 74 years.
In 2005, less than 4 per cent of the population lived in
poverty, and inequality has dropped steadily
As a result of these social and economic achievements, the
Tunisian middle class has expanded. This middle class has
contributed to Tunisia’s stability.
• During this period, the purchasing power of
minimum wage workers was preserved thanks
to the many revaluations of this wage category
(18 times since 1990).
• At the same time, the average purchasing power
increases about 2 points annually over the
In parallel, the indicators inherent to the utility services clearly
1-the rate of drinking water supply in the rural zones
reached 93.9% in 2008 versus 68.3% in 1996,
2-the rate of electrification in rural zones was for its part in
98% versus 75.7%,
3- the rate of connection to the sewer system reached, on
its side, 79.7% versus 62.6% during the same period.
4-In the same way, telephone density is passing from 6.4
lines per 100 inhabitants in 1996 to 78.2 lines in 2008.
As for extreme poverty, the portion of the population
with less than a Dollar a day to spend went down from
1.5% in 1990 to 0.5% in 2008.
As for the population with less than two Dollars a day to
live on, the percentage stabilized at about 6.7% in 2008
against 11.1% in 1990.
Tunisia is going to attain, or even go beyond, the different
Millennium Development Goals.
1. The rate of poverty was 4.2% in 2000, against 6.7% in
1990 and 12.6% in 1980 and is expected to be below 2% in 2015.
2. The objective of primary education for all children has
been nearly attained. The reduction in the dropout rate will make
it possible to resorb the 1.2% of pupils who do not complete
their primary education.
3. The objective of eliminating gender disparities in primary
and secondary education by 2005 and at all levels of education
by 2015” has already been attained by Tunisia in 2000.
Tunisia has pursued structural reforms to
maintain a prudent macroeconomic
framework, liberalize domestic prices and
controls, and reduce the public sector’s role
in economic activity. Regulation is more
efficient. Property rights are largely
respected even though the executive branch
is the supreme arbiter. Tunisia has been able
to keep its fiscal deficits relatively low.
Despite these reforms, however, a number of
institutional challenges remain to be
addressed. Tunisia scores low in trade
freedom and investment freedom.
Excessively high tariffs, import restrictions,
and licensing requirements limit trade
freedom. Protectionist investment policies
and cumbersome bureaucracy stifle a more
stable inflow of foreign investment. The
financial sector and judiciary are subject to
political influence, and corruption remains
we have much work to do…
thank you for your attention